The changing face of innovation policy Programme on Regional Innovation University of Cambridge

1. The changing face of innovation policy Programme on Regional Innovation University of Cambridge Belfast,17 June 2010 PLEASE DO NOT QUOTE WITHOUT PERMISSION

2. The changing face of innovation policy • Innovation: the conventional wisdom • A new framework for innovation policy

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4. Source: RIS (2009)

5. Innovation: the conventional wisdom • The importance of high technology manufacturing • The importance of R&D • Importance of corporate laboratories and protecting IP • The role of Universities • Technology transfer • Low level of university-business collaborations in the UK

7. Innovation and growth: the (Solow) paradox • “You can see the computer age everywhere these days, except in the productivity statistics". Robert Solow, 1987, (MIT, Nobel Laureate) • Economic growth is not apparently correlated with innovation

8. The Innovation (Solow) paradox • Answer? • Innovation takes time to have a major impact on economic growth. • Why? • It is the use of technology not the generation of technology that has the biggest impact on growth

9. The innovation (Solow) paradox • US Productivity growth 1995-2000: the three largest contributors to the productivity surge were, in order: • wholesale trade • retail trade • security and commodity brokers (Solow, CMI Summit 2001)

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13. Innovation: how important is R&D? ‘This country’s success ultimately depends on a strong skills base and dynamic R&D both driving an innovative and competitive economy...... The Government will continue to play its part by stimulating R&D investment. The recent changes to the Research and Development Tax Credit, for example, will bring additional benefits to small, medium and large companies alike’. Lord Drayson, Minister of State for Science and Innovation,The 2008 R&D Scoreboard, pp. 2-3

14. How important is R&D? • EU target of increasing research and development (R&D) to 3 per cent of GDP by 2010 • Illusive or elusive ‘externalities’? • Frequent failure to distinguish between ‘R’ and ‘D’ • Many innovating firms do little or no R&D

15. Innovation expenditure per employee (£ in 2004) From: Abreu, Grinevich, Kitson and Savona (2008), Taking Services Seriously, NESTA

16. Innovation expenditure per employee (£ in 2004) From: Abreu, Grinevich, Kitson and Savona (2008), Taking Services Seriously, NESTA

17. Importance of corporate laboratories • Conventional view is that innovation takes place within the corporate laboratory • But most ideas and most expertise are outside the organisation • Importance of being open • Importance of being connected • Importance of Knowledge exchange

18. Source: Chesbrough, 2006

19. The implications of open innovation • Importance of developing networks and communities • It is not costless • Often difficult for individual businesses • Develop ‘boundary spanners’ – people who understand partners and can manage relationships • Utilise economic anchors – organisations that do not move • Universities and Hospitals (‘eds and meds’)

20. Innovation: the role of universities • The ‘laissez faire’ model • Importance of chance, luck and serendipity • The narrow model • Focus on a narrow range of technology transfer mechanisms • The wider model • Focus on a wide range of interactions • Exchange rather than transfer

21. The laissez faire model • Universities focussed on two missions – research and education • Example: the ‘Cambridge Phenomenon’ initially developed when the University took little active interest in business engagement. In the past: • University largely ignored IP issue • Adopted a liberal attitude to what academics did • Industrial liaison merely acted as ‘window’ on what the university did – little exchange or dialogue

22. The standard narrow model • Narrow focus on Technology Transfer • Mechanisms: Patents, Licenses, Spin-outs • Limitations • Model is incomplete • Potential financial returns were frequently over-estimated • Metrics distorting behaviour (Goodhart’s Law: any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes)

23. Commercialisation Activities of Academics • Patents (7% of academics) • Licenses (5% of academics) • Spin- outs (4% of academics)

25. The wider model: multiple knowledge exchange mechanisms • A ‘systems’ approach and not simply ‘market failure’ • Educating people • Problem solving • Role of many disciplines (not just STEM) • Interactions with public and third sectors as well as with business • Public space functions (Universities do not move) • Relatively neglected, but distinctive • Includes networking, social interaction, meetings, informal advice etc • Focus on exchange not simply ‘transfer’

26. Academic Interactions with External Organisations People-based activities Standard-setting forums Sitting on advisory boards Giving invited lectures Participating in networks Enterprise education Attending conferences Student placements Employee training Curriculum development Commercialisation activities Community- based activities 5 Licensed research Lectures for the community Public exhibitions 7 Patenting Schools project 4 14 Spun-out company Community-based sports Formed/run consultancy Format adapted from Ulrichsen (2009) Source: Abreu, M., Grinevich, V., Hughes, A. and Kitson, M. (2009), Knowledge Exchange between Academics and the Business, Public and Third Sectors, Centre for Business Research, University of Cambridge, Cambridge.

27. Academic Interactions with External Organisations People-based activities 87 65 38 Standard-setting forums 6 31 Sitting on advisory boards Giving invited lectures Participating in networks Enterprise education Attending conferences 33 67 33 28 Student placements Employee training Curriculum development 49 Commercialisation activities Problem-solving activities Community- based activities 38 35 Joint research 5 43 57 Hosting personnel Licensed research 27 Research consortia Lectures for the community Public exhibitions 7 Consultancy services 10 10 Informal advice Patenting 30 15 Prototyping and testing External secondment 37 Schools project 14 4 46 3 9 Contract research Spun-out company Community-based sports Formed/run consultancy Joint Publications Setting of physical facilities Format adapted from Ulrichsen (2009) Source: Abreu, M., Grinevich, V., Hughes, A. and Kitson, M. (2009), Knowledge Exchange between Academics and the Business, Public and Third Sectors, Centre for Business Research, University of Cambridge, Cambridge.

28. Constraints on Collaboration • Commonly cited constraints include: • cultural differences • disputes over intellectual property (IP) • But, overall, these are not highly cited by in the businesses or academics • Although they may be important for certain types of interaction

29. Academic and business perceptions of constraints on interactions Source: Hughes, A. and Kitson, M. (2010), Connecting with the Ivory Tower: The Business Perspective on Knowledge Exchange in the UK, Centre for Business Research, University of Cambridge, Cambridge.

30. Innovation Policy: lessons from Europe • Moderately superior comparators: • Schleswig-Holstein (Germany) • Wales (UK) • Superior comparator: • Liguria (Italy) • Significantly superior comparator: • Noord-Brabant (The Netherlands) • Leading regions as target comparator: • Gothenburg (Vastsverige) • Southern Finland

31. A new framework for innovation policy • Importance of local economic structure • Adopt a broad notion of innovation • Foster connectivity and openness • Importance of key regional economic anchors • Develop a Triple Helix approach • Develop appropriate governance and policy implementation

32. Importance of local economic structure • Build on local strengths • Develop, transform and upgrade local industries • More cost effective and a bigger impact then developing new industries

35. Adopt a broad notion of innovation • No simply about high technology manufacturing • Importance of process • Importance of design • Importance of business practice • Importance of innovation in services and ‘traditional sectors’

36. A useful electronic device? ‘It has no camera; no USB port; no replaceable battery; no obvious advantage over a laptop, it doesn't support Flash’ Who would buy this?

39. Foster connectivity and openness • Develop collaborative structures and communities • Develop a professional skilled secretariat • Train ‘boundary spanners’ • Networks must be outward looking and inward looking • Move from giving grants to supporting networks

40. Importance of key regional economic anchors • Many economic actors move or can move • Skilled workers, businesses • Importance of connecting to local economic ‘anchors’ • Major employers, universities, hospitals • Creates and embedded networked economy

41. In 1999, Philips decided to concentrate all its innovation activities in one campus Since 2001 the campus has been open to other high-tech companies It operates under an “open innovation” policy Facilities are shared, and collaborations and knowledge exchange are encouraged High Tech Campus Eindhoven

42. Develop a Triple Helix approach • Triple Helix: foster and strengthen connectivity between business, universities and policy makers • Fosters knowledge exchange and wider innovation • Strengthens all partners and the local economy

43. ISH: Schleswig-Holstein

44. ISH: Schleswig-Holstein • Public-private partnership • Foster and support collaboration between academics and business to develop innovation • Provides (temporary) financial, institutional and informational support • Supports development of facilities and studentships in the regions’ universities • Objective is culture change and developing long-term collaboration

45. The Triple Helix approach in Northern Ireland • Northern Ireland has strong universities • The UK study of knowledge exchange in the UK shows that academics from Northern Ireland engage in more knowledge exchange activity than academics from any other part of the UK

46. Governance and evaluation • Collaborative structures need to be guided by the needs of business, academia and the policy community • Focus should be long-term - and policy should not shift based on short-term changes or temporary • Metrics should be concerned with innovation trajectories and behavioural change

47. Summary: Building a Networked Economy • Importance of local economic structure – supporting key sectors – often large traditional sectors • Role of key regional economic anchors • Universities, Hospitals, Large Businesses • Importance of local culture and traditions • Importance of governance structures • Policy must be long term • Impacts will take time • Importance of appropriate metrics

48. Summary Building a Networked Economy • Building collaborative structures – between different businesses and with academia and government (Triple Helix approach) • Structures must facilitate and manage relationships – providing finance/ grants is insufficient • Importance of providing information on how to collaborate and the potential benefits