A waste of good ideas

March 17, 2000

Why is Britain not making the most of its innovations? The fault does not lie with academics, says Michael Rennie

Why do university academics get the feeling that as well as providing an education for tomorrow's graduates, they have to be innovative in producing new ideas and discoveries to underpin the provision of new services and products, and in addition have to do the technology transfer and set up small companies to market the new goods and services? Furthermore, why are academics rather than industrialists blamed for not turning brains into billions?

Helen Liddell, our minister for competitiveness in Europe, recently said: "I have earned the deepest scars trying to convince some of our brilliant innovators that a business plan is not a fruitless waste of computer time. I have looked on in awe at how our competitors on the other side of the Atlantic have left us standing when it comes to developing business ideas, especially as spin-offs from colleges and universities."

But at a time when David Blunkett has admitted that government policy has too often not been informed by good research, Liddell bases much of her criticism upon a report (the Global Entrepreneurship Monitor 1999 Report, or GEM report, London Business School), the conclusions of which are based upon pretty ropey evidence.

The authors' main index of the entrepreneurial character of a country was derived from asking 1,000 of its citizens if they had started a business recently. Guess what? A country with the largest and richest domestic market, composed of individuals with the greatest disposable income and the highest access to financial support, and the highest current growth rate, ie, the United States, came out on top. Britain was fifth.

The data collected were so imprecise that the relationships between either growth of gross domestic product or employment rate and the entrepreneurial index did not meet the normal criteria for statistical significance. In fact, the authors of the report admit that there is no good hard data, even in the United States, on the generation or the lifetime of small technology-based companies; there is even less on the characteristics of successful technology transfer from science-based activities in universities.

There is, however, some hard data available about the relative success of US academic institutions in turning basic science into

business opportunities. According to the GEM report, technology transfer from universities was responsible for adding $21 billion and 180,000 jobs to the US economy each year. This sounds a lot, but in the context of a

US GDP of about $10 trillion it is peanuts.

Similarly, when one examines the rate of award of US patents to American academic institutions (US patent office data), 2,436 patents were awarded in 1997. However, this is only 2.2 per cent of all US patents - IBM alone was awarded more than 1,000 patents in the same year.

Sir Robert May, the government's chief scientific adviser, has pointed out in his paper The Scientific Investment of Nations that of the Organisation for Economic Cooperation and Development) countries, Britain lies fifth in the league table of US and EU patents awarded. Unfortunately the UK patent office is not nearly so interested in the sources of home-grown innovation as the US patent office, and it is impossible to discover, from published data, how much of the activity of British academic scientists ends up as a patentable idea.

However, due to the efforts of Bob Smailes, director of Edinburgh University's research and innovation office, a comparison has been made between the activities of 132 US universities and the activities of Edinburgh, Glasgow, Strathclyde, Dundee, Stirling and Aberdeen universities, which together are probably fairly representative of research-active universities in the UK as a whole.

Dr Smailes's figures show that between 1994 and 1997, both the US universities and the six Scottish universities were about equally efficient in terms of the cost of activities leading to disclosures, patents, licences and the return of cash in royalties. The Scottish universities were consistently more efficient in converting sponsored research income into spin-off companies. In the US, about $93 million of investment was required before one spin-off company was launched, whereas in the six Scottish universities only $25.5 million was required (see graph).

There is often a lot of sloppiness and confusion in the terms "spin-off" and "start-up". A spin-off company is wholly derived from the activity of a university. A start-up, on the other hand, has been created by previous graduates of the university, not necessarily requiring access to university patents or technology.

As Dr Smailes has pointed out, the number of spin-offs that are created, even from institutions as powerful as Massachusetts Institute of Technology, remains only a handful, and there is no evidence to suggest that, by this benchmark, the activity of US academics is any better than that of British ones. These apparently highly efficient Scottish scientists were probably who Helen Liddell was berating for being second-rate to the US during her time as education minister in the Scottish Office.

If it is not the fault of the universities that Britain's businessmen and industrialists are not making the most of British inventions, whose fault is it? The rate of research and development spending in the OECD countries correlates very well with the rate of award of patents, whether US or European (see graph).

British business and industry only spend half as much as a percentage of our GDP on industrial and commercial R&D as their counterparts in the United States (OECD data). Is it any wonder that we get so little back in terms of share of US and European patents awarded? The problem is obviously, as it has been for the past 20 years, the short-sightedness of Britain's small businesses and industrialists, who are notoriously bad at investing in R&D.

It may be true that there should be better exploitation of British science but it is no good asking an overburdened academic sector to do it or blaming them for not doing it. Furthermore, it is unlikely that tying a greater proportion of the science budget (as is currently being considered by the Office of Science and Technology) into goal-oriented, business-friendly R&D would do more than repeat the Ropa (Realising Our Potential Awards) fiasco, in which poor-quality proposals were funded to the exclusion of better quality science.

The culture within British business, of short-term gain and shareholder value riding pre-eminent over long-term development based upon science, engineering and technology needs to be changed. This cannot be done by exhortation. A start could be made by altering the corporate tax structure in favour of greater investment in R&D by all sizes of business.

Whatever is done, the government would be extremely ill-advised to divert support from the UK science base, which is now at a lower level, in real terms, than it was when Tony Blair was first elected to Parliament in 1983.

Michael Rennie is professor of physiology, University of Dundee.

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