Written evidence submitted by the Department
for Business, Innovation and Skills (TIC 00)
BACKGROUND
1. Public investment in R&D is required
because the results of research are difficult for any one firm
or organisation to fully appropriate, and firms may not be able
to mitigate the substantial technical and commercial risks involved
in innovation projects entirely through market mechanisms.
2. Government support for R&D enables
the private sector to undertake projects with significant overall
benefits for the economy that it would not be able to fund or
manage itself.
3. Direct, targeted, government incentives
for business led R&D and knowledge transfer is currently provided
primarily via the BIS sponsored Technology Strategy Board, through
a wide range of economically robust business support interventions
including Collaborative R&D, Knowledge Transfer Networks,
Knowledge Transfer Partnerships and the Small Business Research
Initiative (SBRI).
4. Technology and Innovation Centres (TICs)
will complement these approaches, by providing a business led,
capital intensive infrastructure, that enables business to exploit
new and emerging technologies, by providing a capability that
primarily operates, at Technology Readiness Levels 4 to 7, bridging
research and technology commercialisation, de-risking the process
for business.
5. TICs will perform tasks that business
and universities, left to their own devices, often cannot or will
not perform in sufficient quantity and/or quality. This helps
make new technologies investment ready and able to attract VC
or other forms of investment, shortening the time to market. The
role of the TICs is to support business activity focused on the
development and commercialisation of new technologies that originate
in the research base and for which there is business demand. This
is achieved through: conducting in house R&D; providing access
to skills and equipment which might not otherwise be within their
reach; helping scale up manufacturing processes and producing
technology demonstrators; and helping develop value/supply chains.
They inform businesses about the potential of new technologies
and help early-stage SMEs. In some cases, these centres also act
as the focal point for clusters of companies in particular sectors.
6. Other countries have powerful capabilities
such as these, and this has had a transformative effect on their
industrial base including ITRI creating the electronic display
screen industry in Taiwan, and ETRI establishing South Korea as
a major semiconductor producer. The most famous network of centres,
the Fraunhofer Gesellschaft in Germany, has for example developed
the MP3 licence, which alone generated €100 million of revenue
in 2005 (the network received total licensing income of €83
million in 2008). ETRI in South Korea received £134.8 million
in licensing revenues between 2004 and 2008.
7. The Spending Review announced the provision
of over £200 million of funding for TICs over the next four
years, with the overall network of centres to be established and
overseen by the Technology Strategy Board.
What is the Fraunhofer model and would it be applicable
to the UK?
8. The Fraunhofer Society (FhG) is one of
Germany's four non-university research organisations and focuses
on applied research. They undertake contract research for the
public sector, government, and industry, including small and medium-sized
enterprises (SMEs), which lack the critical mass to carry out
their own R&D.
9. In terms of research strategy, the Fraunhofer
Society directs its efforts toward as-yet-undeveloped markets
for products that might take over five years to mature. Institutional
funding is provided by the federal and state (Länder) governments.
This funding leverages additional public-sector project grants
from federal and states sources and the EU, alongside industry
funding from contract research.
10. The German Fraunhofer model is not unique
however as the innovation systems of all of the OECD economies
are characterised by a variety of non-university research organisations
that perform tasks that business and universities, left to their
own devices, often cannot or will not perform in sufficient quantity
and/or quality.
11. The UK is amongst those who have established
such structures beginning in the 1930s and 1940s, when the UK
Government encouraged the establishment of Research Associations
that served the needs of specific industrial sectors.
12. More recently, the Regional Development Agencies
in particular, have established a number of these intermediate
institutes, focused on driving regional economic growth.
Are there existing Fraunhofer-Type Research Centres
within the UK, and if so, are they effective?
13. In the UK, a range of public sector bodies
have invested in research centres to address objectives aligned
with their core remit.
14. Research Councils have established centres
primarily aimed at supporting excellent academic research, often
with a clear requirement to address business or societal needs
or opportunities. Examples include the Innovative Manufacturing
Research Centres (IMRCs) and more recently UKCMRI at St Pancras.
These are however distinct from the TIC model and operate at earlier
TRL levels.
15. The UK also has a number of independent,
Research and Technology Organisations (RTOs) that fulfil a similar
function—these organisations trace their origins to the
Research Associations established in the 1930s and 1940s, and
operate on both a commercial and not-for-profit basis with a focus
on more routine and commercially lucrative laboratory and technical
consultancy services, as a result of a gradual withdrawal of public
funding from Research Associations.
16. Furthermore, as noted above, the Regional
Development Agencies have also funded over 60 centres focused
on driving regional economic growth during the current spending
review period (CSR07).
17. The effectiveness of these centres with a
range of objectives cannot be easily compared, but where these
are primarily about delivering to business needs and requirements
(i.e. the RDA funded centres and independent RTOs that fulfil
a similar function), examples of success include:
— The
Advanced Manufacturing Research Centre (AMRC) in Sheffield, which
is a £100m partnership between academia, government and industry,
— The
New and Renewable Energy Centre (NAREC), which is recognised in
the renewable energy industry as one of the lead centres of excellence
worldwide for offshore wind technology development,
— TWI,
which has 157 granted patents on its books, with its income from
licensing activities exceeding £1.8million in 2008; and
— The
Centre for Process Innovation (CPI) which has resulted in 11 spin-out
companies and 14 filed patents since its establishment.
18. As highlighted in the Hauser review however,
the approach taken to date in the UK to establish and support
business focused centres has not had the clear prioritisation,
long-term strategic vision, or coordination at a national level
that is needed. The mechanisms for identifying the sectors or
technologies which would benefit from such support has had no
formal role for Technology Strategy Board despite its role to
develop and deliver a national technology strategy.
19. The current UK approach has therefore often
resulted in sub-optimal and dispersed investments with the lack
of long-term funding certainty damaging the ability of the established
centres to: engage with business; realise the full potential of
their assets; invest in long-term capability; recruit and retain
the best staff; and commercialise leading edge research.
20. A review commissioned by the Technology Strategy
Board and the RDA and Devolved Administrations on the Micro and
Nanotechnology (MNT) programme for example concluded that while
the development of open access facilities for business was undoubtedly
beneficial, the investment was thinly spread across a number of
centres, resulting in "sub-critical" activity that compromised
the ability of the centres to achieve world-class capability.
21. This compromises the ability of the UK to
establish or build on existing capabilities, and make the best
use of potential synergies with industrial partners located in
existing manufacturing clusters. It also makes it difficult to
provide business with information about the centres which exist,
assure them of the quality of their service and enable access.
What other models are there for research centres
oriented toward applications and results?
22. Most countries studied in the Hauser review
identified the need for an 'intermediate sector' as a critical
element to deliver governmental, or wider public sector, policies
and strategies to promote innovation.
23. The specific role of TICs varies according
to the innovation system and economic and social landscape of
the countries in which they operate.
24. Centres in many countries frequently focus
on a sector or technology rather than have a wider spread of investments
in many technology or sectoral fields which, whilst being highly
successful for the Fraunhofer Institutes in Germany, is less common.
25. ITRI in Taiwan is credited with helping to
create the electronic display screen industry there, ETRI in establishing
South Korea as a major semiconductor producer, while the Inter-University
Micro Electronics Centre (IMEC) in Belgium was established with
a view to operating three to 10 years ahead of industrial needs
and to foster the development of the local industrial base through
the creation of spin-out companies, promoting R&D collaboration
and developing technology skills with business.
Whose role should it be to coordinate research
in a uk-wide network of innovation centres?
26. The Technology Strategy Board is a BIS sponsored,
business-led non departmental public body that plays a cross-Government
leadership role in delivering a national technology strategy and
advising on polices which relate to technology innovation and
knowledge transfer.
27. Joint working between the Technology Strategy
Board and the Regional Development Agencies and partners across
Government, has to date, enabled businesses to utilise the centres
currently in existence when undertaking projects funded by the
Technology Strategy Board.
28. However, as highlighted in the Hauser review,
the dispersed approach taken to establishing and funding these
centres has resulted in there being no formal process for oversight,
coordination, promotion and prioritisation of investment in centres
at a national level to ensure alignment with national technology
priorities or strengths. Furthermore, it was also noted that in
establishing centres, the prospect of competitively tendered project-based
funding from the Technology Strategy Board and the EU was often
envisaged, but the plans for such activity beyond the period of
the initial investment had not taken account of the level of funding
required to develop and maintain the capability of the TIC, or
its role within the long term technology priorities of organisations
such as the Technology Strategy Board for which it was critical.
29. Having the Technology Strategy Board establish
and prioritise investments in centres in the context of its wider
programme of work will address the key issues highlighted in the
Hauser review and ensure that the TICs can engage with business;
realise the full potential of their assets; invest in long-term
capability; recruit and retain the best staff; and commercialise
leading edge research.
30. Individual centres within the network will
operate with a high level of autonomy, to give them the flexibility
to respond to business needs and market opportunities.
31. However, the overall network of centres will
therefore be established and overseen by the Technology Strategy
Board who will develop a national strategy for managing these
centres as part of the UK's innovation system, linking these with
other institutions, programmes and funding streams.
32. The Technology Strategy Board has begun the
process of identifying, with a view to developing, existing RDA
funded centres which are excellent, and will also look to establish
new centres in the context of its overall programme of work.
33. It will publish a strategy and implementation
plan for TICs by April 2011, and have created a network of TICs
by April 2012 as highlighted in the BIS Business Plan.
What effect would the introduction of Fraunhofer-type
institutes have on the work of Public Sector Research Establishments
and other existing research centres that undertake Government
sponsored research?
34. TICs are business focused, mission-driven
organisations that are focused on the exploitation of new technologies,
through an infrastructure which bridges the spectrum of activities
between research and technology commercialisation.
35. Typical activities and outputs of the new
TICs therefore include the development and scaling up of manufacturing
processes, and the production of technology and application demonstrators
(see Figure 1)
36. They are therefore distinct from, though
complementary to, University and Research Council funded centres
and Public Sector Research Establishments (PSREs), which are funded
through a separate funding stream (the Science budget and Departmental
R&D budgets) and already co-exist with the over 60 business
focused TICs that received funding during the current spending
review period.
37. Close working between these parties is however
critical and we will incentivise the centres to link with, and
draw upon, the outputs of the research base and PSREs where appropriate.
38. Such models of cooperation already exist—examples
include the involvement of the University of Sheffield in the
Advanced Manufacturing Research Centre, and the memorandum of
understanding between the Printable Electronics Technology Centre
and four university based centres (Welsh Centre for Printing and
Coating, part of the School of Engineering at the University of
Swansea; Cambridge Integrated Knowledge Centre; Organic Materials
Innovation Centre in the School of Chemistry at the University
of Manchester; and the Imperial College Centre for Plastic Electronics)
to provide a focused cluster for technology development and prototyping,
aiming to translate UK strengths into the industries of the future
39. This is also consistent with the broader
model of collaboration and alignment of activity between the Technology
Strategy Board and the Research Councils that seeks to enable
increased economic benefit for the UK, by ensuring investments
in research are more closely informed by business challenges,
and businesses are more able to exploit the outputs of leading
academic research.
Department for Business, Innovation and Skills
1 December 2010
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