Innovations in Policy and Practice: Unlocking the Potential of New Ideas

1. New Developments in Innovation Policy and Practice Michael Kitson University of Cambridge Judge Business School (name) (date)

4. Innovation is the successful exploitation of new ideas.

5. Innovation: the conventional wisdom • The importance of R&D especially in high technology manufacturing • Importance of corporate laboratories and protecting IP • The crucial role of technology transfer from universities of Universities • The importance of location: clusters and agglomerations • Innovation is an important driver of growth

6. 5 Things they don’t tell you about innovation

7. 1 The importance of R&D is exaggerated

8. Innovation: how important is R&D? • ‘This country’s success ultimately depends on a strong skills base and dynamic R&D both driving an innovative and competitive economy...... The Government will continue to play its part by stimulating R&D investment. The recent changes to the Research and Development Tax Credit, for example, will bring additional benefits to small, medium and large companies alike’. • Lord Drayson, former Minister of State for Science and Innovation, The 2008 R&D Scoreboard, pp. 2-3

9. Innovation: how important is R&D? • Argument that R&D drives innovation • But private sector will under-invest in R&D because it will not capture all the benefits because of externalities • Therefore, the public sector must do R&D or subsidise private sector R&D

10. Direct and indirect government funding of business R&D and tax incentives for R&D, 2007 (% of GDP) Source: OECD

11. How important is R&D? • EU target of increasing research and development (R&D) to 3 per cent of GDP by 2010 • Illusive or elusive ‘externalities’? • Frequent failure to distinguish between ‘R’ and ‘D’ • Many innovating firms do little or no R&D

12. Innovation expenditure per employee in the UK (£) From: Abreu, Grinevich, Kitson and Savona (2008), Taking services Seriously, NESTA

13. Innovation expenditure per employee in the UK (£) From: Abreu, Grinevich, Kitson and Savona (2008), Taking services Seriously, NESTA

14. 2 Most innovation takes place outside corporate laboratories

15. Importance of corporate laboratories

16. Source: Henry Chesbrough (2007) A Closed Innovation System Science & Technology Base The Market Research Investigations Development New Products & Services R D&E

17. Limitations of Closed Innovation • Most ideas and technologies are outside the firm • Importance of accessing and absorbing external ideas • Importance of being open • Importance of being connected • Importance of knowledge exchange

18. 3 Technology transfer is only one part of the role of universities in the innovation system

19. Innovation: the role of universities • The ‘laissez faire’ model • Importance of chance, luck and serendipity • The narrow model • Focus on a narrow range of technology transfer mechanisms • The wider model • Focus on a wide range of interactions • Exchange rather than transfer

20. The laissez faire model • Universities focussed on two missions – research and education • Example: the ‘Cambridge Phenomenon’ initially developed when the University took little active interest in business engagement. In the past: • University largely ignored IP issue • Adopted a liberal attitude to what academics did • Industrial liaison merely acted as ‘window’ on what the university did – little exchange or dialogue

21. The standard narrow model • Narrow focus on Technology Transfer • Mechanisms: Patents, Licenses, Spin-outs • Limitations • Potential financial returns were frequently over-estimated • Metrics distorting behaviour (Goodhart’s Law: any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes) • Model is incomplete

22. Commercialisation Activities of Academics in the UK • Patents (7% of academics) • Licenses (5% of academics) • Spin- outs (4% of academics)

23. Patenting by UK Academics in the last 3 years (% of respondents) Source: Abreu, M., Grinevich, V., Hughes, A. and Kitson, M. (2009), Knowledge Exchange between Academics and the Business, Public and Third Sectors, Centre for Business Research, University of Cambridge, Cambridge.

25. The wider model: multiple knowledge exchange mechanisms • Problem solving through multiple mechanisms • Role of many disciplines (not just science and engineering) • Interactions with public and third (not for profit) sectors as well as with business • Public space functions (Universities do not move) • Relatively neglected, but distinctive • Includes networking, social interaction, meetings, informal advice etc • Exchange not simply ‘transfer’

26. Academic Interactions with External Organisations Commercialisation activities 5 Licensed research 7 Patenting 4 14 Spun-out company Formed/run consultancy Format adapted from Ulrichsen (2009) Source: Abreu, M., Grinevich, V., Hughes, A. and Kitson, M. (2009), Knowledge Exchange between Academics and the Business, Public and Third Sectors, Centre for Business Research, University of Cambridge, Cambridge.

27. Academic Interactions with External Organisations People-based activities 87 65 38 Standard-setting forums 6 31 Sitting on advisory boards Giving invited lectures Participating in networks Enterprise education Attending conferences 33 67 33 28 Student placements Employee training Curriculum development 49 Commercialisation activities Problem-solving activities Community- based activities 38 35 Joint research 5 43 57 Hosting personnel Licensed research 27 Research consortia Lectures for the community Public exhibitions 7 Consultancy services 10 10 Informal advice Patenting 30 15 Prototyping and testing External secondment 37 Schools project 14 4 46 3 9 Contract research Spun-out company Community-based sports Formed/run consultancy Joint Publications Setting of physical facilities Format adapted from Ulrichsen (2009) Source: Abreu, M., Grinevich, V., Hughes, A. and Kitson, M. (2009), Knowledge Exchange between Academics and the Business, Public and Third Sectors, Centre for Business Research, University of Cambridge, Cambridge.

28. Constraints

31. Constraints on interactions with external organisations (% of respondents – All and Engineering) Source: Cambridge Centre for Business Research Survey of Knowledge Exchange Activity by UK Academics (Hughes, A., Kitson, M., Abreu, M., Grinevich, V., Bullock, A. and Milner, I.) UK Data Archive Study Number 6462. Source: Cambridge Centre for Business Research Survey of Knowledge Exchange Activity by UK Academics (Hughes, A., Kitson, M., Abreu, M., Grinevich, V., Bullock, A. and Milner, I.) UK Data Archive Study Number 6462

32. Academic and business perceptions of constraints on interactions Source: Hughes, A. and Kitson, M. (2010), Connecting with the Ivory Tower: The Business Perspective on Knowledge Exchange in the UK, Centre for Business Research, University of Cambridge, Cambridge. Source: Hughes, A. and Kitson, M. (2011), Connecting with the Ivory Tower: The Business Perspective on Knowledge Exchange in the UK, Centre for Business Research, University of Cambridge, Cambridge.

33. THE ACADEMIC IVORY TOWER IS A MYTH

34. 4 Geography: clusters are very different

35. Innovation and location: collaboration and clusters • According to Porter (1998) clusters are ‘geographic concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries, and associated institutions (for example universities, standards agencies, and trade associations) in particular fields that compete but also co-operate.’

36. Collaboration and clusters • The stress on ‘geographic concentrations’ of collaborators can be misleading • The Porter analysis is based on where firms are, not what firms do • Local collaborative behaviour is often not an important driver of innovation • National and international collaborations are usually more important than local collaboration • Important to distinguish between ‘bridging and’ bonding’ networks – bridging networks that are outward looking may be more important for knowledge based activity • There is no one model of clusters

38. Developing New Technologies: the tale of two cities • Strong biotechnology clusters in the Cambridges (USA and UK) • But the development of the industry in the two cities reflects different trajectories and different challenges • Indicates the importance of understanding the geography and history of place

39. Source: MIT Entrepreneurship Centre 1 mile

40. 8 miles

41. Collaboration and clusters • Importance of local economic structure and local economic history • Role of important economic anchors • Universities, Hospitals and key employers • The character of local clusters will vary • So policies will need to be shaped to the local economy

42. 5 Innovation is not correlated with economic growth

43. Innovation and Growth • Economic growth can be increased by technology and innovation • Technological progress can be increased through appropriate policies • Technology transfer, support for R&D

44. Investors Entrepreneurs & Inventors Team Growth: the Role of Innovation IDEAS INNOVATION

45. Innovation and growth: the (Solow) paradox • “You can see the computer age everywhere these days, except in the productivity statistics". Robert Solow, 1987, (MIT, Nobel Laureate) • Economic growth is not apparently correlated with innovation

46. The Innovation (Solow) paradox • Answer? • Innovation takes time to have a major impact on economic growth • Why? • It is the use of technology not the generation of technology that has the biggest impact on growth

47. The innovation (Solow) paradox • US Productivity growth 1995-2000: the three largest contributors to the productivity surge were, in order: • wholesale trade • retail trade • security and commodity brokers (Solow, Cambridge -MIT Summit 2001)

48. Bentonville AR.

50. Michael Kitson IDEAS INNOVATION D I F F U S I O N Investors Entrepreneurs & Inventors Team Growth: the Role of Innovation