Enabling Local R&D Systems to Drive Growth

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This is part two of a blog by Professor Simon Collinson on R&D, innovation and regional growth, following an academic forum hosted by WM REDI and UKRI that discussed the evidence that should inform the government’s place R&D strategy.

It was first published on the UKRI website. Part one is available here.

R&D investment in regions can increase innovative capacity and capability which can give rise to productivity improvements, greater levels of firm competitiveness and/or increased concentrations of better-skilled, higher-income workers. Many of the national policies recently advocated (R&D Roadmap, 2020; NCUB, 2020) should be supported. However, their impact and the subsequent outcomes will be significantly limited if place is left out of the equation. Standard policy interventions need to be targeted and adapted to create growth in different local economic contexts. This is even more apparent when we see the different impacts of the Covid-19 pandemic on different regions and some of the limits of a national command-and-control structure to respond.

Focusing investment in places that would benefit, also partly means building on existing successes. There are already a range of specialist clusters of activity in places which have already started to develop pathways between local R&D centres, often in universities, and local firms. Focusing funding on both the R&D and local commercialisation, adoption and diffusion mechanisms (improving absorptive capacity) would create a stronger critical mass.

We should not forget that there is also a link with productivity, incomes, health and well-being. Cambridge produces over 60 patents for every 100,000 people, Bolton produces less than 0.5. Mean weekly earnings in Cambridge are £658 and average life expectancy is 82.3 years (81 for men and 83.6 for women). In Bolton average earnings are £478 and life expectancy 79.5 years (78 and 81). But this over-simplifies the spatial relationships between R&D outputs and economic and welfare outcomes. Rebalancing requires a robust understanding of the different strengths, weaknesses and challenges of different regional economies to underpin policy interventions.

How do we focus on the kinds of interventions and investments that are most likely to work? Part of the answer lies in less-risky, more reliable policies, starting with places that have existing structures in place to leverage this investment. Here are some recommendations, partly based on the wider work of WM REDI and the conclusions of a number of academic and policy workshops.

  • A stronger focus on innovation and conditions placed on universities to work in collaboration with local partners, on outcomes, rather than outputs.
  • The application of evaluation, monitoring and measurement, of local outcomes, required as part of the funding process.
  • Investment in applied research skills, secondments and other collaboration / co-creation mechanisms.
  • Approaches that target and build on existing, strong engagement between University technology transfer offices, student entrepreneurship centres and business schools, with local firms.
  • Provide more funding for collaborations which combine universities, firms and regional bodes (combined authorities, local enterprise partnerships, Chambers of Commerce etc.), helping alignment with local industrial strategies.
University spin-out and start-up enterprises are a necessary part of the portfolio but are usually higher-risk.

The UK R&D Roadmap acknowledges the need to improve university commercialisation to ‘capture the economic benefit from our research through innovation’ (p.31). There are various exemplars of both funding schemes and collaborative partnerships that illustrate better practices that should be scaled up. Building on the concept of the Connecting Capability Fund, the Industrial Strategy Challenge Fund (ISCF) and Strategic Priorities Fund (SPF), Strength in Places Funding (SIPF) as well as research council and Innovate UK funding streams, that could help businesses, with universities, deliver against commercial missions. There are strong indications that the above funding schemes have increased the number and range of local knowledge exchange activities matching the above list of criteria.

University spin-out and start-up enterprises are a necessary part of the portfolio but are usually higher-risk. They can also be easily bought-out and move away and tend not to give rise to higher average levels of productivity or employment.

Collaborative projects involving knowledge exchange, capacity building and problem-led research with large firms or SMEs with growth potential are more difficult to measure (patents, licensing and royalties are not useful proxy measures for most kinds of innovation) but do drive positive growth effects over time. These can improve innovation capacity and capability in local firms, with a built-in link to university-based expertise. Employment multiplier effects and, over time, increased GVA per head and export competitiveness are appropriate outcome measures, but only over time.

‘Fixed assets’, or capital investments in facilities which host collaborative teams, co-owned by universities and firms, with matching support from regional economic development agencies (such as combined authorities, local enterprise partnerships, local authorities, city councils and Chambers of Commerce) tend to develop a better fit with local innovation needs and support or attract complementary skills and inward investment. The Manufacturing Technology Centre (MTC) at Ansty and the Warwick Manufacturing Group (WMG) are examples in the West Midlands.

Additional recommendations include:

  • Allocate funds conditional to matched investment from new, inward investors to the region. Slightly over half of R&D investment in the UK is foreign-owned so foreign direct investment (FDI) should be a target, connected to international R&D collaboration. Universities with global research and teaching partnerships could support this activity.
  • Dedicate funding streams to identify and promote the enabling effects of particular technologies (digital), capabilities (management, design, creativity), processes and ‘better practices’, which promote innovation across many types of firms and sectors.
  • Explore more experimental funding approaches ‘skunk-works’ or pilot innovation projects potentially combined with the development of soft-start-ups.
  • Fund multi-disciplinary teams in universities focused on problem-led R&D. For example, university engineering departments working with operations management specialists in business schools on projects that improve the global supply chain logistics and therefore the productivity of multinational aerospace firms.

This final point stems from the fact that while invention might be the domain of science and engineering, innovation pathways, the adoption commercialisation or utilisation process is more about business models, organisational practices and people’s behaviour (including consumers, managers and policymakers). More collaboration between STEM experts and social scientists including business schools, given their scale and links with businesses, will improve our overall ability to leverage our intellectual capital for national benefit.

Get all of this right and the benefits will be significant in terms of generating not just growth, but more inclusive growth across the UK.

This blog was written by Professor Simon Collinson, Director, City-REDI and WM REDI.

The opinions presented here belong to the author rather than the University of Birmingham.

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