George Boag: Innovation needs proper support if it is to create value

Published on Tuesday 2 June 2009 19:29

THERE is no dispute about the need to encourage creativity at policymaking level, whether in Scotland, the UK or EU.

A recent report from the National Endowment for Science, Technology and the Arts (Nesta) highlights the importance of the role that higher education institutions play in this sphere. The report demonstrates the performance of UK universities' knowledge transfer has dramatically improved in the last ten years and now compares favourably with universities in the US. It also highlights the broader contribution universities make to the economy, identifying their importance as sources of knowledge and skills and as centres for economic clusters.

At a time when the UK needs to look for new sources of growth, it is vitally important policy recognises the contribution that universities can make.

The view of innovation in the recent Budget was very narrow, focusing on the science base.

A wider, more appropriate definition of innovation is about the ability to create tangible value from new ideas.

In many cases, the implementation of new business models, in addition to the introduction of new services, creates greater value than merely focusing on the development of new products.

In my view, the Chancellor fails to address the wider business base and service sector – a significant and valuable contributor to the Scottish economy, accounting for more than 70 per cent of GDP.

Mr Darling has committed to spending 750 million in a strategic investment fund designed to improve the creation of emerging technologies.

His belief is this new fund will provide financial support for emerging technologies and regionally important sectors in, for example, advanced manufacturing, digital and biotechnology. This will, he thinks, encourage exports, support inward investment, promote research and development our world-class science base, creating thousands of hi-tech businesses and hundreds of thousands of high-skilled jobs in the process.

But there is a distinct lack of detail about how the fund will operate and align with existing support from the public sector.

Scottish Enterprise already provides a range of funding through the Scottish Seed, Scottish Co-Investment and Scottish Venture funds, and two days before the Budget, the Scottish Government announced it had earmarked 150 million to bring these funds together and establish a Scottish Investment Bank.

The new entity aims to provide investment in innovative Scottish firms with significant growth potential.

Ultimately, these funds will only create economic impact if they complement each other to stimulate innovation and back winners dropping through gaps left by other support mechanisms.

Moreover, the Chancellor announced further review of the tax system to consider how changes to it will encourage innovative activity. This has great potential, but must be carried out against the background of a broader definition of innovation.

Since the 2003 Lambert Review there has been growing emphasis on university knowledge transfer and commercialisation activities. These are relevant to the engagement of the higher education sector with industry, through collaborative research, consultancy, licensing and spin-out companies.

Six years on, the Scottish Government's Joint Future Thinking Task Force was established to optimise the contribution the Scottish university sector can make to the Scottish economy in the next 20 years. However, the Department of Innovation, Universities and Skills is expected to save 1.9 billion, including 400m in 2010-11, mainly through making the research councils, universities and colleges "more efficient".

From a Scottish perspective, the Budget raises questions about the effectiveness of support to result from the announcements, and how the support will complement existing initiatives.

Equally, there are questions about the focus on science and technology rather than a wider definition, but more worrying is how the cuts on public sector spending will impact on business support and the contribution of universities.

&#149 George Boag is chief executive of Targeting Innovation.