Companies risk falling behind competitors by failing to make the most of the younger generation and new technology, a study by the Chartered Institute of Personnel and Development claims.

The research suggests organisations are failing to give enough attention to developing management innovation, which the CIPD claims is vital to getting the best out of the so-called Generation Y - employees born after around 1980 - and Web 2.0 technologies.

As a result, companies are unable to understand what younger employees value and are failing to get the maximum benefit from social networking sites that could actually help their business.

Almost half (46%) of respondents thought Generation Y was different to previous ones, with family needs and personal life given far greater priority and a need for managers to be actively engaged in their development.

Some organisations said they had experimented with using Web 2.0 technologies but the majority said they were waiting to see how such systems evolved.

"Web 2.0 tools, such as social networking, Wikis and blogs are having a dramatic impact on the way we interact with one another," said Julian Birkinshaw, professor at London Business School, which carried out the research.

"Their potential for changing the nature of management - how we make decisions, motivate employees, co-ordinate activities - are profound.

"But many companies actually ban their employees from using social networking tools at work. Tomorrow's leading companies will be the ones that actively embrace these exciting new tools today to find new ways of harnessing their potential and to build deeper levels of trust and responsibility among their employees."

The study of 500 senior managers found that less than a quarter said management innovation was given a high level of attention in their organisation, compared to product or service innovation (65%). But despite this 80% admitted management innovation was a key driver for long-term success.

"Pioneers in management innovation attract and retain top employees and they build a capability for change and adaptation," said Vanessa Robinson, head of operations, research and policy at the CIPD. "These attributes have never been more important in today's highly competitive business world."