Memorandum submitted by South West Regional
Development Agency (SWRDA)
How UK business compares internationally in areas
such as research and development, creativity and design
There is a huge opportunity with the
formation of the Technology Strategy Board (TSB) as an NDPB to
develop a strategic overview of UK strengths in these areas, bringing
together the expertise and knowledge that already exists and adding
value by addressing, through research, gaps in this intelligence.
This should cover both the expertise and knowledge found within
the academic sector as well as the high knowledge centres found
in the private sector and Public Sector Research Establishments
(PSREs). This follows the recommendation of the Sainsbury Review
(Recommendation 3.7).
Regional Science and Industry Council's (including
that in the South West) are working regionally to improve intelligence
and ensure it is better used to inform policy making by a wide
range of organisations. The emphasis is increasingly on understanding
where we have genuine strengths and drilling down from broad,
generic descriptions to a more informed understanding of our specialisms
and how these can improve our international competitiveness.
The South West is increasingly seen as a creative
hub, building on international success within the creative industries,
and strengths in cutting edge technologies and pioneering industries
such as renewable energies and digital industries. The South West
has key assets that underpin the UK economy, including Bristol
Science City, Silicon Southwest and Wavehub. These harness the
practical creativity, innovation and knowledge of Southwest businesses
and seek to couple them with the knowledge and creativity found
in the public sector knowledge base. The South West Science and
Industry Council provides the strategic direction and real world
expertise the guides SWRDA investment decisions.
Overall, South West business investment
in R&D (as a proportion of GVA) is above the UK average and
has grown more quickly than the national average. However, this
is highly concentrated within a small number of large businesses
and mainly undertaken in the north of the region. As with all
regions, most South West R&D spend (75%) is by business, with
the remainder accounted for by government and Higher Education
R&D spending.
What can be learnt from the experience of other
countries in this area and how fast other countries are moving
up the value chain
The South West of England Regional Development
Agency (SWRDA), in conjunction with the other RDAs, is looking
to strengthen its relationship with the FCO science and technology
network, and utilise the links through its Inward Investment teams,
UKTI and the FCO to build on the good practice of other countries.
The UK can benefit considerably from the work of
other countries, both within Europe and the wider international
community, and regions have the opportunity to share this learning
within the RDA and DA community. We are currently exploring the
possibility of leading a new European network as part of the EU's
Innovating Regions of Knowledge programme, which will focus on
the capitalisation of past exchange of experience into more innovative
Structural Funds activities to support innovation in our small
and medium sized businesses. This builds upon our past engagement
in European network which have provided a valuable opportunity
to benchmark our performance and introduce good practice from
elsewhere.
The Sainsbury Review particularly noted
the San Diego CONNECT scheme, which has UK partners in the from
of SETsquared, a partnership between the universities of Bath,
Bristol, Southampton and Surrey, which give a level of scale required
to develop meaningful relationships both nationally and internationally.
We have supported a number of visits by South West academics overseas
to raise awareness of the South West offer and to learn from what
is happening elsewhere.
Why some sectors of the UK economy appear to be
more effective at embracing value-added activities than others
The impact of metrics cannot be ignored
in this context. Focus on metrics such as R&D spend and patents
lead to under reporting of other areas of innovation that go unreported,
which distorts the overall comparison between sectors. This can
lead to the development of broad policy responses which are not
appropriate to all sectors and may fail to support innovation
and growth potential sectors in ways which best suit to their
development and their particular style of innovation. Reports
from NESTA and others have described the complex connectivity
between companies, individual business-people, academics, researchers,
creatives, investors, marketers, advisors, mentors and various
business support professionals, in the UK and overseas, which
drives innovation. There is often an element of chance in such
interactions and it is difficult to engineer situations and predict
outcomes. This provides a case for more flexible policies to support
innovation which are less based upon traditional outputs.
NESTA have also made the case that a concentration
on measuring innovation through R&D spend, numbers of patents
etc creates an emphasis on the role of natural sciences and manufacturing
industry and understates the true extent of innovation. Government
measures of UK's innovation performance rely partly the amount
of investment made by businesses. This mainly relates to spending
on physical plant and machinery that can be relatively easily
counted. As the proportion of total activity accounted for by
the manufacturing sector is decreasing, investment in such "tangible"
assets grows relatively slowly. In a modern knowledge economy,
however, there is an argument that significant investment takes
place in intangible elements: computer software and scientific
R&D, non-scientific research into new design and products,
and investment in brands and organisational skills. If measured
at all, these may be counted as consumption rather than investment.
Yet these "softer" elements of innovation are becoming
critical for productivity-led development.
There is a growing interest in looking
at broader based models of innovation, beyond traditional physical
science based models. This includes the emergence of a new academic
discipline known as services science, which is exploring how technical
advances, particularly in ICT, create new business models in areas
such as business and financial services, which are responsible
for so much of the economic and productivity growth of advanced
economies. This merges technology with an understanding of business
processes and organisation, bringing together a range of different
disciplines including computer and communications sciences, design,
business science, and psychology.
The impact on business of government efforts to
promote research and development, including the research and development
tax credit
The impact of government investment in
this area needs to be increased, and we see the Science and Industry
Councils (SICs) and the TSB as key drivers and communicators in
this process, supported by national and regional mechanisms (within
the BSSP framework).
The RDAs have recently provided a set of Case Studies
and outputs to HMT as part of the Comprehensive Spending Review,
which show the specific impact of RDA investment.
It is also important to note that the
EU Structural Fund Programmes (Convergence and Competitiveness
in the South West) have a strong commitment to innovation and
future public sector investment will need to take this into account.
Each have a Priority Axis focused on Innovation and Research as
a Priority Axis aimed at improving the region's overall innovation
performance and close the intra-regional gap in innovation; maximising
the economic contribution from the region's HE/FE institutions
and helping companies exploit their own ideas and innovations.
In the far South West, the Convergence Programme aims to enable
Cornwall and IoS to compete as a centre for creativity, innovation
and R&D, identifying and supporting areas where Cornwall and
the Isles of Scilly can establish specialist expertise and knowledge,
attract investment and talented people and build, on established
business and sectoral strengths.
The progress that has been made on university/business
co-operation and knowledge transfer since the publication of the
Lambert Review in December 2003
The RDAs collectively responded to the
Lambert Report with the introduction of a mandatory core output
"4a: the number of businesses within the region assisted
to engage in new collaborations with the knowledge base".
The RDAs report annually against this target, and the wider context
and supporting information was recently submitted as part of the
Comprehensive Spending Review.
In addition, the South West has piloted a small programme
which supports academics who aspire to become non-Executive Directors
of businesses, in line with the recommendations of the Lambert
Review. This has already successfully enabled academics to gain
positions in a highly competitive environment.
Whether business and government interpret innovation
too narrowly
It is our opinion that this is the case—see
comments above.
What the Government can do to further promote
high value-added business activities and innovative thinking among
UK businesses
The recent strengthening of the SIC link to the TSB,
and the reinforcement if the SIC role nationally, as well as the
establishment of the TSB as a Non-Departmental Public Body (NDPB),
provides an ideal opportunity for creative thinking around the
promotion of innovation.
The Government needs to allow sufficient flexibility
within BSSP to allow best placed organisations to promote innovation,
and also promotion that is appropriate for the target community.
We also support continued delivery and
mainstreaming of the Cox review recommendations, including the
work of the Design Council.
The impact of nationality of ownership on the
location of research and development work
We support the continued lack of restriction
on the ownership of research and development work carried out
in the UK, which is part of the enabling framework for UK interactions
within the global economy.
There is a rich tradition of international student
and visiting worker activity among UK HEIs and research rich private
industry. SWRDA believe that this provides a rich global alumni
network which gives an opportunity to promote the South West and
the UK as a positive environment for inward investment.
The effectiveness of machinery of government arrangements
in encouraging innovation and creativity
The current national government arrangements
are relatively recent, and so we believe that it is too early
to examine the effectiveness of this structure. We welcome the
establishment of the Technology Strategy Board as an NDPB, and
look forward to working closely with the TSB in setting national
and regional priorities.
We would note, however, our concerns regarding the
capital and revenue split within the Single Pot, and the capital
spend restriction that this carries. If the bulk of monies available
to the RDA is in capital, it has a strong influence on the type
of innovation and creativity investment that can be made. Given
that the bulk of innovation and creativity investments lean towards
revenue spend, this is an issue of some concern for RDAs.
November 2007
| 
