Witty Review: UK Competitiveness and the Local Dynamics of Innovation


Fourth post on Witty Review and Partnerships for Progress

4. UK Competitiveness and the “Local Dynamics of Innovation”

The national Enhancing Value Task Force work through CIHE and UK-IRC delivered a report in 2011 on the UK’s R&D Landscape  (Alan Hughes and Andrea Mina). This made sobering reading. While the UK has the lowest share of total government financed support for business R&D going to small and medium sized firms of the comparator countries sampled in the report, the UK ‘has by comparative international standards a relatively high share (over 40%) of its business enterprise R&D expenditure carried out by the subsidiaries of overseas firms’.

Furthermore, ‘the business enterprise component of R&D expenditure in the UK is low by international standards and is concentrated in the hands of a few very large firms and the small number of industrial sectors in which they are based’. SMEs ‘accounted for only around 3.5% of the total R&D spend’. Even if we recognise that investment in R&D and share of R&D is only one indicator of a healthy innovation system, these factors do have significant implications for policy.

The implication of this combination is that SMEs are not being empowered/empowering themselves to grow, as they are in comparator countries, and multinationals have an enormous influence on UK R&D investment; this, together with other factors, weakens the UK competitive position. The UK is ‘vulnerable to the strategic investment decisions of overseas funders of UK R&D and of the parent companies of subsidiaries based in the UK as well as the decisions of the major UK based multinationals’.

Indeed we have seen how significant the effect of multinational companies investing and disinvesting in UK R&D and production through examples like Nissan in the NE and Pfizer in Kent respectively. Arguably, the UK has long been too dependent on these sorts of overseas investments, especially as they are sometimes short-term.

CIHE UK R&D Landscape

Why is this of particular resonance for the Witty Review? Well, Witty determines that UK innovation policy should ‘eliminate the barriers which create domestic competition’ and should ‘avoid unhelpful competition’. Indeed competition, rather than collaboration seems to be the main driver and dominant behaviour in UK innovation, including in universities, so one may question whether the current balance is right. Are we so busy competing against each other (as the former RDAs did) that we nullify each other and therefore allow multinationals into the vacuum to shape the UK economy?

Are we failing to build complementary collaborations which could help develop a much more sustainable home share of research and innovation in the UK market? Witty seems inclined to think so. He notes that ‘our share of exporting SMEs, and the proportion of SMEs’ revenues accounted for by exports are both below the EU average’ and sees a significant role for universities in helping local SMEs create and grow their export markets, by drawing on universities’ ‘alumni networks and international business relationships’.

What are ‘the local dynamics of innovation’? Well, according to the Global Innovation Index Report, the improving local dynamics of innovation around the world are instrumental in helping to keep innovation alive and well following the 2008 crisis. These include new hotspots for local innovation in China, Brazil and other countries, the development of local clusters which can then engage internationally and the focus on more local innovation support methods, for which the Report cites Uruguay and some notable examples from the Arab World.

The determinants for effective local innovation include  ‘strengths and weaknesses of local industries and knowledge institutions as well as access to finance and to markets within and outside national borders’. A good example of precisely this growing but locally driven innovation which takes full account of these determinants is OpenLivIn, one of the open innovation demonstrator partnerships Jisc funded.

However, any discussion of innovation systems seems incomplete without consideration of the physical infrastructure, whether transport or information, upon which such systems would, at least to some degree, depend. Some would say that the UK’s rather piecemeal transport infrastructure does not lend itself to efficient transfer of people and ideas; even if the UK is one of the more digitally advanced nations on earth (albeit with 8M people who have never used the internet), it still needs a much more efficient and joined-up transport infrastructure to support and maximise innovation and development effectively.

Witty notes that other countries are putting substantial resources into improving their research and innovation systems so we must not become complacent – indeed we have slipped from 2nd to 5th in the World Economic Forum ranking for university-business collaboration. Witty believes that local growth should be supported wherever it is and that the growing sectors are more important than the locality itself. So he sees a major role for the 39 Local Enterprise Partnerships (LEPs), which he recommends should put universities at the heart of their thinking, and all should have university membership on their Boards.  Every LEP should have a strategic goal that every innovative SME in the locality that could benefit from university engagement should do so.

On the collaboration theme, he highlights the importance of trans-locality and inter-LEP collaboration, as it makes no sense to assume all innovation in one business sector should be confined to one geographic area; this inter-LEP collaboartion will enhance UK competitiveness. He notes that LEPs will have significant EU structural funds which will help enable this. The other key messages in Witty’s vision are the leading role for universities in this picture, the TSB continuing its good work but setting its sights higher and supporting more local innovation, and both TSB and UKTI supporting more SME-centred growth.

Jisc’s Partnerships for Progress have demonstrated how some of these university and college led collaborations and local innovation dynamics can work in practice. Many of these projects engaged LEPs and local enterprise zones closely in their work, for example Humber Open, and engaged new SMEs at the same time as creating innovative spaces for the application of their knowledge and expertise, for example myKE in Corridor manchester and RetailClimate in the Dyfi Biosphere.

Retail Climate

However, one element that receives relatively little attention in Witty’s report is that of enabling technology. Yet digital technology is transforming university external engagement, whether through customer relationship management, LinkedIn or online collaboration and open innovation. As SMEs are time poor and resource-poor, online engagement can be a highly effective way of interacting with them.

Interface Scotland, through OpenBiz, have demonstrated how the innovative use of digital technologies can result in increased SME engagement using webinars and podcasts for example. Jisc BCE’s Partnerships for Progress demonstrate how digital technology, when combined with university leadership, SME engagement and an enhanced, empowered Third Mission can deliver remarkable results in opening up knowledge for innovation and co-development.

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