According to the Economist Intelligence Unit, China will be the world’s largest economy by 2020, followed by the United States, India, Japan, Germany and Britain.
With countries such as Brazil, Russia, South Korea and Mexico set to rise through the ranks, the key question is how can Britain maintain its competitive advantage in a shifting and increasingly global market?
The answer from the British Government, to paraphrase a number of strategies, reports and other communiqués, is clear. To effectively compete in the global economy, British businesses can no longer derive competitive advantage from low prices but must do so through producing innovative products and services. Government sees the effective use of science and technology as crucial to the ongoing competitiveness of the British economy, as it can be used to improve business processes, develop new products and services and access new markets.
Although necessary, this is a big ask from Government. Figure 1 shows that the UK has a longstanding productivity gap with the USA, France and the average for the G7 (excluding the UK). One of the main drivers of this productivity gap is historically low investment in research and development (R&D). The level of business R&D in the UK as a proportion of GDP was 1.2% in 2004, well below the OECD average of 1.5%. Another driver of the UK productivity gap is the relative difficulty that we seem to have translating science and technology IP into new products, services and processes, when compared with countries such as the USA, France and Germany (see Figure 2). There is also substantive variation in productivity performance across the UK regions (see Figure 3).
Cleary, there is much to be done if the Government is to meet its objective of maintaining the competitiveness of the UK economy through the effective application of science and technology. But what is the role of the Regional Development Agencies (RDAs) in all of this? Well, according to the UK Government’s Technology Strategy Board, the role of the RDAs is to help stimulate demand and create the conditions for success in science and technology.
One example of where this is taking place is in the six science cities of Birmingham, Bristol, Manchester, Newcastle, Nottingham and York. The Government defines these locations as science cities because they all have strong science-based assets (such as a major university or centre of research excellence) that can be used to attract a critical mass of innovative businesses and become drivers of regional growth.
England’s science cities can provide a strong platform to support regional economic growth through the commercial exploitation of science and technology. Drawing from established (e.g. Kista Science City in Sweden, www.kista.com) and new (e.g. Gujarat Science City in India, www.scity.org) competitor schemes, I set out below what I consider to be the top-three steps for success for England’s science cities. Cleary there are a number of other steps for success for science cities. The three outlined below have been chosen as they contradict what is often regarded as ‘received wisdom’ in this area.
1. Look beyond university spin-outs RDAs have traditionally supported the commercialisation of university IP by helping businesses to ‘spin-out’ of universities. This has typically involved funding for business incubators to house spin-outs and funding for soft support services (e.g. legal, financial, commercial and marketing advice) to help spin-outs grow. However, to date too many of these spin-outs have been lifestyle businesses and we need to recognise that spin-outs without the potential for sustainable profits are merely hobbies. RDAs should focus their efforts supporting only start-ups with real profit potential, freeing up resources for support in equally important areas such as university-industry collaboration with established regional SMEs and large corporates. RDAs need to focus more efforts supporting universities to engage with existing businesses in science cities so that they can raise productivity levels and their overall competitiveness. From the academic year 2007/08, the Higher Education Funding Council for England (HEFCE) will allocate £60 million of research funding a year based on how much research income universities receive from industry. Universities in science cities are well placed to attract such funding.
The answer from the British Government, to paraphrase a number of strategies, reports and other communiqués, is clear. To effectively compete in the global economy, British businesses can no longer derive competitive advantage from low prices but must do so through producing innovative products and services. Government sees the effective use of science and technology as crucial to the ongoing competitiveness of the British economy, as it can be used to improve business processes, develop new products and services and access new markets.
Although necessary, this is a big ask from Government. Figure 1 shows that the UK has a longstanding productivity gap with the USA, France and the average for the G7 (excluding the UK). One of the main drivers of this productivity gap is historically low investment in research and development (R&D). The level of business R&D in the UK as a proportion of GDP was 1.2% in 2004, well below the OECD average of 1.5%. Another driver of the UK productivity gap is the relative difficulty that we seem to have translating science and technology IP into new products, services and processes, when compared with countries such as the USA, France and Germany (see Figure 2). There is also substantive variation in productivity performance across the UK regions (see Figure 3).
Cleary, there is much to be done if the Government is to meet its objective of maintaining the competitiveness of the UK economy through the effective application of science and technology. But what is the role of the Regional Development Agencies (RDAs) in all of this? Well, according to the UK Government’s Technology Strategy Board, the role of the RDAs is to help stimulate demand and create the conditions for success in science and technology.
One example of where this is taking place is in the six science cities of Birmingham, Bristol, Manchester, Newcastle, Nottingham and York. The Government defines these locations as science cities because they all have strong science-based assets (such as a major university or centre of research excellence) that can be used to attract a critical mass of innovative businesses and become drivers of regional growth.
England’s science cities can provide a strong platform to support regional economic growth through the commercial exploitation of science and technology. Drawing from established (e.g. Kista Science City in Sweden, www.kista.com) and new (e.g. Gujarat Science City in India, www.scity.org) competitor schemes, I set out below what I consider to be the top-three steps for success for England’s science cities. Cleary there are a number of other steps for success for science cities. The three outlined below have been chosen as they contradict what is often regarded as ‘received wisdom’ in this area.
1. Look beyond university spin-outs RDAs have traditionally supported the commercialisation of university IP by helping businesses to ‘spin-out’ of universities. This has typically involved funding for business incubators to house spin-outs and funding for soft support services (e.g. legal, financial, commercial and marketing advice) to help spin-outs grow. However, to date too many of these spin-outs have been lifestyle businesses and we need to recognise that spin-outs without the potential for sustainable profits are merely hobbies. RDAs should focus their efforts supporting only start-ups with real profit potential, freeing up resources for support in equally important areas such as university-industry collaboration with established regional SMEs and large corporates. RDAs need to focus more efforts supporting universities to engage with existing businesses in science cities so that they can raise productivity levels and their overall competitiveness. From the academic year 2007/08, the Higher Education Funding Council for England (HEFCE) will allocate £60 million of research funding a year based on how much research income universities receive from industry. Universities in science cities are well placed to attract such funding.
2. Segment the market There is a popular misconception that science parks and wider science cities are primarily focused on attracting globally mobile investment projects into the UK. Although inward investment is important (it brings new jobs, technology and ‘know-how’ to the country), it comprised less than 20% of total demand for UK science and technology premises in 2005 (see Figure 4). On average, the majority of demand for science and technology premises in the UK (over 60% in 2005) is derived from companies located within 30 miles of the scheme in question. Although science cities should still spend time identifying and targeting inward investment opportunities, the majority of their efforts should be focused on indigenous high-growth companies and existing inward investors (many of whom will be seeking re-investment opportunities) in their respective city-regions.
3. Educate consumers Science cities have an important role to play in encouraging people to study science and technology subjects at school, college and university. These subjects are in decline (e.g. engineering students represented under 5% of the HE total in 2003, down from almost 12% in 1996) and there are stark implications for the industries that rely on these skills. Furthermore, science and technology industries (ranging from aerospace through life sciences to telecommunications) provide not only jobs in the UK but are also an important source of external income.
Despite this, science cities should not overlook their role in educating consumers in science and technology. Perfect information is a bedrock of economic theory – consumers with perfect information choose the best products and services, rewarding companies with higher sales. Science cities cannot flourish without science-savvy consumers and more work needs to be done to educate consumers on matters as diverse as global warming, GM foods, nanotechnology and stem cell research.
Science cities have the infrastructure to support economic competitiveness in each of the city-regions they operate in, not just in science, engineering and technology-related sectors, but across the wider economic base. To be effective though, they need to look beyond ‘received wisdoms’ and be managed as innovatively as the industries they seek to nurture.
*Martin Cooper is an Associate Director at DTZ Consulting & Research.
He leads the company’s work in the field of science, technology and innovation. Martin is happy to discuss any questions that you have on this article and can be contacted at martin.cooper@dtz.com.
3. Educate consumers Science cities have an important role to play in encouraging people to study science and technology subjects at school, college and university. These subjects are in decline (e.g. engineering students represented under 5% of the HE total in 2003, down from almost 12% in 1996) and there are stark implications for the industries that rely on these skills. Furthermore, science and technology industries (ranging from aerospace through life sciences to telecommunications) provide not only jobs in the UK but are also an important source of external income.
Despite this, science cities should not overlook their role in educating consumers in science and technology. Perfect information is a bedrock of economic theory – consumers with perfect information choose the best products and services, rewarding companies with higher sales. Science cities cannot flourish without science-savvy consumers and more work needs to be done to educate consumers on matters as diverse as global warming, GM foods, nanotechnology and stem cell research.
Science cities have the infrastructure to support economic competitiveness in each of the city-regions they operate in, not just in science, engineering and technology-related sectors, but across the wider economic base. To be effective though, they need to look beyond ‘received wisdoms’ and be managed as innovatively as the industries they seek to nurture.
*Martin Cooper is an Associate Director at DTZ Consulting & Research.
He leads the company’s work in the field of science, technology and innovation. Martin is happy to discuss any questions that you have on this article and can be contacted at martin.cooper@dtz.com.
