bis science innovation week presentation tera 140314 full slide pack

Global leadership in science and innovation:

international comparative evidenceon UK performance

Tera Allas

March 2014

2

The evidence project focused on international benchmarking, not recommendations

Exam question for the project on international comparative evidence on the performance of the UK’s science and innovation system

"What does international comparative evidence tell us about

the key challenges we need to address in order to maintain and

develop the UK's global leadership position in science and innovation?"

3

Comparative evidence on UK science and innovation performance: outline

• Context: importance of science and innovation for productivity, competitiveness and growth

• Science and innovation systems: what “good” looks like and implications for benchmarking

• UK’s performance: international benchmarking of key elements of science and innovation systems

• Implications: broader issues for industrial strategy and BIS

4

A large proportion of productivity growth is associated with science and innovation

Sources of growth in UK labour productivity 2000-2008Health warning: these figures are volatile from year to year

Captures the impacts of the science and innovation system

Key input into innovation activities

Sou

rce:

UK

Inn

ovat

ion

Inde

x: P

rodu

ctiv

ity a

nd G

row

th in

UK

Ind

ustr

ies,

NE

ST

A W

orki

ng P

aper

12/

09,

(NE

ST

A,

2012

)

5

The UK’s comparative advantage derives from knowledge intensive innovative sectors

UK revealed comparative advantage* in selected sectors 2011** = R&D intensive sector; *** Highly innovation active sector

Sou

rce:

BIS

cal

cula

tions

bas

ed o

n U

NC

OM

TR

AD

E a

nd I

MF

dat

a; B

IS E

cono

mic

s P

aper

15

Fig

ures

34

and

35*

A p

ositi

ve r

elat

ive

com

para

tive

adva

ntag

e (R

CA

) va

lue

indi

cate

s th

at c

ompa

red

to t

he r

est

of

the

wor

ld,

a se

ctor

rep

rese

nts

a di

spro

port

iona

tely

larg

e sh

are

of a

cou

ntry

’s o

vera

ll ex

port

s; 1

wou

ld im

ply

a co

untr

y is

co

mpl

etel

y sp

ecia

lised

in a

spe

cific

sec

tor;

-1

that

the

cou

ntry

ha

s no

exp

orts

in t

hat

sect

or;

and

0 th

at t

he

shar

e of

the

sec

tor

in t

he c

ount

ry’s

exp

orts

is e

xact

ly t

he s

ame

as t

he w

orld

sha

re o

f th

at s

ecto

r

**

**

**

** **

**

****

*

***

***

***

6



• Science and innovation systems: what good looks like and implications for benchmarking



7

Science and innovation systems are complex and can contain virtuous or vicious circles

Illustrative map of the UK’s science and innovation system

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rce:

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atio

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8

For example, more public money for science can “buy” more than just better research

Illustrative example of what public sector science funding can “buy”

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Indeed, there is a strong correlation between public and private sector R&D investment

Government and business expenditure on R&D 2011% of GDP

* G

over

nmen

t fin

ance

d G

ross

Exp

endi

ture

on

R&

D;

** T

otal

Gro

ss E

xpen

ditu

re o

n R

&D

(G

ER

D)

min

us G

over

nmen

t fin

ance

d G

ER

DS

ourc

e: O

EC

D,

BIS

ana

lysi

s

10

Effective S&I systems rely on a large number of elements that work well together

Money (investment, expenditure, financing)• Sufficient public sector funded research

(often performed in HE institutions)• Strong private sector funded and performed

research (relative to industrial structure)• Funding from other sources (charity/third

sector and overseas)Talent (human capital, absorptive capacity)• Population instilled with intellectual curiosity

and inspired by science• Ability to grow, attract and retain world-class

researchersKnowledge assets (science base, IP)• World-class, internationally collaborative,

highly cited published research• High-quality research facilitiesStructures and incentives• Competitive excellence driven funding, with

sufficient stable investment in new areas• Balance between curiosity-driven (“pure”)

and needs-driven (“applied”) research• Balance between deep expertise and inter-

disciplinary research• Meaningful (public/private) career paths for

world-class researchersBroader environment• Sufficient number of companies willing and

able to invest in knowledge creation

Money• Effective funding for applied research and

innovation investment (public and private)Talent• Sufficient quantity of individuals in firms and

public sector with right absorptive capacity‒ Specific science and technology

understanding‒ More generic basic, STEM,

knowledge management and business translation skills

Knowledge assets• Strong business/academia co-authorship• High-performing clusters with world-class

research institutions and and critical massStructures and incentives (institutions,

collaboration, co-ordination)• Incentives for business/researcher

collaboration, co-creation and mobility• Sufficient co-ordination and strategic

alignment among key actors• Effective challenge-led programmesBroader environment (structure of the

economy, tax and regulation)• Open markets encouraging innovation as a

source of competitive advantage• Mutually reinforcing activities within and

links between science base and firm base

Money• Timely access to risk capital (alongside

advice, skills, networks, market disciplines)• Exit routes that provide access to markets

and finance for growth companiesTalent • Entrepreneurial aspirations and business

building skills• General business skills (e.g., strategy,

management, marketing, production)Knowledge assets• Patents, trade-marks and other

commercialisable IPStructures and incentives• Sufficient intellectual property protection to

incentivise innovation and capture valueBroader environment• Productive dynamic between large firms

and vibrant growth companies• Sophisticated demand, including from public

sector (procurement)• Generally positive business environment

(tax, regulation, planning, etc.)Innovation outputs• Revenues, exports, profits, productivity and

growth derived from science and innovation• Improved societal outcomes due to better

level and application of knowledge* T

his

is n

ot a

com

preh

ensi

ve li

st b

ut o

ne w

hich

aim

s to

cap

ture

the

mos

t im

port

ant

feat

ures

; w

hile

the

key

cha

ract

eris

tics

are

cate

goris

ed h

ere

in a

nec

essa

riy 2

-dim

ensi

onal

way

, th

e ac

tual

sys

tem

is m

ulti-

dim

ensi

onal

and

non

-line

ar,

whe

re t

he c

onne

ctio

ns b

etw

een

elem

ents

are

crit

ical

Knowledgecreation

Knowledgediffusion and translation

Knowledgeapplication and value capture

Key characteristics* of an effective science and innovation system

11

We have used a 6-part framework for the main features of science and innovation systems

Framework for assessing science and innovation systems

2. Talent

1. Money

5. Broader

3. Knowledge

Assets

6. Innovation

Outputs

4. Structures

and Incentives

Environment

2. Talent

1. Money

5. Broader

3. Knowledge

Assets

6. Innovation

Outputs

4. Structures

and Incentives

Environment

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12






13

Share of global exports by sector* 2010

Sou

rce:

BIS

cal

cula

tions

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ed o

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tern

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rade

Cen

tre

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and

IM

F W

orld

Eco

nom

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utlo

ok d

ata

* W

eigh

ted

by s

ize

of e

cono

my

6. Innovation outputs

The UK’s export performance is strong in knowledge-intensive goods and services

Overall performance on innovation outputs is mixed*, with apparent weaknesses in SMEs

UK relative score on a number of innovation output indicators10 = highest ranking comparator country; 0 = lowest ranking comparator country

Sou

rce:

BIS

ana

lysi

s us

ing

OE

CD

and

IU

S d

ata

6. Innovation outputs*

The

re a

re f

ew r

elia

ble

met

rics

of in

nova

tion

outp

ut a

cros

s co

mpa

rato

r co

untr

ies;

for

som

e of

the

indi

cato

rs b

elow

, a

redu

ced

list

of c

ount

ries

(Ger

man

y, F

ranc

e, F

inla

nd,

UK

) w

as u

sed

15

Gross Expenditure on Research and Development (GERD) 1991-2011% of GDP

Sou

rce:

OE

CD

(20

13)

Sci

ence

, T

echn

olog

y an

d In

dust

ry S

core

boar

d

1. Money

0

1

2

3

4

5

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Per cent

Canada Finland France Germany

Japan South Korea United Kingdom United States

The UK’s investment in R&D has been static and below comparators since early 1990s

Public and private sector GERD as a % of GDP, 2011

1.0 0.90.6

0.8 0.9 0.8 0.80.6 0.7

3.02.8

2.8 2.0 1.8

1.4 1.4

1.2 1.1

0

1

2

3

4

5

South Korea Finland Japan Germany United States France Australia UnitedKingdom

Canada

Per cent

Private and third sector GERD

Government financed GERD

16

The UK appears to significantly under-spend on R&D relative to comparator countries

Public and private sector gross expenditure on R&D 2011% of GDP

1. Money*

Gov

ernm

ent

finan

ced

Gro

ss E

xpen

ditu

re o

n R

&D

; **

Tot

al G

ross

Exp

endi

ture

on

R&

D (

GE

RD

) m

inus

Gov

ernm

ent

finan

ced

GE

RD

Sou

rce:

OE

CD

, B

IS a

naly

sis

4.03.7

3.4

2.8 2.7

2.2 2.2

1.8 1.8

17

Only part of the lower private sector R&D spend is explained by industrial structure

1. Money

Business Enterprise R&D (BERD) adjusted for industrial structure 2011% of GDP

Sou

rce:

OE

CD

Sci

ence

, T

echn

olog

y an

d In

dust

ry S

core

boar

d 20

13

18

The UK’s innovation body is significantly smaller than those in Germany and Finland

Comparison of innovation bodies

1. MoneyS

ourc

e: T

SB

, F

raun

hofe

r an

d T

EK

ES

web

site

s, E

uros

tat

(for

GD

P a

nd e

xcha

nge

rate

s) CountryInnovation body

Budget 2013, £m*

Budget as % of GDP

UKTechnology Strategy Board

440 0.03

GermanyFraunhofer Institutes

1600 0.07

Finland TEKES 490 0.29

19

Even with private sector innovation included, UK’s total investment is only average

Estimated total R&D and innovation investment 2011% of GDP

1. Money*

Gov

ernm

ent

fund

ed G

ross

Exp

endi

ture

on

Res

earc

h an

d D

evel

opm

ent

(GE

RD

); *

* G

ER

D m

inus

Gov

ernm

ent

fund

ed

GE

RD

(un

adju

sted

for

indu

stria

l str

uctu

re);

***

See

sep

arat

e m

etho

dolo

gica

l not

e (u

nadj

uste

d fo

r in

dust

rial s

truc

ture

)S

ourc

e: O

EC

D,

IMF

, C

orra

do e

t al

201

0 da

ta,

BIS

ana

lysi

s

20

The UK’s performance in science and innovation related human capital is mixed

UK relative score on a number of talent indicators10=highest ranking comparator country, 0=lowest ranking comparator country

2. TalentS

ourc

e:,

BIS

ana

lysi

s us

ing

OE

CD

, U

NE

SC

O,

WE

F,

CE

P a

nd I

MD

dat

a

21

University qualifiers in STEM subjects 2011-12

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2. Talent

The UK’s STEM graduates tend to be concentrated in life science fields

22

Proportion of tertiary degrees awarded to women 2000 and 2009

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2. Talent

Women’s participation in STEM education is high but concentrated in health related fields

In the UK in 2011/12, 53% of all STEM

graduates were female

23

UK’s field-weighted citation impact across ten research fields in 2002 and 2012

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3. Knowledge assets

The UK’s science output is strong across a broad range of research fields

UK relative score on a number of indicators relating to structures and incentives operating in the system1=worst comparator country; 10=best comparator country

Structures and incentives in our science and innovation system are mostly fit-for-purpose

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4. Structures and incentives24

25

Different indicators provide a mixed picture of university-business collaboration in the UK

4. Structures and incentives

Relative UK score on indicators of university-business collaboration% of comparator** countries’ average

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26

The UK’s business environment is relatively favourable to science and innovation

5. Broader environment

UK relative score on a number of broader environment indicators10=highest ranking comparator country, 0=lowest ranking comparator country

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27

The UK business environment produces new businesses at a high rate compared to others

EXAMPLE: New business registrations per thousand population* 2011

5. Broader environment

10.4

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3.6 3.11.8 1.4 1.1

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Can

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(200

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28 5. Talent5. Broader environment

Mid-sized businesses are more innovative but a smaller share of UK business population

Mid-sized businesses are moreinnovative in the UK….

Source: Mid-sized Businesses in Finland, France, Germany, Sweden and the UK – General Statistics, NIESR, December 2011;Future champions: Unlocking growth in the UK’s medium-sized businesses, CBI, October 2011

% of revenue derived from innovation by company size in the UK 2009

Mid-sized businesses as % of turnover of all businesses 2009

32.8

32.0

31.5

30.5

19.7

Sweden

Finland

Germany

France

UK

…but make up a relatively smallpart of the UK business population

29

In sum, the UK’s main weaknesses are overall under-investment and human capital issues

Summary of the relative performance of the UK’s S&I system

ElementRelative performance Comments

Money Medium / Low • Public sector support for both R&D and innovation low (but data imperfect)• Private sector R&D investment low even after adjusting for industrial structure• Relatively high private investment in innovation does not outweigh low R&D

Talent Medium / Low • Long-standing issues in basic numeracy and literacy, STEM and especially engineering disciplines, and management skills

Knowledge assets

Medium / High • Extraordinary productivity of science system as measured by highly quoted articles and field-weighted impact

• Relatively poor performance on patents not a good indicator of value added

Structures and incentives

Medium / High • Excellence driven competitive system praised by other nations• Questions about whether science portfolio and incentives balanced enough

Broader environment

Medium / High • Overall business environment positive in comparison to non-US comparators• Issues around ability of business population to fully exploit science and

innovation

Innovation outputs

Medium (mixed)

• Export performance and general competitiveness relatively high• Low levels of innovation active SMEs and questions about innovativeness (and

productivity) of sectors less exposed to global competition

30


• Context: importance of science and innovation for productivity, competiveness and growth




31

Emerging thinking on maximising S&I value suggests a number of policy links to explore

Emerging thinking on issues that need addressing in order to further maximise the value of the UK science and innovation system

Element Potential priority issues to address (FOR DISCUSSION)

Money • Addressing under-investment in non-incremental way

Talent • Addressing basic numeracy and literacy, STEM, management skills• Considering government levers to raise aspiration and entrepreneurship

Knowledge assets

• N/A

Structures and incentives

• Linking innovation support more seamlessly into other business support• Managing science and innovation investment as a balanced portfolio• Further aligning Industrial Strategy with science and innovation strengths

Broader environment

• Attracting R&D intensive corporations to locate and stay in the UK• Ensuring access to finance interventions are of sufficient scale and co-

ordinated with industrial strategy and science and innovation policy

Innovation outputs

• Understanding drivers of innovation in service sectors• Understanding whether competition policy drives enough innovation

Global leadership in science and innovation:

international comparative evidenceon UK performance

Full report and annexes available at:

https://www.gov.uk/government/publications/science-and-innovation-system-international-benchmarking

bis science innovation week presentation tera 140314 full slide pack

Documents

uks science

innovation performance

uk science

growth science

importance of science

science ability

innovation investment

public sector science