Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 40-53)



  40. When you were answering Lord Cavendish you mentioned something about collaboration. I presume you were talking about collaboration in industry between what are essentially competing companies.

  A. Potentially.

  41. Do you think there is anything government can do to encourage this kind of collaboration and make sure competition is perhaps softened.

  A. I do not think they are trying to soften competition.

  42. I did not put that terribly well.

  A. What we are trying to do is pick up the strengths of the different parties in all of this to the common good. Not all companies these days have the capability to target some of these areas. It has not come out really, but we are talking about risk here and big rewards sometimes equal big risks. The advantage of collaboration is that you can spread the risk to an extent. A lot of the research programmes we are talking about are not research programmes developing the final application product, but the platform that all companies can use and then lead off into products they need for their own ends. I was thinking of collaboration in that sort of area and linking in with suppliers and the like.

Baroness Cohen of Pimlico

  43. It seemed to me that when you started you were really supporting what I am now proposing to describe as the MIT model. Get a good enough university, get it co-operating with industry and away you go. That is not exactly what we do in the UK. There is a huge variety of things to support entrepreneurship. Which of those do you find most useful and which do you terrifically wish you had? Which one we have not yet invented would be most useful, perhaps starting from the ones you already find very useful?

  A. The first thing to say is that anything we can do to engender entrepreneurship, whatever it might be, whether it be co-ordinated, unco-ordinated or irrelevant to an extent, is good because this is the sort of thing which needs a lot of energy to move the snowball in the first instance. That is what we are talking about here. We are talking about the culture change around the whole entrepreneurial behaviour and that means everybody contributing to what they can. All the policies which are trying to be achieved here are positively helpful in that whole area. It helps though to have a policy which puts entrepreneurialism into context. There is a philosophy which you could have which is to let a thousand flowers bloom type. As long as we get the environment right and as long as we get the training and development and the encouragement and support, then things will happen and you will end up with an entrepreneurial society because it will happen as almost an act of faith. My experience is that it works much better in a context and you do all the things I have mentioned but you do it in the context of a direction and a target. I mentioned some of the Framework 6 areas before, or some of the areas which the regional economic strategy are trying to deliver. We want entrepreneurialism in that area. We want to do something in that area of science, we want to pull it together in this. In that process we want to be able to create a spirit and a culture of entrepreneurialism. The variety is good; it would be really very helpful to have almost a national agenda for entrepreneurialism which is to say these are the themes where we want to create an entrepreneurial behaviour. It is so easy to get hooked onto new business start-ups and we were recently looking at how our region behaves in new business start-ups. The south-east is usually the top in new business start-ups but then you realise that a lot of them are building companies and plumbers who are servicing an overheating economy and that looks great because they are new businesses, which in the North American sense they would be. Other parts of the regions do not have those because they do not have the need for extra plumbers and builders and everything else which goes with it. It is a very dangerous thing to have the thousand flowers bloom philosophy if you want to create something sustainable. I believe what we are on is a sustainable build of a better future. That is really what this is about.

  44. A lot of our initiatives go towards improving finance as opposed to the supply side, labour and management skills. Is the balance quite right or do you need more of one than the other? How do you feel about the finance initiatives, might be the best question?

  A. They both have their place; I would not like to say one or the other. There is an issue around some of the financial areas, around the smaller end of the scale, particularly both the smaller end of the scale and the further distance from market end of the scale. For example, the Treasury has put extra funding into regional venture capital funds and it has a £0.5 million total limit to any individual company. That is working enormously well in terms of developing because there is a gap there which is just too small for traditional venture capital funds to go for. Often some of those things are related to what is called concept funding which is that somebody has had a good idea, but it is not yet to the stage where they can see a business. How do you get funding for that sort of thing? There is an important area with a financial gap in that.

  Baroness Cohen of Pimlico: You have a good deal of international experience. Do you believe there are lessons for policy support of entrepreneurships in other countries from which the UK and Europe could learn? Take it that Lord Fearn asked that one.

Lord Fearn

  45. Have you had much experience abroad? What about the American economy? Do we lead in Europe or is Europe behind? What about the Far East?

  A. In running international businesses I see all regions of the world and how they behave. You can easily fall into stereotyping feelings about how the Chinese are the most entrepreneurial bunch you would ever wish to meet and that sort of thing. In terms of our economy, there are two lessons which I have picked out to share with you. First of all, I think we can learn from the US in terms of our attitude to entrepreneurialism failure and bouncing back and all those sorts of things which are potentially a very positive move which we can make. All the moves around being declared bankrupt and coming back, all those sorts of changes, which can be changed relatively easily and no stigma attached, are part of a culture change which the US does not have and it would be positively healthy if we did not have it either. The other example is around Australia, which for a nation of that size has been remarkably successful in choosing the areas in which it wants to be world class. We can all choose sport as being the area where we all grit our teeth, but as I understand it, that was a really distinct policy where you could say they wanted to become world class in sport in this, this and this and that and they achieved that by a clear focus on what they wanted to become and a consistent approach to making it happen. If you draw those lessons into the areas we are talking about, entrepreneurialism, innovation, new business start-ups, you can draw the same lessons for whatever you want to become, what it looks like, but let us be consistent about delivering it so that we are building on whatever we have. It is about communication as well, so that the country knows that is what our targets are and we are all going for it. Those are two lessons which I picked out.

  46. Who is ahead in Europe then? What about Italy? Are they ahead?

  A. I would not downgrade the UK if it is a question of who is ahead. As previous speakers said, we have a lot to be proud about in this country, but we are still a long way behind the best. That is not just Europe we are talking about here. In terms of Europe itself, I like the attitude of the Netherlands whenever I see how they tend to behave in creating business and I am particularly thinking of intrapreneurship here and big companies spawning other companies. They have done extremely well in allowing companies to come out of the bigger companies and be supported and survive, which has then given them a life of their own. You can pick other examples around Europe. Take Germany, some of the ideas around things like the Fraunhofer institutes which are research centres targeted at particular areas. They are potentially a very interesting concept for us. We in the north-east tried to replicate some of that by our centres of excellence, by saying that a bridge is needed between universities who tend to think five years plus and industry and business who want it today. How do we bridge the gap? Answer: centres of excellence, or in their case Fraunhofer institutes. These are public/private funded bridges. I would not like to generalise by saying Germany is better but there are good examples in different countries that we can cherrypick from and build on our own success.

  47. We did hear from the Professor, and very forcefully actually, that in some of our universities salaries are very, very low, I presume compared with other countries. Do you find this? Not about your own company, of course.

  A. Being on the Council of the University of Durham and being a prudent finance guy, I think they are paid perfectly well. Strike that from the record. I am sure that there is an issue around academic salaries, particularly the research active international market for individuals—put it that way. I would agree that if it comes to a market university economy, then we are not going to win and what we have to have is academics who, I hope, do not just do the work for the money. They do it for other reasons and maybe our universities can offer a lot of the other reasons which allow them to enjoy their work and create the research that they want.


  48. I thought you were diplomatic on a number of occasions and you commendably stuck to positive messages throughout. The Institute of Directors in their paper to us pointed out that until fairly recently the Department of Trade and Industry (DTI) alone ran 183 different programmes, 59 of which provided grants direct to business. In the submission to us by the Small Business Section of the DTI, we were told that the DTI have identified the need to greatly simplify support services and is going to close its existing schemes. Frankly, in your evidence to us, you say nothing about what the government does or does not do other than universities. You have given me the distinct impression that the government might as well close most of those schemes down because they have not mattered much at all to you and the businesses you are seeing. The final point the DTI paper drew to my attention, which you have not seen, but I shall read it to you, is on intrapreneurship, known as spin-offs, says the DTI. "Although intrapreneurship exists in the UK", which I think is probably right, "most examples have occurred within companies and so go unrecorded and unobserved. If there is reticence on spin-offs", by which they mean intrapreneurship, "it is more likely because the firm feels guilty about downsizing or embarrassed at discarding a business which is subsequently successful. There are no specific government support measures for policies to promote intrapreneurship". I have to say that sounds enormously negative to me on the part of the DTI. Does your optimism still hold? Surely your evidence to us is almost telling us that all these government programmes to give money here and give money there, support that, are really largely irrelevant. Secondly, the DTI certainly appears to place no significance or importance at all on intrapreneurship. Do you remain as optimistic as possible about everything?

  A. Of course.

  49. We have a duty here to be looking critically at what is going on. It is no good us just saying the world is rosy.

  A. I am not saying that. I am talking about priorities here and selection. In the general approach to entrepreneurialism, we should be positive. When it comes to the specifics of how it is done, you will have heard from all my evidence that I believe that there are priorities we must push and go for. If you want me to be specific about the DTI programme, then the total sum of public money would be better used on fewer more focused programmes than the large numbers which are there. I do see that happening already anyway. It is not as though we are talking to deaf ears in all of this. That was part of my submission on the Chemistry Leadership Council which was formed by the DTI to bring us all together to see what the UK and the DTI should do in terms of the whole chemical industry in this country and creating the sort of innovation and everything which goes with that. In terms of your point about entrepreneurship, I would actually tend to agree with you. I did not give any written submission to the Committee in the sense that is not something I do shout about too much except in specific examples and the specific examples tend to be the companies which have been successful in making it from the large company into the smaller marketplace. In my own experience, I have created those companies and made them happen, but a corporation generally does not tend to have an intrapreneurship strategy.

  50. Should large companies?

  A. That is what I was saying about the Netherlands experience. Some large companies in the last few years in the Netherlands have had an intrapreneurship strategy where they are encouraged to look to see what they have within and allow it to come out and prosper and survive in its own right, either because it is not part of their priority, but not just ditched. That is a positive direction.

  Chairman: What could the government in this country finally do to encourage information. To me it is almost self-evident that very large companies have within them an awful lot of intelligent people who cannot do everything, they do not develop everything and they should be encouraged to maximise the internal entrepreneurial talent within them and the potential for things which cannot be kept in a straitjacket of the existing company.

  Baroness Cohen of Pimlico: And cannot carry the overheads of existing companies.


  51. Yes. The EU Green Paper did make a point about intrapreneurship. So far, but subject to when we have hearings with ministers of the departments, the submissions to us from government do not seem terribly interested in intrapreneurship.

  A. There is a value there. I think you are on the right lines when saying "should there be?". There is potentially an untapped value which could be brought out. Asking what should be done goes right back to what I said at the beginning which is that it is all down to individuals within; the stone in the shoe type thing again. A lot of this is large companies identifying who those people are and giving them the opportunity to do intrapreneurship activities and not be seen to be counter cultural, which a lot of them can be seen to be. That needs a positive statement of support from the company itself.

  52. So perhaps Cambridge-MIT could help encourage larger companies to be more active in intrapreneurship rather than start-up people from outside.

  A. I agree with that. I think Cambridge-MIT would be a good vehicle for that because the prime reason is that they get the senior people's attention in some of the big companies and by focusing in on intrapreneurship as well as entrepreneurship it just raised the profile of how valuable that potentially could be. It is not for every company, but for some there will be value there.

  53. Mr Coxon you have given us excellent value on your part. I am most grateful to you. There are one or two things inevitably which I have not been able to put to you, but if I were able to write to you about just one or two small points I should be very grateful.

  A. Okay. Thank you very much.

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