Academics say lessons must be learned from ITIs failure

A CONTROVERSIAL Scottish Government-funded business scheme aimed a supporting innovation that was abandoned early has been branded a chronic failure by a team of academics who studied the £450 million initiative – and they said policymakers may not have learned all the lessons from its demise.
MSP Murdo Fraser claimed the spectacular failure returned only 600,000 from its investments. Picture: PAMSP Murdo Fraser claimed the spectacular failure returned only 600,000 from its investments. Picture: PA
MSP Murdo Fraser claimed the spectacular failure returned only 600,000 from its investments. Picture: PA

The Intermediate Technology Institutes (ITIs) were never regarded as a ­success and were wound up in 2010 ­having spent around half their budget. The latest research found they “badly malfunctioned, chronically failing to ­deliver the economic objectives envisaged by Scottish Enterprise”.

Launched by then first minister Jack McConnell in 2003, the three “flagship” ITIs were supposed to promote the energy, life sciences and digital media industries across Scotland. With a projected budget of £450m over ten years, their aim was to create a focus for commercialisation of the country’s academic research.

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They were in operation for about six years under a series of leaders before being absorbed back into the main operations of Scottish Enterprise in 2009. Their failure led to calls from Conservative MSP Murdo Fraser for an Audit Scotland investigation. He claimed the “spectacular failure” returned only £600,000 from its investments but cost around £230m.

Now a team of entrepreneurship researchers from the universities of Edinburgh, Glasgow and St Andrews have published an in-depth study on the subject. Led by Dr Ross Brown from the School of Management at the University of St Andrews, the researchers conclude that the programme “produced very little of the expected commercial outputs, such as new tech start-ups and licensing revenues”.

In what is the first independent and objective assessment of the initiative, the research examined the reasons for this policy failure.

Brown said: “The ITI programme was based on an outdated, linear view of ­innovation. The critical stumbling block behind the policy’s failure was the inability of policymakers to properly diagnose the nature of structural problems within the Scottish entrepreneurial ecosystem.”

Co-author Dr Geoff Gregson from the University of Edinburgh said: “We identified a number of factors contributing to ITI underperformance: the research undertaken was too ‘far from market’, ­fitted poorly with the innovation needs of Scottish SMEs, had too many restrictions in terms of the usage of the intellectual property (IP) and the licensing conditions were prohibitively expensive.”

However, the authors are concerned that Scottish policy-makers may not have fully absorbed the lessons from the failure of the initiative.

Professor Colin Mason from the University of Glasgow, who also worked on the project, said: “Lessons need to be learnt to prevent similar and costly policy failures being repeated.

“This entails being open with external researchers and stakeholders with information and data to further our understanding of the performance of policies and, crucially, the causes of failure.”

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Brown added: “While policy failures in the sphere of innovation policy are numerous and costly, such failures are rarely acknowledged by policy-makers, as was the case of the ITIs. Arguably, this prevents the ability to learn from past mistakes.”

In terms of future policy, Gregson said: “Innovation policy-makers need to become less focused on generating the supply of new IP and more focused on increasing the ability of Scottish SMEs to undertake innovative activities and to ­absorb external sources of knowledge.

“A critical mass of innovative SMEs will provide more of a seed-bed for new tech start-ups than policies to stimulate and protect new IP.”