The notion that you build and run racing cars for the benefit of today’s motorists is about as convincing as the idea that you send people to the Moon so that you can build a better frying pan. It turns out, though, that Formula 1 motor racing may have a point beyond its ‘benefit’ to TV, advertising and makers of champagne. (Such a waste.)

A recent report from the Advanced Institute of Management Research (AIM) looks into “how the successful introduction of innovation in motorsport is organised and managed”.

The report, Racing For Radical Innovation: How motorsport companies harness network diversity for discontinuous innovation, tells us that motor racing is not small beer. It has an annual turnover of £6 billion, exports worth £3.6 billion and supports 38,500 full and part-time jobs, 25,000 of them engineers. Motorsport and performance engineering is, they say, “one of the UK’s industrial success stories”.

But trouble is just around the corner. Professor Rick Delbridge of the Cardiff Business School, who did the research behind the report, warns that “innovation activity is under extreme pressure. Regulation changes, increased concerns with costs, and limits to exploration and networking for knowledge creation are undermining the innovativeness of motorsport firms.”

The Fédération Internationale de l’Automobile (FIA) wants to slash the budgets that companies can dedicate to each year’s new Formula 1 racing cars. One consequence might be to slow down the pace of innovation. But there are lessons we can draw from all the money that has already gushed into making faster cars.

The report, tells us that there really are some “innovations which have their origins in the motorsport industry” – things like “carbon fibre wheel-chairs, non-slip boots, hi-tech fishing line and the influence of pit-stop crews on the efficient transferral of patients from the operating theatre to intensive care”.

Like the non-stick frying pan, that mythical spin off from the US’s space programme, these innovations might well have happened without motor racing. But looking at racing’s technological advances can still teach us some wider lessons about innovation itself.

The AIM report looks at a number of innovations within racing itself and draws from then some thoughts that might be pertinent for others who are pushing forward technology.

For example, the report describes diesel engines developed for the 24-hour Le Mans race. A German racing car manufacturer created an engine block made out of aluminium, “something nobody had done before”.

This particular idea relied on working with long-established partners, but that may not be the best source of groundbreaking ideas. The report says that a weak spot in the industry’s innovation strategy may be its failure to tap into external input of the sort behind another “radical innovation” in motor racing technology, the use of carbon fibre in Formula-1 cars.

In general, the report advocates more “lateral thinking within the industry”. It also recommends “the development of inter-sector relationships, between the aerospace and motorsport industries, for example”.

The nice thing about the motor sport industry is that it is a less complicated research challenge than bigger and complicated sectors. This relative simplicity can make it easier identify and study the factors in play when it comes to successful innovation.

Professor Delbridge certainly has lessons for the motorsport sector, and advice to the policy makers on how to keep the show on the road. But there are also messages in the work for the wider innovation community.

The report says that “By studying the way that the motorsport industry approaches innovation it is possible for organisations in both the public and private sector to become more effective at supporting and developing radical innovation.”

The topic in the researchers’ headlights was “the way the motorsport industry harnesses the power of diverse networks -  networks outside the usual sphere that a firm operates within – to generate radical innovations”. That’s something that all innovators have to think about.

The report has a set of bullet points that describe the characteristics of successful innovators. They:

• Engage in wide exploratory innovation search activities, looking beyond their own knowledge base and domain of expertise;
• Identify the advantages offered by new combinations of existing knowledge, through the application of technologies and materials initially developed elsewhere;
• Often partner with ‘unusual’ firms – firms that operate beyond the usual sphere of collaboration, in the motorsport industry;
• Collaborate with partner companies to establish a close working relationship – strengthening personal ties and promoting more general reciprocity and trust;
• Encourage lateral thinking within their existing web of partners.

You don’t have to be a petrol head to find something of interest in there.

At first sight, it looked like the effect of the UK government’s latest reshuffle of departments was to reassemble the old Department of Trade and Industry. Just two years ago the DTI disappeared into the Department for Business, Enterprise & Regulatory Reform, the Department for Innovation, Universities and Skills and the Department of Energy and Climate Change. So, you could almost see the new Department for Business, Innovation and Skills as a DTI lacking energy.

Far from it, says Lord Drayson, Minister for Science and Innovation, when we Twitter the accusation at him. “Science & Innovation are now at the heart of the new department,” he tweeted back. “Focus now is on the high tech growth agenda.”

The government spells out the new department in an announcement from Number 10. The senior minister in what we will probably have to call DBIS is Lord Peter Mandelson, previously Secretary of State for DTI before he shuffled off to Brussels and the House of Lords.

DBIS, the announcement tells us, “combines BERR’s strengths in shaping the enterprise environment, analysing the strengths and needs of the various parts of British industry, building strategies for industrial strength and expertise in better regulation with DIUS’s expertise in maintaining world class universities, expanding access to higher education, investing in the UK’s science base and shaping skills policy and innovation through bodies such as the Technology Strategy Board”.

In his own take on DBIS, Drayson says “The science ring-fence is safe and sound and the innovation agenda will further benefit from this move.” Sadly, this is unlikely to convince those academics who think that they, and they alone, should decide what goes on in universities, and that they can safely dismiss the views of anyone not intimately involved in doing research.

The last time we talked to people in the old departments, just a month or so ago, in DIUS at least, Drayson’s previous home, they were still trying to bring coherence to the previous witches brew of responsibilities they had inherited two years ago.

We can probably assume that for the time being at least, anyone with dealings with the UK government on innovation matters will see little effect of the changes. After all, even some of those old DTI email addresses still work, although links to web sites never really caught up with the split into BERR and DIUS.

The announcement of the new department does not say if the remit of DBIS includes rearranging the canvas covered collapsible seating on the decks of large ‘unsinkable’ ocean-going liners at risk of hitting an iceberg.

While earlier generations of students took to the streets to protest about apartheid, miners’ wages and even student fees, today’s undergraduates, in the UK at least, seem to get hot under the collar about the commercialisation of academic research.

In a story, Protesters disrupt business-link conference, the magazine Times Higher Education reports on student disturbances, scuffles even, at a knowledge-transfer conference, organised by the Association for University Research and Industry Links.

The title of the event, “Knowledge Transfer: Delivering a Route to Growth How HE Institutions can add value to the UK economy!” doesn’t seem likely to bring them out on the streets. But THE quotes a statement that protesters read out at the event: “The organisers of this conference want to use our collective resources, our public services, to prop up an unfair system. Financial crisis has shown us that we can’t trust the profit mongers … Don’t give our education system wholesale to business.” The magazine quotes one delegate as responding “Don’t they want a job after graduation?”

Then again, the students’ line is not far removed from some of their teachers. Some of whom are dead against any hint of public influence over their freedom to spend taxpayers’ money with little regard for its possible value to society.

The funny thing is that the academics who rail against turning academic research into an R&D arm of business don’t seem to talk to companies. Were they to do so they would find that most businesses agree with them. They don’t want academics involved in product development.

Companies have given up on basic science and want academics want roaming around on the frontiers of the unknown. They do, though, want to know what the ‘boffins’ find there, and a bit of help in exploiting it, which doesn’t seem to be a lot to ask of people who depend on money from taxpayers.

“[I]ndustry should not be expected to make up shortfalls in research funding by others such as Research Councils and the European Commission,” it says on the CBI’s Innovation, science and technology homepage. The CBI’s Inter-Company Academic Relations Group (ICARG) raises this grumble in its response to a recent joint Review of the Impact of Full Economic Costing on the UK Higher Education Sector (580KB PDF file) for Research Councils UK and Universities UK.

The contentious issue is the demand that whenever a company, or anyone outside the system, including research councils and government departments, pays academics to do research the customers should pay the “full economic costs,” mysteriously shortened to fEC in the report, “depending on the extent to which the research provided a public good,” as the announcement of the review put is. The idea behind fEC is that it should include the costs of the paperclips, office cleaners and so on that you need to maintain a lab as well as a share of capital costs.

The review has a more detailed definition of fEC:

“An institution is being managed on a sustainable basis if, taking one year with another, it is recovering its full economic costs across its activities as a whole, and is investing in its infrastructure (physical, human, and intellectual) at a rate adequate to maintain its future productive capacity appropriate to the needs of its strategic plan and students, sponsors and other customer requirements.”

The issue of fEC came up recently when talking to a researcher. Now a professor in London, the researcher had come from a university in another European country and still had a research group there. It turned out that the team in the “other country,” oh, alright, Belgium, costs less to run. So that is where the professor still does some of his work there.

While this is good for European togetherness, you have to wonder if it makes sense for universities in the UK to be subcontracting work in this way.

The CBI, naturally enough,  worries about the impact of fEC on businesses wanting to work with universities. In its submission  to UUK/RCUK (390KB PDF file) it writes that for many companies the move to fEC “has been to raise the cost of university research, and this has constrained growth or caused a decline in their research engagement with UK universities”.

The CBI fingers another hot topic for universities, what are they for? In recent years the government seems to have seen them as innovation machines, the front end of a chain that leads inexorably to new technologies. Stuff £X into the system and you will get £nX out as profits at the end of the chain, with, if all goes to plan, n being bigger than 1. The CBI reminds us that “the main objectives of government support for university-business interaction are improvement of the  knowledge base and increased economic impact”.

While the idea of “increased economic impact” may fall into what they call, in research circles, the “linear model” of innovation, “improvement of the  knowledge base” is another matter.

Recent governments have all encouraged industry and universities to work more closely together. The CBI fears that fEC works against that. It is concerned that “the transmission of higher costs to business funders of research as a  result of FEC has had a negative impact on the development and maintenance of business-university research relationships in the UK”.

So, while the review for UUK/RCUK is generally optimistic that fEC has done good things for universities, elsewhere there are concerns. The CBI sums up the issue in a sentence “The UK is now seen as the most expensive place in the world to fund a post-doctoral researcher.”

One problem seems to be in arriving at the numbers for fEC. The CBI complains that “the costs which some universities seek to attribute to a single researcher often bear little relationship to the value”.

The UUK/RCUK review issue seems to agree that universities need to be clearer on this, but it buries its take in jargon about things like “Trigger metrics”. The review also acknowledges that companies may not be happy about the current situation. “Research should be conducted to examine the degree to which UK industry is contracting  research overseas, and the degree to which research at UK universities is being contracted inward by overseas-based companies. This study would examine the reasons for these flows and for any trends that can be discerned in them.”

As we reported recently, RCUK is already looking at the relationship between universities and industry. Clearly they will want to include fEC when questioning the business community.

That survey might also throw in questions about another issue that the CBI has talked about recently, tax credits for R&D. The UK may demand that universities implement fEC, unlike universities in other countries, but some of those countries lack the tax credits that are available in the UK. This must complicate calculations about the relative costs of different countries for R&D, especially if businesses can set some of those bills for fEC against tax.

There is plenty of talk of the importance of patent licensing in the business world, but little in the way of concrete evidence. That, at least, is the view of the OECD which has done something to plug that information gap in a working paper from the Directorate for Science, Technology and Industry (DSTI) Who Licenses Out Patents and Why? Lessons from a Business Survey (360K pdf file).

The OECD, the European Patent Office and the University of Tokyo surveyed businesses on their licensing-out of patents. “The goal was to investigate the intensity of licensing to affiliated and non-affiliated companies, its evolution, the characteristics, motivations and obstacles met by companies doing or willing to license.”

The survey, in the second half of 2007, elicited responses from 600 European firms and 1600 Japanese firms. In both regions, the aim was to see what patent holders were doing, “the questionnaire focuses on licensing out and not on licensing in“.

The working paper describes licensing as a part of a changed landscape in innovation. “A new organisation of industrial research has emerged, less centred on the individual firm, more based on networks and markets, and relying more on new entrants and technology-based firms.” One consequence of this is that innovative firms “are increasingly dependent on external sources of knowledge rather than conducting in-house research”.

Patent licensing is a natural part of this process. Just how much, though, is an open question. As the working paper puts it: “Little is known on licensing transactions from a quantitative perspective: their volume, the profile of companies involved, the sectors where they are more prevalent, the motives for the firms involved, their economic effects and the difficulties they meet with.” This is where the survey comes in. It begins to flesh out some of these issues.

It turns out that 35% of firms in Europe and 59% of Japanese respondents declare having licensed out patents. The licensing activity seems to be less common for “middle-sized” companies: “the share of licensing-out companies is higher among the smallest and notably, among the larger companies, above 1000 employees”.

There are regional differences even within Europe. “The highest proportion of firms license-out in Europe is found in the UK, followed by Nordic countries.”

Why would companies license out patents? They do it to make money. “The first motivation, by far, to license patents to third parties is ‘earning revenue’ for both European and Japanese companies.”

The second motive is to gain access to someone else’s patents through cross-licensing deals. Here the trade is more important for larger companies.

The third reason for dealing in patents, in Europe at least, they didn’t ask the Japanese companies, is to “stop others from infringing your patents”. The report suggests that “This can be seen to a certain extent as forcing a license through: the patent holder has identified an alleged infringer and proposes him/her a license so as to avoid going to court. It is noticeable that this motive is exactly the same in importance for large and smaller firms.”

A final reason is to set a standard based on the patented technology. As the report puts it “licensing boosts the diffusion of the invention, which might therefore become a de facto standard”.

There is plenty of untapped knowledge tied up in patents out there, it seems. “About 24% of firms in Europe declare having patents that they would be willing to license out but could not (53% of firms in Japan).”

The report draws several conclusions that could influence policy makers. For example, the survey shows that “licensing markets are less developed than they could be, in view of the willingness of patent holding companies to license more of their portfolio. Helping suppliers to find partners would substantially increase transactions in patent markets.”

On the other hand, the report suggests that we need more evidence before going too far down that road. “A proper evaluation of the private and public mechanisms that could help solve market failures in patent markets has yet to be made before specific policy implications can be drawn from this study.”

Innovators, and those who support them, in the south east of England occasionally complain that they get less of the regional money, national or EU, to support technology businesses that floods into places like the north east and north west of the country. So it is interesting to see that the Engineering and Physical Sciences Research Council (EPSRC) chose to work with Finance South East (FSE) on a “pioneering” new grant scheme. in all, the first round of this new fund will have £2 million to distribute in lumps of up to £100,000.

Under the scheme, “FSE will deliver a new two year pilot fund that will facilitate the collaboration of universities with industry”. The idea is that there will be grants of up to £100,000 for “academic institutions that have previously received EPSRC research funding and that wish to work in collaboration with a commercial partner to develop that research into an industry application”.

FSE is a hybrid public-private organisation that receives backing from South East England Development Agency (SEEDA). It has a number of funds that work at different dinancial levels to support various aspects of the innovation process. The organisations says that it has “over £20m of funds under management and early-stage proof-of-concept funding is one of its specialist areas”.

Dr John Baird, EPSRC’s head of Knowledge Transfer, says that he expects to see three calls a year for the new funds. He believes that the scheme “will deliver practical support to researchers looking to explore the commercial potential of their work with a collaborative partner.  Key benefits will include experienced mentors assigned to each project and access to funding advisors for help with business planning and the structure of a suitable longer term funding package.”

News that Research Councils UK (RCUK) is to sponsor a study “to demonstrate and enhance the impact of research” is another sign of the growing interest in finding out just what society gets in return for the money its invests in academic research. The RCUK announcement says that the Council for Industry and Higher Education (CIHE) hopes to “obtain a deeper understanding of companies’ motives for collaborating with Higher Education Institutions (HEIs), such as how and why they collaborate and what benefits they think come from collaborations”.

Governments put money into academic research on the assumption that society will get something back from this “investment”. After all, no one would spend billions every year simply to keep university researchers off the streets. The challenge is to discover what society, including the business world, gets in return for that taxpayers’ cash.

In the new study, the CIHE plans to interview 20 companies, “ranging from large global companies to UK small and medium enterprises” that have indulged in research based collaborations with HEIs. The work is a follow on from previous work, including the report Universities, Business and
Knowledge Exchange.

One  motivation behind this work is to persuade the Treasury that the investment in research over the past decade or so was money well spent, and that it is not a good idea to turn off the tap just because the economy has turned sour.

Politicians like simple numbers when they measure such things, which is why for a time there was what many saw as an overemphasis on counting companies spun out of universities or patents filed by academics. As the earlier report points out, there are other interactions “including informal contacts, publications, conferences, graduate recruitment, internships, joint research projects, problem solving and consulting by university staff, testing and standard-setting, participation in networks, access to public space for cross-sector engagement”. Just try counting that lot, let alone putting a monetary value on it.

RCUK is not the only organisation that is pondering the point of business-university research links. The Confederation of British Industry (CBI) has launched its own consultation, through its Inter-Company Academic Relations Group (ICARG). The CBI’s announcement says that ICARG, a committee “drawn from a wide spectrum of R&D-intensive companies and other organisations, who have direct involvement and responsibility for managing the relationships between their organisations and the academic sector,” is “collecting members’ perceptions and experiences of methods of demonstrating the benefits to companies of research links with universities”.

One reason for seeking this information is to feed into its policy input on a new way of allocating research funds to universities that is due to start in 2014. The R&D managers who respond to the CBI’s request may also find the results useful ammunition in their attempts to persuade management that it pays to invest in R&D. Then there is the likelihood that the UK government will pay more attention to evidence that comes from the business world when it comes to deciding on the value of academic research to society.

Now that the US government has said that it is OK to conduct research with stem cells, we can expect growing global competition in the area. This might have been a factor behind last week’s announcement from the UK government of the details of the Office for Life Sciences (OLS), first announced by the Prime Minister at an industry summit in January. After all, stem cells are this year’s hot topic in the life sciences.

The press release with details of the OLS, from the Department for Innovation, Universities and Skills (DIUS), tells us that “by the end of July 2009″ the new outfit should take action “to make a real difference to the operating environment for life sciences companies by working across Government to address a range of key issues”. The new “virtual Office,” as DIUS describes it, has staff seconded from the Department of Health, the Department for Business, Enterprise & Regulatory Reform and the Treasury.

“Working with Departments responsible for these areas, the virtual Office will,” says the announcement, “co-ordinate national policy, undertaking work to build a sustainable and integrated life sciences industry in the future. It will look at what steps can be taken to improve access to finance for SMEs and to stimulate investment in the life sciences industry.”

The jumping off point for the new initiative was the report The Review and Refresh of Bioscience 2015. Among the four areas that this report highlighted, “finance, regulation, new ideas, and human capital and resources,” funding for companies is probably the most pressing. The Science|Business report of the recent BioIndustry Association (BIA) survey of 295 companies shows just how dire the postion is in the UK.

The new office will also have to look at a perennial issue for research in the life sciences in the UK. What can the government do to turn the National Health Service (NHS), which purports to be one of the world’s best health care sectors, and one of the UK’s country’s largest consumers of research, into something that supports rather than hinders innovation.

The innovation minister, Lord Drayson, makes all the right noises. “This new Office represents the government’s commitment to safeguarding the future of our life sciences industry, creating an environment where everyone from large pharmaceuticals to small biotech and medical tech companies can prosper. The skills, expertise and intellectual property these businesses possess are extremely valuable to the future of this country.”

Somehow, though, the NHS usually manages to shrug off attempts to turn it into an enthusiastic promulgator of innovation. Small businesses can find it an especially hard market to break into.

Richard Barker, Director General of the Association of the British Pharmaceutical Industry, makes the point in his quotes for the press release. “The Government needs to protect and build the UK’s scientific talent base and do all it can to encourage the NHS to be a champion of innovation by speeding up access to new medicines and boosting clinical trials.”

The news that there are opportunities to take up internships at Imperial Innovations provides a rare opportunity to write about “job opportunities”. There aren’t many chances to get experience at the frontiers of knowledge transfer.

This one doesn’t say so, which is a big mistake on their part, but Imperial Innovations is actually offering to pay interns. Too often the word “intern” means slave labour, where you have to pay your own way. This is especially true in the media, which may go some way to explain why there are so many middle-class entrants whose parents can afford to bankroll them.

Chris Haley, the Market Services Manager at Imperial Innovations, who posted the opportunity over on LinkedIn, says that “these are paid internships, although we would hope that applicants are more interested in the work experience than the salary!”

There are two positions open, covering technology transfer and market research. Lasting for four months, “extendable by mutual agreement,” the announcement says that the internships “would be ideal for candidates with a strong technical/scientific background wishing to move from research into the commercialisation of the results of research”. Apply by 17 April.

The knowledge transfer profession is becoming increasingly professional. No longer is it the domain of career academic admin folks. Indeed, the whole idea behind the Institute of Knowledge Transfer (IKT) is to professionalise the business. Maybe an internship should count for one of the qualifications that the IKT is so keen to promote.

The last time the economy caught flu, the innovation community may have had a hard time, but it did not hibernate completely. Google is probably the most famous example of a business with its roots in a recession. Now there is evidence from the Institute for Manufacturing (IfM) at the University of Cambridge Engineering Department that in one region at least, Cambridge, high-tech companies that opened for business in the recession had a higher survival rate than businesses born in boom times.

Alex Drofiak and Elizabeth Garnsey of the IfM have looked at the performance of companies over the past two decades. Their findings appear in a new working paper The Cambridge High Tech Cluster: resilience and response to cyclical trends. “During the recession of the early 1990s,” they write, “a smaller cohort of tech start-ups achieved higher survival rates than those started in boom years.”

The researchers set out to “identify discontinuities in the expansion and contraction of technology-based firms and jobs, against the background of cyclical influences”. Their study shows that the nature of the high-tech businesses influences the region’s economic development.

One reason why Cambridge fared better than others is that it didn’t rely so much on Internet start ups.  “The relative immunity of Cambridge firms to the Internet crash between 2000 and 2002 was partly the result of relatively few high tech Internet firms having been founded in the area.”

In general, though, there was a marked decline in tech businesses in the Cambridge area between 2002 and 2006 “caused by a high failure rate amongst new IT software companies, started during the technology boom”. However,  some sectors, “biotech and R&D” saw steady growth through the 1990s and early 2000s with an increase in both firm and job numbers.

Cambridge may have bucked the trend because it gave birth to “specialist firms in market niches with a relatively low failure rate, a different dynamic from that in larger population centres with more internet firms.” One such niche, a mini-cluster even, is inkjet printing where the five firms in the area expanded from 297 employees in 1988, to 840 employees in 1998, and up to 1055 employees in 2008.

One factor in the ebb and flow of businesses into the area is the ‘birthplace’ of the parent company. When it comes to the success rate of the larger businesses, companies with their roots in Cambridge generally do better than companies that move into the area in an attempt to tap into the region’s high-tech expertise.

Mergers and acquisitions (M&A) also play a part. “Cambridge technology firms are attractive targets for acquisition by corporations seeking to improve their innovation performance by buying a promising technology and/ or innovative team,” says the report. But acquired companies don’t always survive in the region.

There was a flurry of M&A activity during the post-1996 tech boom, mostly in telecoms, IT software, instruments and biotechnology. One consequence of this is that businesses can get shut down during recession as the acquirers pull in their horns.

It depends on the tech sector, but the IfM’s numbers for the period between 1994 and 2006 show that job losses follow acquisitions. “For those firms issuing performance figures for acquired units, there were 1365 fewer jobs after acquisition than there had been when these firms (in biotech, instruments, IT software and telecoms sectors) were independent.”

The availability of financing is also important. There may be more venture capital around in Cambridge than there was, but businesses also need banks to back them. After 2004, “tech start-ups may have been disproportionately affected by financial stringency during the housing boom”. Indeed, that boom may have helped to starve tech businesses of cash.

One theory is that banks preferred putting money into mortgages rather than high-tech businesses. Interviews with former bankers, revealed another factor, a shortage of bankers knowledgeable about technology firms.

When it comes to the survival of those companies that did come into being during recessionary times, the IfM report suggests that this could be because “Only firms with better prospects may have been founded in the recession of the early 1990s and these benefited from the economic expansion later in the decade.” This suggests that, if this phenomenon persists, while fewer companies may have come into being in recent years, more of them may still be around after the recession.

One difference between today’s start ups and those of earlier times is that “many Cambridge firms are developing innovations with actual or potential applications to environmental products and services”. So the region may be better placed to exploit a “cleantech” wave.

The report highlights the role of government procurement in encouraging the growth if cleantech businesses.  “New companies need customers for their innovations. Government procurement of innovative products and services could demonstrate their value and stimulate private sector demand.”

There is a role model that the government could follow. “In the Netherlands, all products procured by government will have to achieve high standards of sustainability by 2012, a way of stimulating demand for environmental innovation.”

Whatever the sector, when it comes to creating new businesses, the authors warn that technology based firms “have been showing signs of contraction since the technology downturn. While credit was available, they were subject to pressure from the financial sector to achieve value-capture more rapidly than was feasible. Unless these firms have the funds to create new value for users, financial value-capture cannot be sustained.”