Government departments come and go in the UK, but the Technology Strategy Board survives. DTI, BERR and now BIS, all have sheltered the TSB and shelled out for its annual ‘Innovate’ shindig.

This year Innovate ’09, on Tuesday 13^th October, is back in its original home, the Business Design Centre in London’s fashionable Islington. This is the venue the TSB used before it mutated from being, as the name suggests, an advisory board, lobbing ideas on innovation into the government machine, into a “research council in waiting,” spending as much money as some RCs but without all the cumbersome formalised peer review and academic interference that goes with those other launderers of public cash.

The real Research Councils may have had qualms about this upstart, but they are already lining up announcements to show their adherence to the TSB’s message, that research should feed through into innovation. The Engineering and Physical Sciences Research Council (EPSRC) has flagged up that Innovate ’09 will be its launch pad for its “Third Call for Applications for Innovation and Knowledge Centres”.

The IKCs, says EPSRC’s press release, “will develop the knowledge transfer interface with business and provide professional relationship management as well as collaborative research and postgraduate training to increase future capability in these key areas”.

There are already a bunch of IKCs, but more are in the pipeline.

“Each new IKC, expected to be announced in autumn 2010, will receive up to £9.45m in addition to funding from other sources. £6.95m will come from EPSRC and BBSRC (where the research falls within the biotechnology and biological science remit) and a further £2.5m from the Technology Strategy Board over a period of five years.”

No news yet on the subjects these planned IKCs will cover. But they desperately want the business world to join in the fun:

“The overall aim of the IKC initiative is to provide a centre of excellence where the best research and business innovation can work together to maximise the economic impact of EPSRC research and postgraduate training.”

Anyone going to Innovate ’09 can dig around on the IKC stand at Innovate ’09. Maybe they will say something about the subjects the call hopes to back.

Scotland prides itself on the quality of its universities and their research. It has also put considerable effort into coaxing academics into turning their toiling in the lab into profitable businesses, through, for example, the  Scottish Enterprise (SE) Proof of Concept programme. But it seems that for all of its attempts to stand out from its larger southern neighbour, in one area at least it has been quietly sitting on its hands.

The Scottish Science Advisory Council’s (SSAC) reckons that the country’s businesses are deficient in their R&D spending. As Professor Steve Beaumont, Vice Principal for Research and Enterprise at the University of Glasgow and a member of the SSAC, puts it “Scottish industry appears to be less research intensive than business in the same sector elsewhere. If we are to accelerate innovation in the economy, companies need more incentives to invest in R&D and this in turn will help them capitalise on the strength of our universities.”

Beaumont was commenting on a new report, Business R&D in Scotland: A Missing Link, in which the SSAC says that “Business R&D conducted in Scotland under-performs the rest of the UK, contributing only 0.56% of GDP compared with 1.08% for the UK as a whole in 2006″.

The council puts some of the blame for this deficit down to poor links between business and the country’s world class universities. As the report puts it: “The outputs of Scotland’s universities (research, consultancy, trained PhD graduates) are not being captured by Scottish industry, which in turn exerts little influence on the research undertaken in academia.”

The report goes on to say that the mismatch between supply of academic research output and demand from industrial R&D “is at least a missed opportunity whose correction could improve our economic performance”.

According to Professor Anne Glover, Chief Scientific Adviser for Scotland and Co-Chair of the SSAC, “There is a compelling argument for business to benefit from the substantial public investment in our research base and to translate this into focussed business R&D programmes in collaboration with academia. Our research base has a role to play too, in reaching out to industry to help turn lab-based developments into the new products and processes that will boost our economy.”

One problem facing Scotland’s policy makers seems to be confused evidence on the capabilities of the country’s industry. The reports recommends that, because of “mixed messages about the innovative behaviour and capabilities of the Scottish business base,” Scotland should seek to resolve “apparently contradictory findings from recent policy research on the capabilities of the Scottish business base.”

Among other recommendations, the report calls for the Scottish Government to “strengthen the pipeline of support mechanisms” including expanding proof of concept type support “to include business innovation”. The SSAC advocates looking into the idea of expanding SE’s Proof of Concept programme to “develop innovative products and processes of value from sectors of the economy other than the Universities, Research Institutes and NHS”.

One reason for advocating more emphasis on proof of concept activities is that it has already delivered results. As the report puts it “proposals seeking R&D grant support emerging from the SE Proof of Concept Programme tend in the main to be strong candidates for support – they tend to be ‘SMART-investment’ ready”.

One idea that the report floats might have come a bit too late. Scotland’s once proud financial sector now has rather a lot of egg on its face, thanks in part to innovations that turned out to be less than wondrous. However, the SSAC, which tactfully overlooks the sector’s recent woes, still thinks that there is room for innovation, especially in the sector’s use of new technology.

The council admits that it would be “pointless to expect this sector to increase its research spend to a national norm”. On the other hand, “investing in research-intensive sectors that create the technologies on which new services might be built not only creates new markets for those sectors but also enhances the competitiveness of the service sector”.

The council believes that “Scotland could enhance the competitiveness of one of its most important industries by supporting R&D in its technology supply chain”. It also says that “a better understanding of supply chain linkages between the technology and the service sectors is vital”.

Companies are not the only beneficiaries from their R&D spending. The latest edition of ZEWnews, the newsletter from the Centre for European Economic Research (ZEW), points out that there are also “additional social returns”.

The newsletter reports on a study that ZEW is carrying out in collaboration with SV Gemeinnützige Gesellschaft für Wissenschaftsstatistik mbH. The research shows that “R&D gives rise to both high direct benefits and high additional social benefits”.

These social gains may not be what the company had in mind, but when governments put money into R&D they should be higher on the agenda. As the newsletter puts it, there is a question as to “whether it is appropriate to concentrate research funding increasingly on areas that promise to generate maximum additional social returns”.

As well as putting numbers on the returns that companies gain from their own R&D – a 41 per cent return on investment within two years – the study shows that “knowledge generated by R&D also makes an important contribution to increasing productivity in other companies”.But these benefits are much lower than the additional social benefits.

The researchers claim that “From the perspective of the economy as a whole, the additional social benefits surpass the direct benefits from R&D. They represent between 130 and 150 percent of direct benefits.”

There are significant implications, says the ZEW team, for government investment in R&D. “The existence of additional social benefits provides an important justification for government R&D funding.” The researchers conclude that “the state must provide incentives for companies to conduct R&D in those areas in which such benefits accrue”.

Their key message is that “The government should therefore concentrate its funding on those areas in which companies, if left to their own devices, would not invest or only invest very little, because the transfer of knowledge to third parties is too great.”

“The optimum structure for a university TTO [tech transfer office] is for it to be a wholly owned subsidiary company of the University.” That is the view of Tom Hockaday, the Managing Director of Isis Innovation Ltd, the wholly owned subsidiary of Oxford University.

Hockaday,one of the most respected and experienced practitioners of tech transfer, comes to this conclusion in a short item on the website of Isis Innovation, What is the Best Structure for a University Technology Transfer Office? He may conclude that Oxford has it right, but Hockaday is open to other ways of doing things. As he puts it “Good people can make any system work and bad people can make any system fail.”

Hockaday makes important points that any tech transfer professional should heed. For example, he insists that “the TTO is wholly dependent upon the willingness of researchers to engage in the process, support from senior university members, and should adopt a philosophy of supporting researchers who want support”. In other words, don’t run around trying to bully researchers who simply don’t want to be involved in tech transfer.

This leads on to another issue, and one that can be a negative aspect of having a separate company. It can, he explains, “forget it is owned by a university. If the TTO starts showing off then the researchers will turn against it.”

Hockaday is too polite to name names. But anyone who has been around TTOs for any time can probably think of one or two who fall into this trap.

He is also too polite to name any of the “bad people” who have managed to make a system fail.  They still exist, despite many years of increasingly professional TTOs.

Talk to enough people and you will still hear occasional complaints that TTOs manage to get in the way, and to screw up relationships between companies and researchers who desperately want to work together. One reason that you sometimes here for these failures is the intervention of lawyers. It would be interesting to read Hockaday’s views on this aspect of tech transfer.

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.”