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Research report: April 2009

The Connected University

Driving Recovery and Growthin the UK Economy

Michael Kitson, Jeremy Howells,Richard Braham and Stian Westlake


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Foreword by Lord Sainsbury o Turville

As this report clearly shows, the perormance o UK universities in knowledge transer hasdramatically improved in the last ten years and now compares avourably with universities in theUnited States. Not only have our world-class research universities maintained their outstanding

record o research, but they are now producing a high level o patents, licensing agreements,industrial research and spin-o companies. Also around many o them, as the report vividlydescribes, high-tech clusters are growing up. These not only provide the knowledge andinormation-rich conditions which spin-o companies need to grow and be protable but alsoattract spin-in companies and oreign research institutes.

It has been claimed that industrially we live on a fat earth where geography is no longer importantand where talented individuals across the world compete on a level playing eld. But the reality isdierent. In the new global economy i high-tech companies want to be competitive, they need tolocate the key parts o their operations in knowledge and inormation-rich regions where there isa concentration o the research, creative individuals and inrastructure needed or innovation. Andthe government must adopt the policies which enable such clusters to grow and be successul.

At a time when the UK needs to look or new sources o growth, providing the right conditionsor high-tech manuacturing companies and knowledge-intensive business services should be apriority, and there is an exciting opportunity or government and RDAs to build on the success thathas already been achieved.

As the report makes clear our world-class research universities are already having a major economicimpact on their surrounding areas. This should not come as a surprise. I one looks at the USAone nds that the universities which have had most impact on their local economies, such as MIT,Berkeley, Stanord and Austin, are all world-class research universities.

There is, however, enormous scope or business-acing universities to more actively engage withsmall- and medium-sized businesses in their regions, and government and the RDAs should make

certain that they have the incentives and resources to do so. Also a ew tentative initiatives havebeen taken in supporting knowledge transer rom FE colleges and this is something that governmentand RDAs ought now to be rapidly expanding. For many small businesses the best organisations tohelp them be more innovative and protable will be FE colleges rather than universities.

At a time when it is essential to produce the best possible conditions or high-tech manuacturingto grow and be protable, there is a danger that a great deal o eort will be wasted in introducingtotally new incentives or policies. Instead o doing so, the most valuable action that governmentand the RDAs could take, as this report makes clear, is to build on what has been achieved in thelast 15 years and to encourage universities to travel urther along the exciting road on which theyhave already embarked.

It is not possible to predict exactly where new jobs will emerge in the uture, but it is possible to seemany opportunities or UK industries to create new products and services, and new industries, inareas as diverse as aerospace, pharmaceuticals, biotechnology, regenerative medicine, telemedicine,nanotechnology, the space industry, intelligent transport systems, new sources o energy, creativeindustries, computer games, business services, computer services and education. We can alsobe certain that many o the new businesses which will drive change in these industries will bedeveloped in the high-tech clusters around our universities.

Lord Sainsbury o Turville

April, 2009

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Executive summary

The UKs universities are precious nationalassets, regularly leading the world in thequality o their research and discoveries. But ordecades, policymakers have wrestled with thequestion o how to turn academic excellenceinto economic impact. With the collapse o

the UKs nancial services sector, this issuehas become urgent. The innovative businessesthat our universities create and support willbe essential to allowing us to emerge stronglyrom the recession. This report asks how we canmake this a reality.

It begins by examining the multiacetedcontribution that universities make to theeconomy, highlighting their importance assources o knowledge, and also their role assources o skilled employees and as the centres

or regional economic clusters.

Eight case studies show how thriving clusterso economic activity have grown up aroundleading UK universities, and the eect orecent policy and university strategy in helpingthis to happen.

The case studies also show that the wayuniversities interact with businesses is evolving.The earliest collaborations, such as those seenin the initial growth o the Cambridge cluster,relied signicantly on good ortune and otenhappened below the universitys radar, a modelwe have called the serendipitous university.Over the past 15 years, the process o ormalknowledge transer developing spin-outcompanies, proting rom patents and licences has been proessionalised and upgraded.This commercial university model has helpedpromising clusters emerge more widely. Morerecently, universities have been casting theirattention even more broadly, thinking notjust about the ormal transer o intellectualproperty to industry, but also their role in

building clusters, connecting to the nationaland international economies and bringingtogether thinking, practice, and nance. This

model o the connected university holds thekey to urther economic growth.

Building the links to encourage businessgrowth will become an increasingly urgentissue or universities. As public sector unding

in other areas is cut, there will be an increasingonus on universities to demonstrate the publicand economic benet o spending on science,technology and research. There are severalways that universities can do this:

Getting the basics right: ensuring thattechnology transer organisations areperorming at the standard set by leadingUK institutions; or good practice initiativesin the wider pool o pre- and post-1992institutions.

Embracing the model o the ConnectedUniversity: recognising the importanceo building networks with local rms,nurturing local clusters, creating national andinternational connections, and putting this atthe heart o their strategy.

Recruiting, developing and promotingmore boundary spanners: people whoseexperience encompasses both public andprivate sectors who can build links betweenthem.

Measuring the benets o university-business interaction more eectively andcommunicating these to the public.

Government has a role to play as well. Localgovernment should look careully at how itapplies planning regulations to universities.Since physical spaces or university-business interactions are just as importantas institutions, local authorities interested ininnovation and growth should give priority to

requests to develop places where rms anduniversities can interact. Local authoritiesand universities should move beyond a

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transactional relationship ocusing on planning,to a broader dialogue on the role the universitycan play in local economic development.

The unding system should also take intoaccount the importance o university-businessinteraction. Those portions o university

unding dedicated to encouraging universitiesto interact with the outside world such asthe Higher Education Innovation Fund (HEIF) should better measure the contributionsthat universities make to the local, nationaland international economies, to sharpen theincentives or co-operation. A version o HEIFshould be extended to the Further EducationSector. The orthcoming Research ExcellenceFramework should increase the rewards orinterdisciplinary and outward-acing research,drawing on existing good practice amongresearch councils.

The recession presents a unique chance or usto realise the economic benets o our rst-class research base. This is an opportunity thatthe UK cannot aord to miss.1

1. Parts o this report draw onresearch supported by theEconomic and Social ResearchCouncil (grants RES-171-25-0018 and RES 171 25-0038).The usual disclaimer applies.


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Acknowledgements

The authors would like to thank: Dr Ronnie Ramlogan, Emeritus Proessor John Goddard, ProessorColin Whitehouse, John Leake, Dr Paul Treloar, Andy Sharp, Linda Enderby, Proessor Bill Wakeham,Dr Tony Raven, Emma Connolly, Graeme Purdy, John Dersley, Alan Sanderson, Proessor Ian Clarke,Davide Consoli, Dimitri Gagliardi, Alice Frost, Adrian Day, Matt Hatch, Simon Bond, Andy Curtis,James Bates, Proessor Philip Jones, Proessor Mike Smith, Iain Wilcock, George Whitehead, Dr Ivan

Grin, Libby Kinsey, Andrew Small and Alex Hook.

NESTA is the National Endowment or Science, Technology and the Arts.

Our aim is to transorm the UKs capacity or innovation. We invest inearly-stage companies, inorm innovation policy and encourage a culturethat helps innovation to ourish.


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Contents

The Connected University

Recovery and Growth in the UK Economy

Part 1: Universities have a vital place in the knowledge economy 8

Part 2: Case Studies 15

The Cambridge Phenomenon: a high-tech cluster with the university at its heart 15

Spin out success at the University o Southampton 17

The University o Newcastle: developing networks between business 19and academia

TheUniversity o Manchester: translating medical research into practice 21

The microelectronics industry in the South West 24

Sheeld Hallam University: supporting regional growth in the 27creative industries

The University o Dundee: excellence in lie sciences 29

Open innovation at Daresbury 31

Part 3: The changing ace o university-business interactions 34

Part 4: Policy recommendations 39

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Part 1: Universities have a vital place in the knowledge

economy

The UKs research universities are one o itssuccess stories. The UK has our universities

in the top ten o the world the only top-ten universities outside the United States.2UK researchers are the most ecient andproductive in the world and our researchbase is second only to that o the US in termso most leading scientic indicators.3 Ourresearch excellence has not, however, beenaccompanied by the kind o economic successwe associate with the USs technology sector.Addressing this question has been a core goalo UK science and innovation policy in recentyears.

The importance o translating our researchexcellence into economic reality has beenbrought into sharp ocus by the nancialcrisis and the ensuing global recession. At anational level, the recession makes urgentthe need to nd new sources o economicactivity to take the place o nancial andbusiness services and drive uture growth.At a regional level, universities are oten themost stable and permanent eature o localeconomies that may otherwise be bueted byunemployment, business ailure, and corporateretrenchment; eective engagement between alocal university and local businesses can meanthe dierence between local decline and localresilience.4

The strength o the higher education systemwill be tested by the current economic crisis but also its importance is likely to increaseater the crisis has subsided. According tothe Treasury the current crisis will cause apermanent 5 per cent reduction in GDP.5Following the severe recession o the early

1980s, lost manuacturing output wascompensated or by the growth o nancialservices; the issue now is what will make up

or the sharp contraction in nancial services?The higher education system has an important

role to play here, because it is a sector wherethe UK has a strong competitive advantage,because it is more resilient to business cyclesand economic shocks than many other parts othe economy, and because it oers a eedstocko skills and knowledge or new and establishedbusinesses to drive innovation and growth.

This report asks how this growth comes about,and how to make it more likely. First o all, itexamines the dierent way in which universitiessupport economic growth, based on practical

examples and the extensive academic literatureon the subject. Second, it looks at a serieso case studies o UK universities that havegenerated thriving clusters o economic activityaround them.6 Finally, it draws conclusionsrom these case studies about how universitiesinteraction with businesses and society isdeveloping, and how policy can help translateour research excellence into economic growth.

Universities are powerul economic actors

with our important roles

Universities contribute to the economy inseveral ways. Their most celebrated role isas well-springs o discoveries, ideas andtechnologies, some o which have greatcommercial value. But their other unctionsare also important, not least because o theirstability and permanence. Universities act assignicant employers and purchasers in manyareas. They produce a skilled workorce thatis oten a crucial resource or local businesses.And, more subtly, they provide a locus orco-ordinating local activity, beneting localrms both through the inormal exchange

o knowledge and expertise, and by oeringan anchor around which regional clusterscan orm. The academic literature suggests

2. Times Higher Education,World University Rankings2008. See http://www.timeshighereducation.co.uk/hybrid.asp?typeCode=243&pubCode=1&navcode=137

3. Evidence (2008) Internationalcomparative perormanceo the UK research base.

Report to the Department orInnovation, Universities andSkills. London: DIUS.

4. Consider, or example, the roleo universities in enabling thegrowth o phoenix industriesin areas o industrial decay.See Christopherson, S. andClark, J. (2009) Remakingregional economies. NewYork: Routledge.

5. HM Treasury (2008) Pre-Budget Report. London: HMTreasury.

6. It should be acknowledgedhere that the term cluster isa much-contested term andhas been variously dened.

Clusters in this report aredened as geographicallyproximate concentrationso interconnected rms,including specialisedsuppliers and related serviceproviders and innovationintermediaries, as well asother key institutions, notablyhere, universities, whichco-operate (and compete)usually in a particular seto technologies linked bya set o commonalities andcomplementarities. Clustersshould be seen as directlybestowing certain economicbenets to rms and other

organisations in the clusterand potentially indirectlyto other rms and actors inthe cluster locality throughspillover and other benets.They should be seen asthereore more than justsimple concentrations oragglomerations o rms andother economic actors in anarea. The geographic scale othese clusters can range roma city or region through tointer-regional or internationalscales o collaboration andnetworking.

7. Swann, G. (2006) Universitiesand Business Innovation. In:DTI (2006) Innovation in the

UK: Indicators and Insights.DTI Occasional Paper No. 6.London: DTI.

8. Lester, R. (2005) Universities,Innovation, and theCompetitiveness o LocalEconomies: A SummaryReport rom the LocalInnovation Systems ProjectPhase I. MIT IndustrialPerormance Center WorkingPaper 05-010. Cambridge,MA: MIT.

9. Stone, I. et al. (Eds) (1997)Northern Economic Review.Issue 26. Newcastle: NorthernEconomic Research Unit,University o Northumbria at

Newcastle.


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that collaboration between businesses anduniversities is associated with improvedbusiness perormance across a range oindicators, including new market entranceand increased market share; production oan increased range o goods or services;producing higher quality goods or services; and

generating higher value added.

7

Universities are especially important to local

economies because o their stability

The ongoing eects o globalisation and theimmediate challenges o the recession aremaking key economic actors more mobile:rms move in response to shits in comparativeadvantage or recessionary pressures; andworkers, particularly those that are skilled,move in response to dierences in wages andthe quality o lie. This mobility o the actorso production may improve the eciency

o markets but it can put severe strain onplaces that lose businesses or workers. Placesneed embedded economic actors anduniversities are one o the most important.They may expand or decline, but they rarely goelsewhere.8 Although the benets o a greatresearch university may be elt worldwide, theyare at the same time uniquely important localinstitutions. We now consider the specic waysin which universities can benet their localities.

1. Universities are important sources olocal employment and purchases romlocal suppliers

The most direct eect universities have ontheir localities is by increasing local demand.The expenditure impact o universitiescomprises the direct and indirect jobs created;as well as the extra income within an economythat a university generates. The economicmultiplier eect o a university is greater thanthat o most private sector rms because othe structure o turnover, and the proportiono expenditure by sta and students likely toremain in the local area.9 A number o studieson the local impact o university expenditure invarious parts o the UK nd signicant incomeeects due to sta salaries and goods andservices together with spending by students;they also nd that increases in income in theregions generate a multiplier eect which eedsits way through a number o sequential roundso expenditure.10 Additionally, the growtho universities may have positive impacts on

the built environment as new buildings andacilities oten replace derelict industrial,residential or commercial areas.11

Consider or example the direct economiceects o the University o Cambridge, whichas o 2006 employed more than 11,700 peopledirectly and indirectly supported more than77,000 jobs in the Eastern region.12 It wasestimated at the time that i the universitydid not exist, the economic impact on the UK

economy between 2006 and 2016 would bea 4.4 billion loss in GDP and approximately10,800 ewer jobs, and the impact on theregion would be even greater, requiringreplacement o a net present value o 21.2billion in GDP.13 This excludes the importanceo the technology cluster associated with theuniversity.

2. Universities produce skilled workorces

and transer knowledge through their

graduates

National and local economies benet romhaving graduates and this exceeds theimpact o those with a university educationnormally having a relatively high income.(Graduates receive an annual average wage16 to 20 per cent higher than individualswith A-level qualications, although there issignicant variation by subject and place ostudy.)14 The transer o graduates is a highlyeective method o knowledge exchange, not

least because much o the most importantknowledge is tacit, which is exchanged throughinormal interactions rather than codiedknowledge which can be transerred throughless personal mechanisms.

Universities role in building regions humancapital also increases their social capital,15a concept that encompasses trust, networkand community engagement. A high level osocial capital generates a number o economicand social benets over and above the directimpact o a more skilled workorce.16 Forinstance, mutual trust aids the transer oknowledge and it reduces transaction costs, asthose who trust one another are less likely toneed expensive contracts to interact with oneanother. And those that are most trusting and trust others rom dierent social, economicand ethnic backgrounds are those with thehighest level o education.17

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10. Studies include:

Nottingham: See Bleaney,M., Binks, M., Greenaway,D., Reed, G. and Whynes,D. (1992) What doesa University add to itslocal economy? AppliedEconomics. 24, pp.305311.

Greater Manchester:See Robson, B., Deas, I.,Topham, N. and Twomey, J.

(1995) The economic andsocial impact o GreaterManchesters Universities.Manchester: Centre orUrban Policy Studies,University o Manchesterand Salord UniversityBusiness Services Ltd.

Newcastle: See Lincoln,I., Stone, I. and Walker, A.(1995) The Contributiono Newcastles HigherEducation Sector to theLocal Economy. NorthernEconomic Review. 1995,Issue 24.

Birmingham: See Centreor Urban and Regional

Studies/GHK (2007)Regional and Local ImpactAssessment o the Universityo Birmingham Centre orUrban and Regional Studies.Birmingham: University oBirmingham.

Bournemouth and theSouth West: See Fletcher, J.and Morakabati, Y. (2007)Bournemouth UniversityEconomic Impact Study,2007. Bournemouth:University o Bournemouth.

11. Building Futures (2009)Growing by Degrees:Universities in the Futureo Urban Development.

London: Royal Institute oBritish Architects.

12. The University includesthe Faculties, Colleges,Cambridge University Pressand Cambridge Assessment.

13. Library House (2006)Cambridge Cluster Report2006. Cambridge: LibraryHouse.

14. Warwick University(2009) Returns to highereducation: variationsby subject and degreeclass. Warwick: WarwickEconomics Department,Warwick University. Availableat: http://www2.warwick.

ac.uk/ac/soc/economics/research/centres/eri/bulletin/2008-09-2/naylor/

15. Iyer, S., Kitson, M. andToh, B. (2005) Socialcapital, economic growthand regional development.Regional Studies. 39,pp.10151040.

16. Putnam, Robert D. (2007)E Pluribus Unum: Diversityand Community in theTwenty-rst Century. The2006 Johan Skytte PrizeLecture. ScandinavianPolitical Studies. 30:22,pp.137174.

17. Iyer, S., Kitson, M. and

Toh, B. (2005) Socialcapital, economic growthand regional development.Regional Studies. 39,pp.10151040.

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3. Universities are leading sources oknowledge

The 1993 White Paper Realising Our Potentialhighlighted the importance o academicresearch in generating wealth and improvingthe quality o lie. The role o universities as

an important part o the innovation ecosystemhas been emphasised by the Lambert reviewo university-business collaboration in 2003,the Sainsbury review o governments scienceand innovation policies in 2007, and has beenreinorced in a series o reviews on the scienceand innovation ramework 2004-2014.18

A common view o how university knowledgecontributes to economic growth centres aroundthe commercialisation o this knowledgeby businesses. Central to this view are theconcepts o intellectual property, which

generates licensing revenue and wealth romspin-outs, and know-how, which generatesconsulting and advisory services. For example,Cambridge, at the oreront o university-business interaction in 2006/07, led 112patents, generated 35 licences, increased itsoverall portolio o active spin-outs to 45 andgenerated income o almost 3.5 million romintellectual property.19

The increasing importance o the openinnovation model involving interactions

between dierent businesses and otherrms and organisations such as universities

rather than a reliance on proprietary in-houseresearch and development (R&D) increasesthe signicance o university-business links inthe innovation process. The open innovationmodel relies on letting ideas fow into abusiness to improve innovation and businessperormance, rather than relying on in-house

R&D.

20

Research indicates that rms that adoptopen innovation strategies and invest in R&Dare more likely than others to use knowledgerom universities.21

Recent research shows that ormal technologytranser is only part o the picture.22 Indeed,or the majority o rms, universities aremost important not as sources o intellectualproperty, but or other types o knowledgethat are harder to package up and codiy.One recent survey, the results o which areshown in Table 1, highlights the importance to

businesses o assistance in problem solvingand improving understanding, which are morereadily gained through consulting or throughinormal interactions than by traditional spin-outs or licensing.

Data rom the Higher Education-Business andCommunity Interaction survey also suggest thatrevenues rom technology transer account oronly a small share o the income UK universitiesmake rom their knowledge, with paid researchand consultancy signicantly more important

(see Figure 1). This holds true even among themost elite research institutions. Case studies

18. See HM Treasury AnnualReport or each year, 2005to 2008. HM Treasury(2008) The ten-year scienceand innovation investmentramework annual report.London: HM Treasury.

19. HEFCE (2008) Highereducation-business andcommunity interactionsurvey: 200607. Availableat: http://www.hece.ac.uk/pubs/hece/2008/08_22/

20. Chesbrough, H. (2003)Open Innovation: The NewImperative or Creating andProting rom Technology.Cambridge, MA: HarvardBusiness School Press,Harvard University.

21. Laursen, K. and Salter, A.(2004) Searching high andlow: what types o rmsuse universities as a sourceo innovation? ResearchPolicy. 33:8, pp.1201-1215.

22. The dynamics o university-industry links have generallybeen analysed rom the

point o view o:The rm: See Laursen,K. and Salter, A. (2004)Searching high and low:what types o rms useuniversities as a sourceo innovation? ResearchPolicy. 33:8, pp.1201-1215.

Particular sectors orclusters: See Meyer-Krahmer, F. and Schmoch,U. (1998) Science-basedtechnologies: university-industry interactions in ourelds. Research Policy. 27,pp.835-851.

Individual scientists: SeeDEste, P. and Patel, P.

(2007) University-industrylinkages in the UK: what arethe actors underlying thevariety o interactions withindustry? Research Policy.36:9, pp.1295-313.

Technology transerorganisations: SeeBercovitz, J. et al. (2001)Organizational Structure asa Determinant o AcademicPatent and LicensingBehavior: An ExploratoryStudy o Duke, JohnsHopkins and PennsylvaniaState Universities. TheJournal o TechnologyTranser. 26:1, pp.21-35.

Some studies have ocusedon both the university andthe rm side. See Charles,D. and Howells, J. (1992)Technology Transer inEurope: Public and PrivateNetworks. London:Belhaven Press.

Others explore thenature and dynamics ocollaborative projects.See Carayol, N. (2003)Objectives, agreements andmatching in science-industrycollaborations: reassemblingthe pieces o the puzzle.Research Policy. 32:6,pp.887-908.

Studies have mainly reliedon surveys on universityindustry links. See Cosh,A., Hughes, A. and Lester,R. (2006) UK plc: Just

Assistance in problem solving 67.3

Improve understanding 66.7

Sources o inormation or new projects 57.5

Recruitment o postgraduates 42.0

Downstream-related activities 29.3

Training o company employees 27.4

Generation o patents 20.0

Percentage o frmsBenefts rom interactions with university

Correlations

Table 1: Benets reported by rms rom interactions with universities

Source: DEste, P. (2008).Gaining rom Interactions with University: Multiple Methods orNurturing Absorptive Capacity. Paper presented at the DRUID Conerence on Entrepreneurshipand Innovation Organizations, Systems and Regions, Copenhagen, Denmark, June, 2008.


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how innovative are we?

Cambridge, MA: MITInstitute, Centre or BusinessResearch and IndustrialPerormance Centre.

Or rom in-depth interviewsand case studies oparticular universities ordepartments. See Ham,R. and Mowery, D. (1998)Improving the eectivenesso public-private R&Dcollaboration: case studiesat a US weapons laboratory.Research Policy. 26,pp.661-675.

23. Abreu, M., Grinevich, V.,Hughes, A., Kitson, M.and Ternouth, P. (2008)

Universities BusinessKnowledge Exchange.London and Cambridge:Council or Industry andHigher Education and Centreor Business Research.

24. Abreu, M., Grinevich, V.,Kitson, M. and Savona, M.(2007) Absorptive Capacityand Regional Patterns oInnovation. London: DIUS.

25. Cosh, A., Hughes, A. andLester, R. (2006) UK PLC:Just how innovative arewe? Cambridge, MA: MITInstitute.

1111

o university-business interactions conrm theimportance o multiple knowledge exchangemechanisms.23 They highlight the importanceo personal relationships, the development otrusting relationships between the partnersand the importance o relational rather thancontractual interactions. Based on this, ithas been suggested that the dierencesbetween the intensity o interactions betweenuniversities and businesses in the UK and inthe US may refect dierences in the absorptivecapacity in UK rms, and by businessesexperience o working with universities and theability to understand and relate to universityacademics. Variations in absorptive capacitycan be explained by variations in managementpractices, training and the use o collaborativenetworks.24 It seems air to say that there is alimited understanding among researchers andpractitioners o how to develop the connectivecapacity between universities and business.

All this suggest that knowledge exchangeworks in a variety o ways, with inormal

knowledge transmission, consultancy and joint-research being important as well as the ormaltranser o patents and licences.

4. Universities are also powerulnetwork-builders

Universities have a powerul second-ordereect in knowledge exchange between rms,by virtue o their role as anchors or clusterso innovative businesses. As our case studiesdemonstrate, oten one o the biggest benetsor rms in setting up near a university is notthe academic knowledge o the university itsel,but o the presence o other rms attracted bythe university. Universities can help acilitatethis: consider the role o the University o Bathin hosting the Silicon South West organisationthat supports the microelectronics industryaround Bristol, Bath and Swindon. The role ouniversities in co-ordinating the developmento industries can be seen in research byCosh, Hughes and Lester, which showed theimportance o universities not just in providingormal and inormal knowledge, but also inacting as co-ordinators and providing publicspace unctions.25

Figure 2 highlights the importance not onlyo inormal contacts with the university, buto the universitys role in bringing people and

Correlations

Figure 1: UK universities income rom business interaction

300,000

400,000

100,000

200,000

0

600,000

700,000

663,924

570,905

557,921

537,066

432,186 432,206

454,227

487,949

401,578

346,082333,659

276,214203,031

179,904

179,911207,810

238,801

165,782 176,861182,911

41,274

46,70349,06930,445

500,000

Contract research Collaborative research Continuous professional development

Consultancy Regeneration

2003/2004 2004/2005 2005/2006 2006/2007

IP (including shares of sales)

Source: HEFCE, Higher Education Business Community Interaction (HE-BCI) surveys 2003 2007.


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2

Figure 2: Types o university-business interaction contributing to innovation

Figure 3: Sources o inormation or innovation (Community Innovation Survey 2005 and2007: percentage o respondents rating source as o some importance)

0 20 3010 40 50 60

Post-doc recruitment

Standards and testing

Conferences

Publications

Informal contacts 4651

4245

4138

3733

3015

2814

2724

2717

2749

174

16

2315

4

Masters or undergrad recruitment

Problem-solving and consulting

Internships

Exclusive licensing of university patents

Innovation-related expenditure on university

Non-exclusive licensing of university patents

Joint R&D

UK US

0 20 3010 40 50 60 70

Professional or industry associations

Within your enterprise

Competitors

Suppliers

6466

6366

5860

5956

5147

4846

4744

4642

3432

2020

2320

Clients or customers

Technical or service standards

Scientific journals

Consultants, commercial labs

Universities

Government research institutes

Conferences, trade fairs

2005 2007

Source: Cosh, A., Hughes, A. and Lester, R. (2006) UK PLC: Just how innovative are we? Cambridge M.A: MIT Institute.

Source: DIUS (2008) Persistence and change in UK innovation, 2002-06. London: DIUS.


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26. Lester, R. (2005)Universities, Innovation,and the Competitivenesso Local Economies: ASummary Report rom theLocal Innovation SystemsProject Phase I. MITIndustrial PerormanceCenter Working Paper 05-010. Cambridge, MA: MIT.

universities together, or example throughorganising conerences and standard-setting.

This is particularly important given the relativeimportance o other business in the corporateinnovation process. Community InnovationSurvey data have repeatedly shown that

businesses on average regard other businessesas more important sources o innovation thanuniversities (see Figure 3).

The economic role o universities varies

according to the nature o local economies

The role o universities in the regionalinnovation process depends on the localeconomic structure and on the strengths othe university in question. Richard Lester, theMIT industrial innovation specialist, has arguedthat there are our types o local economicevolution that can be infuenced by university-

business interactions:26

New industry ormation: developingentirely new sectors, oten based on noveltechnologies and university research.

Industry transplantation: bringing existing(but oten higher value) industries to aregion.

Diversication into technologically-relatedindustries: or example, in helping phoenixindustries to develop rom declining rms.

Upgrading o existing industries: providingtechnical problem-solving advice and skillsdevelopment or existing businesses.

As shown in Table 2, these dierent pathwayswill require dierent types and combinations ouniversity-business interactions. It is importantto note that each type o local economic

evolution requires a variety o types o support

New industry ormation Foreront science and engineering research

Aggressive technology licensing policies

Promote/assist entrepreneurial business (incubation services, etc.)

Cultivate ties between academic researchers and local entrepreneurs

Create an industry identity: standard setting, evangelists, conveningconerences, workshops and entrepreneurs orums etc.

Industry transplantation Education/manpower development

Responsive curricula

Technical assistance or sub-contractors, suppliers

Diversication into Bridging between disconnected actors

technologically-related industriesFilling structural holes

Creating an industry identity

Upgrading o existing industries Problem-solving or industry through contract research, acultyconsulting, etc.

Education/manpower development

Global best practice

Convening oresight exercises

Convening user-supplier orums

University rolesType o economic development

Table 2: University roles in alternative regional innovation-led growth pathways

Source: Lester, R. K. (2005) Universities, Innovation, and the Competitiveness o Local Economies: A Summary Report romthe Local Innovation Systems Project Phase I. Cambridge, MA: MIT Industrial Perormance Center Working Paper 05-010.


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4

rom universities. New industry ormationrequires not only ormal knowledge transer(Lesters oreront science and engineeringresearch and aggressive technology licensingpolicies), but also network-building (creatingan industry identity) and inormal knowledgeexchange (cultivating ties between academic

researchers and local entrepreneurs).

In the UK, there has been a ocus on thecreation o new industries such as theormation o high-tech clusters in knowledge-generating sectors such as ICT, biotechnologyand, more recently, cleantech. There has beenless ocus on the wider knowledge exchangemechanisms through which universities cancontribute to regional economic developmentparticularly in the areas o enabling thedevelopment o an industry that is new to theregion; the diversication into technologically-

related industries and the upgrading o existingindustries.


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15

27. Library House (2006)Cambridge Cluster Report2006. Cambridge: LibraryHouse.

28. The Judge BusinessSchool; the Instituteor Manuacturingwhose research andeducation programmesare underpinned by

close engagement withindustry; the CambridgeProgramme or SustainabilityLeadership which workswith business, public sectorand civil society leaderson issues such as climatechange, resource depletionand poverty; CambridgeEnterprise which helpsacademics make theirideas and concepts morecommercially successul; anda Research Services Divisionwhich manages undingrom external organisations.

29. HEFCE (2008) Highereducation-business and

community interactionsurvey: 200607. Availableat: http://www.hece.ac.uk/pubs/hece/2008/08_22/

30. Including the work oNewton and Darwin, Crickand Watson, Babbage andHawking.

31. SQW (1985) The CambridgePhenomenon: The Growtho High Technology in aUniversity Town. Cambridge:SQW; SQW (2000) TheCambridge PhenomenonRevisited. Vols 1 and 2.Cambridge: SQW.

Part 2: Case Studies

The Cambridge Phenomenon: A high-tech cluster with the university at its

heart

The world-class biotechnology and inormationtechnology cluster around the University oCambridge is requently cited as an exampleo the impact that a university can have on itslocal economy and how it can support regionaldevelopment. The cluster would probablyhave not existed without the presence o theuniversity and the draw o its strong researchbase and a supply o skilled recruitment.However, the emergence o the Cambridge

high-tech cluster with a strong university atits heart was not intended nor strategicallyplanned.

The university generates signifcant

economic impact

The University o Cambridge is one o theworlds leading universities and an economicactor in its own right. It employs more than11,700 people directly and indirectly supportsmore than 77,000 jobs in the Eastern regiono the UK. I the University did not exist, theeconomic impact on the UK economy overthe next ten years would be a 4.4 billionloss in GDP and approximately 10,800 ewerjobs, and the impact on the region would beeven greater, requiring replacement o a netpresent value o 21.2 billion in GDP andapproximately 77,000 jobs.27

Organic growth o university collaboration

A snapshot o the Cambridge economy todayshows many thriving high-tech businesses,particularly in the area o biotechnology,combined with a host o university

departments and organisations whose role is topromote industry collaboration.28 In 2006/07the university generated over 49 million in

income, just under 3.5 million o this rom IP.It led 112 patents and 35 licences, creating

two spin-outs, with a total o 45 active spin-outs.29 Although many high-tech businessesthat locate in Cambridge do not have directconnections with the university, some havevery strong links and have establishedembedded laboratories, where teams oscientists co-locate and collaborate withacademics or an academic department. Forexample, Hitachi, Toshiba, Pzer and Microsotall have high-quality acilities in Cambridge.However, their arrival is relatively recent andrefects the serendipitous and non-prescribed

growth o the Cambridge cluster.

Such a snapshot does not indicate thedynamics o growth o the Cambridgecluster, which initially developed when theuniversity took little active interest in businessengagement. It is indicative that in 2009 theuniversity celebrates its 800th anniversary, butits Business School only celebrates its 20thanniversary.

The origins o the cluster a perect storm

The university has a long tradition o scienticresearch30 and the city has been home tohigh-tech businesses or over a hundred years.But the start o the phenomenon can betraced to the 1970s, which saw a growth orms specialising in inormation technologyespecially computer-aided design. Theuniversity adopted a laissez-aire approach, inthat sta contracts did not prescribe what anacademic could or should do and there was arelaxed view on intellectual property rights.31Some academics embarked on technologicalcommercialisation, most did not. Another

important actor was the availability o nance,as Barclays Bank (in particular the localmanager, Walter Herriot) took an enlightened,


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and at that time unusual, view to providingstart-up nance and advice or high-tech rms.

The Cambridge phenomenon emerged roma perect storm o entrepreneurial scientists,enlightened nance and a laissez-aire attituderom the university, a mixture o serendipity

and luck. This suggests that it is a phenomenonthat cannot be easily replicated elsewhere. It isno accident that this unplanned approach didnot result in other universities developing high-tech clusters in the 1970s and 1980s.

The development o the cluster changing

dynamics and new challenges

As the cluster has grown its dynamics havechanged, and it has now reached critical masswhere the key actors are the availabilityo skilled labour and nance. An importantlocal driver is the labour market, as highly

skilled workers are more willing to work or aCambridge-based enterprise than one locatedelsewhere. Working in a high-tech enterprise isoten associated with unstable employment, asmany rms ail. This problem can be mitigatedby the prospect o being re-employed in thesame local labour market a prospect which ismade more likely by the large number o rmsengaged in similar activities.32

Another important local driver is the access tonance. A Cambridge location oten signalscredibility to the mainly London-based venturecapitalists and the expansion o the cluster hasled to the development o local intermediariesand support institutions including locally-basedventure capital.

Supporting the high-tech cluster as an

engine o economic recovery

I both the university and the cluster didnot exist then the total economic impactor the UK would mean the the need tond up to a net present value o 57.5billion in replacement GDP and 154,000new jobs.33 Recessionary challenges makethe urther development o the cluster morepressing. There has been particular growthin biotechnology rms and more recentlycleantech businesses. Collaborative R&D links

have been ostered between the university(eds) and Addenbrokes, the local teachinghospital (meds) to accelerate drug production,in the hope that this will act as a powerullocal economic engine.34 Supporting growthin this sector is strategically important or theuniversity, regional and national economy.

6

32. Kitson, M. and Primost, D.(2005) Corporate Responsesto Macroeconomic Changesand Shocks. End o AwardReport. Swindon: ESRC.

33. Library House (2006)Cambridge Cluster Report2006. Cambridge: LibraryHouse. p.10.

34. Harkavy, I. and Zuckerman,H. (1999) Eds and Meds:Cities Hidden Assets.Washington, DC: TheBrookings Institution.

A Cambridge spin-out: Light Blue

Optics35

Light Blue Optics (LBO) ormed in January2004 as a spin-out rom the Universityo Cambridge Engineering Department,developing miniature projection systems.As a spin-out the university holds a smallequity stake. The companys holographiclaser projection technology deliversull colour, high-quality video imagesthat remain in ocus at all distances.The technologys eciency and smallsize make it suitable or applicationsacross a range o markets. In October2007, LBO closed a $26 million Series Aunding round, led by Earlybird Venture

Capital and Capital-E. Existing investors 3i, who led LBOs $3.5 million seed-unding round in 2006, and NESTA alsoparticipated. The money will enable LBOto accelerate its product development andcommercialisation programme towards thehigh-volume manuacture o miniatureprojection systems. LBO estimates thatthe total available market or miniatureprojection systems will exceed $5 billionby 2012. Dr Adrian Cable, one o LBOsounders and the current Chie TechnologyOcer, is a Cambridge graduate with aPhD in holographic optics. The other threeounders are also Cambridge PhD graduatesand remain with the company.


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Spin out success at the University oSouthampton

The University o Southampton has enjoyeddisproportionate success in creating spin-outsrom its research. Since 1969, the universityhas launched over 50 spin-out companies

in elds such as oil and gas exploration,pharmaceuticals and nanotechnology. TheUniversity has collaborated with a wide rangeo business partners, such as QinetiQ, IBM,Microsot, Rolls Royce and BAE Systems.

The University o Southampton is ranked thirdin the world or creating spin-outs, behind onlyStanord and Cambridge.36 This is despite beingplaced over 150 positions below Stanord andCambridge in the Shanghai Jiao Tong UniversityRanking system.37 This suggests that theuniversity has a particularly eective approach

that acilitates technology transer, knowledgeexchange and the creation o spin-outs.

Since 2000 there have been 12 successulspin-outs. Three o these have foated on theAlternative Investment Market with a combinedmarket capitalisation value o 160 million.38The university has generated income throughdisposal o some o its shareholdings at foat,and two o these companies remain in theregion, including SPI Lasers, which was soldto German company Trump in 2008 or 28

million.

Structured serendipity

In the past, the university ocused on a pushmodel o technology transer, with academiasupplying ideas, R&D, technical support andtechnological innovations or companies tocommercialise. This university recognisedsome challenges in this model: it requiresbrokerage to the demand side, which wasmore obviously the domain o proessional andspecialist business services with experienceo technological commercialisation, sourcinginvestment and taking products to market.

University management put in placestructures that refect and respond to thisbarrier. Southampton provides a range obusiness support services based on an ethoso structured serendipity. This means thatrather than a prescriptive pipeline o activity,Southampton oers consultancy services,knowledge exchange schemes and businessincubation designed to support any andall types o commercialisation opportunity,

delivered through the right mix o academicand industry-skilled people. The University oSouthampton is the one o UKs top ranked

institutions or collaboration with small andmedium-sized companies.39

Consultancy services and knowledge

exchange schemes

There are seven consultancy units with 125sta that generate 7.5 million revenue per

annum. They provide business support andhelp to secure public and private researchgrants, which accounts or 40 per cent oSouthampton research, in areas such asnanotechnology, stem cell research andalternate uel development. The KnowledgeTranser Partnership portolio is worth over1.7 million. One example is Shell STEP (ShellTechnology Enterprise Programme), which in2008 placed over 600 students in Hampshire-based small and medium-sized companies.

Business incubation with SETsquared

The ability o Southampton to incubate andspin out promising companies is supported bythe SETsquared Partnership, an entrepreneurialcollaboration between the Universities oBath, Bristol, Southampton and Surrey. Thecampus Business Incubation Centre supportsthe growth o early-stage high-tech companieswith access to a network o experiencedentrepreneurs, academics, potential investors,investment advisers and business proessionals.In the last our years, SETsquared companieshave raised over 120 million investment and

created more than 1,000 new jobs.40

International collaboration

The university has built up a strong relationshipwith the University o Caliornia, San Diegoand the University o Caliornia, Irvine, as aresult o the Science Bridges initiative. Theuniversities collaborate in research projects,and exchange knowledge and best practice inbuilding entrepreneurial skills, the commercialdevelopment o technology and expertise inspin-outs. Successul US-UK collaborationhas encouraged UK policy to widen thescope o this initiative to China and India.41Southampton has built up its own links withChina and Thailand to promote collaborationand access to new markets or local companies.

Attacking the recession in Southampton:

growth in the emerging green economy

As the recession deepens and the UK seeksout new areas o growth, South Hampshire iswell placed to build on regional strength in theexpanding cleantech sector. Ilika, as describedoverlea, is one o six South Hampshire

companies working in energy and cleantech,three o which are university spin-outs. This ismore than any other European location except

17

35. See http://www.nesta.org.

uk/light-blue-optics/36. Library House (2007) An

Analysis o UK UniversityTechnology and KnowledgeTranser Activities.Cambridge: Library House.

37. See http://www.arwu.org/rank2008/Top500_EN(by%20rank).pd

38. See http://www.soton.ac.uk/about/economic_impact/index.shtml


40. See http://www.setsquaredpartnership.co.uk/news-events/news/?n=327

41. RCUK press release (2February 2009) RCUKScience Bridges Awardsannounced. Available at:http://www.rcuk.ac.uk/news/090130.htm


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London, and has been recognised as a hotspotby the 2008 Guardian/Library House CleanTech100.42

The UK is already a major player in the 3trillion global market or low carbon goods andservices. The UK low carbon and environmental

sector is worth 107 billion a year. In 2007,the UK attracted 30 per cent o all Europeanventure capital investment in cleantech.43The drive or a green economy is orecast toproduce 7 per cent growth per year (2008 to2013).44

To support the crucial growth o this sector,the government must ensure an adequatesupply o unding and policy support or SouthHampshires inrastructure, its acilities orresearch and development and the skills o itsworkers to make it an obvious international

destination or low carbon industry. GivenSouthamptons successul track record inspinning out commercial ventures, this wouldseem an area o strategic importance.

A better planning system and transport

inrastructure

The Vice-Chancellor has actively driven aprogramme o collaboration between the

university, the city and the regional economythrough inormal and ormal economicpartnerships. While this has supported regionaleconomic development, it has yet to resolvesome ramework policy issues that could deteruture growth.

Planning regulations on the University oSouthamptons Science Park have blockedprivate companies rom coming on-site.Two healthcare clinics were recently turnedaway because they did not t the research ormanuacturing criteria, despite their obviousbenets. It is important that this type o barrierdoes not prevent building up South Hampshireand Southampton as a leader in cleantechand other sectors, or its ability to attractinvestment.

As a coast location Southampton only has

180 exposure. A lack o a ully integratedand well-linked transport inrastructure woulddeter companies rom locating in the region,especially oreign investors. This is an areawhere co-operation between the university andSouth Hampshire authorities will be importantor local economic success.

8

42. See http://www.guardian.co.uk/environment/table/2008/sep/18/cleantech100ulllist.cleantechnology100

43. BERR (2009) Low CarbonIndustrial Strategy: A vision.London: BERR. Available at:http://www.berr.gov.uk/les/le50373.pd

44. NESTA (2009) DemandingGrowth: Why the UK needsa recovery plan based ongrowth and innovation.London: NESTA. Availableat: http://www.nesta.org.uk/assets/Uploads/pd/Research-Report/demanding_growth_report_NESTA.pd

A Southampton spin-out: Ilika

Ilika Technologies Ltd spun out romSouthamptons Chemistry Department in2004. It has established itsel as a protableand innovative growth company in theeld o materials development, or examplecreating better batteries and uel cells.The development o novel materials makesthe company o interest to a number olarge sectors, such as energy, automotive,electronics and biomedical. This successhas helped to secure three rounds o

unding, with the latest round o 7 millioncompleted in August 2007. There is adiverse set o international shareholders,in part a refection o the wide marketappeal o the company. The CEO believesthat the business support services rom theuniversity and SETsquared acilitated thespin-out process. Easy access to a range oproessionals and an agreed IP rameworkallowed the company to ocus on securinginvestment or growth. The company retainsstrong ties with the university, as a sourceo knowledge and recruitment.


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45. One North East (2008)Corporate Plan 2008-13.Newcastle Upon Tyne: OneNorth East.


The University o Newcastle: developingnetworks between business andacademia

Regenerating Newcastle and the North East

The University o Newcastle has a strong trackrecord o providing research-based advice

to local industries. In recent years, it hasundertaken work to deepen its relationshipwith local businesses by investing in individualswho can bridge the gap between academia,the research base and industry, in particular itsProessors o Practice programme.

Ater decades o decline in Newcastlesshipbuilding industry, a variety o regionalpartners have ocused on rehabilitating theregions economic and social standing. Theirprimary objectives are to increase regionalGVA to 90 per cent o the national average

(rom 79 per cent in 2007) and to create22,000 new businesses.45 A central elemento this approach is to capitalise on pocketso scientic excellence in order to improvethe regions competitive position, and initiateand sustain a regeneration process driven byresearch, development and innovation.

Investing in the science and research base

through Newcastle Science City

Investment has, in part, been intendedto stimulate activities that acilitate the

commercial exploitation o scientic research,ensuring that specialist business supportservices are available to scientists, scienceand technology entrepreneurs, start-ups andbusinesses.

To help meet economic challenges, in 2004the government designated Newcastle asone o six English Science Cities, intended todevelop closer links between the science andtechnology research base and industry, in orderto acilitate commercial activity and growth. Inpartnership, the City Council, One NorthEastand the university guide the direction o theScience City.

A central regional role or the university

The University o Newcastle has perormedwell in traditional measures o technologytranser. In 2006/07 it received just under16 million income rom collaboration. Itreceived 370,000 in income rom IP, led 44patents and generated our licences. Thereare 11 active spin-outs associated with theuniversity.46 However, these activities only go

part o the way to achieving the universityseconomic ambitions. Even with the ScienceCity there remains a crucial gap in linking

the demands o industry and the supplyrom the research base. Newcastle decided itneeded to invest in other ways o increasinguniversity-business collaboration, specicallyby developing a group o boundary spanners;people with academic and industry experienceand understanding, with access to networks on

both sides o the interaction. The Proessors oPractice initiative is designed to create such abridging role.

Boundary-spanning Proessors o Practice

The Proessors o Practice (POPs) programmewas established in 2004. POPs are individualsintended to integrate and align the interesto the university and industry, identiyingand making the most o potential commoninterests.

POPs have been appointed by the Business

School in three strategic areas: Ageing &Health, Biomolecular Engineering and DrugDiscovery. Their remit is to provide leadershipand work closely with the scientists, BusinessSchool aculty and Newcastle Science Cityin order to promote commercialisationopportunities or the university in thesestrategic areas. This includes the promotiono industrial networks, developingtranslational research programmes, identiyingcommercialisation opportunities and acting as arole model or sta and students through their

teaching and coaching activities.

Proessors o Practice are typically scientist-entrepreneurs who are currently running theirown business or otherwise engaged in seniormanagement positions. In order to ull thisrole, they maintain their dual aliation withbusinesses and the university on a part-timecontractual basis (this is part o a broadertrend: in the US, by 2001, non-tenure trackaculty members were about 34 per cent o thetotal ull-time academics).

POPs support collaboration initiatives,

organise university-business events, are

innovation role models and support uture

regional growth targets

Proessors o Practice have conducted a rangeo activities that demonstrate an impact inbuilding university-business relations.

POPs have been involved in supporting theplanning o the University Research Centrein Biopharmaceutical and BioprocessingTechnology Centre (BBTC) by capitalising on

research expertise o the School o ChemicalEngineering and Advanced Materials andengaging with industrial partners. The venture

19


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has been successul in securing 20 millionunding rom the EPSRC or an EngineeringDoctorate and Training Programme inBioprocess Technologies. They have also helpedsecure unding or a dedicated Director oIndustrial Liaison or the BBTC.

They have co-ordinated university-businessevents that promote knowledge exchange andacilitate collaboration opportunities, such asConversaziones in BioBusiness. POPs havealso secured an international conerence onAgeing and Health in 2010 expecting to attract500 delegates.

A third role is that o embodiment o the visionset out by Newcastle Science City to promoteinnovation. Under this remit, POPs are acting

as innovation role models, by participating inthe Regional Innovation Awards, representingNewcastle Science City at the National ScienceCity Summit and the Regional Universities BluePrint business planning competition.

Finally, they can support uture regional

growth plans. Newcastle Science City is nowbeing taken orward as a company limited byguarantee. Newcastle University, NewcastleCity Council and One NorthEast have eachinvested 1.37 million over the next threeyears and in return the company has the targeto creating 30 companies and supporting183 companies. POPs can play an importantrole in developing the university-businesscollaborations that can help meet these targetsand support regional growth.

0

Who is a POP?

Proessor Peter Gore is an expert in Ageingand Health. He has over 25 years experiencein medical product design and set up thecompany ADL Smartcare to match people

with technology-based solutions. Peterworks with the Universitys Institute orAgeing and Health and is helping to plan aCampus or Ageing and Vitality, or examplehelping to secure unding and externalpartners, such as Tesco.


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21

47. North West Science (2007)North West ScienceStrategy 20072010.Warrington: North WestScience. Available at: http://www.northwestscience.co.uk/uploads/documents/apr_07/northwestscience_1176911562_Science_Strat_07.pd

48. HEFCE (2008) Higher

education-business andcommunity interactionsurvey: 200607. Availableat: http://www.hece.ac.uk/pubs/hece/2008/08_22/

The University o Manchester:translating medical research intopractice

The University o Manchester has a strongrecord in the production o health researchand the subsequent commercialisation o

products and services. It has recently embarkedon a series o major institutional projectsto build wide-ranging links with clinicians,pharmaceutical rms and medical devicemakers to improve the contribution it makesto the economy. These are the BiomedicalResearch Centre, a Centre or IntegratingMedicine and Innovative Technology, andan Academic Health Centre, which have thepotential to drive up business innovationrom the medical research base, notably inbiotechnology, contributing to regional growth.

The North West o England has a heritage inthe sector, dating back to the developmento the chemicals industry in the late 18thcentury, which in turn led to pharmaceuticals.Indeed, Liverpool was one o the rst sitesto manuacture penicillin by ermentationduring World War II. Figure 4 shows clusterdevelopment in North West England rom 1700onwards.

University-business collaboration in

biotechnology

Manchester, and the North West region moregenerally, are home to a growing biomedicalcluster underpinned by a major pharmaceuticalpresence, a rapidly expanding biotechnologycommunity, and internationally renownedacademic and clinical research strengths. Figure5 shows the biomedical cluster in the NorthWest o England today. The region now housesaround 200 biomedical companies includingrms such as DxS and Myconostica, majorhealth-related companies such as SSL andUnilever, and branches o seven multinationalpharmaceutical rms, including AstraZenecaand GlaxoSmithKline. The sector employs20,000 people and the region is the highestexporter o pharmaceuticals in the UK; in 2003exports were 3.4 billion.47

The University o Manchester perorms wellin technology transer, under the guidanceo The University o Manchester IntellectualProperty Ltd (UMIP). In 2006/07 the universitygenerated over 30 million in collaborativeincome, and 5 million o income rom IP. Theuniversity led 38 patents, generated seven

spin-outs and had 42 active spin-outs.48

The development o the biomedical sector isrecognised by the North West DevelopmentAgency (NWDA) as a priority or theManchester city-region, and a source oproductivity and growth. The Universityo Manchester has been developing neworganisational inrastructure designed to

expand healthcare innovation and so supportthe regions oer and commercial attraction.

Three recent biomedical initiatives involving

the university

The Manchester Biomedical Research Centre

(2008) is a 35 million partnership o theCentral Manchester & Manchester ChildrensUniversity Hospitals NHS Trust and theUniversity o Manchester, unded by theNational Institute or Health Research. TheCentre is ocused on translational research, withprojects aimed at tackling some o the highest

priority disease areas o the Manchesterpopulation. The Centre will receive additionalunding rom the NWDA, Manchester CityCouncil and its commercial partners includeAstraZeneca and GlaxoSmithKline. The GVAimpacts o this initiative are estimated to be111 million at the local level and 127 millionat a regional level and over 100 new jobs willbe created in the city over the next three years.

Manchester: Integrating Medicine and

Innovative Technology(MIMIT, 2008) supports

translational research by multidisciplinary teamsor medical device and clinical technologysystem applications. It supports knowledgecreation, exchange and new productdevelopment in Manchester. MIMIT bringstogether the university with the city-regionsve major teaching hospitals to exploredemand-based technological R&D. MIMITprovides seed unding (competitively awardedby a Scientic Committee) and currentlysupports nine projects. MIMIT has recently wona 1.3 million Science Bridges award rom theEPSRC to urther its development.

The Manchester Academic Health ScienceCentre (2008) brings together Manchestersexisting research activity and researchpartnerships rom six NHS organisations andThe University o Manchester. The Centre aimsto combine excellence in academia, clinicalservice delivery, research management andeducation to help create and exploit newbiomedical opportunities. With over 100million a year currently invested in healthresearch in the Greater Manchester area, it is

believed that co-ordinating and channellingclinical and academic research strengthsunder one umbrella will help to secure more


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investment rom industry, government andcharitable bodies as well as generate healthbenets and economic development inManchester and the wider North West.

Attacking the recession in Manchester and

the North West: supporting growth in the

biomedical clusterCompanies which have emerged rom theuniversity have attracted over 150 million ounding over the last ve years and includesuccesses such as Renovo, ast becominga world leader in drugs to improve theappearance o scars and enhance woundhealing, listed on the London Stock Exchangeand valued at approximately 300 million.49Companies like Ai2, F2G and Muscagen aredeveloping innovative products and services inthe biomedical sector.50

In 2008 UMIP teamed up with one o the UKsleading technology investment managers, MTI,to create a vehicle or providing academicswith access to capital to develop world-leading research and exploit opportunities ortechnological commercialisation. The Fundwill have preerred access to all investment

opportunities generated. The Fund raised initialbacking o 42 million (32 million) rom arange o investors, making it Europes largestinstitutional und to have a single universityocus. It makes investments o 250,000 to750,000 in young technology companies, withollow-on unding possible.51 The biomedicalsector has a large domestic market as well asinternational appeal and is a promising growtharea.

2

49. See http://www.nesta.org.

uk/spin-out-venture-und-achieves-rst-close/

50. Ai2 develops innovativetechnology to preventinection on a wide rangeo commonly used medicaldevices like urinarycatheters, stents and wounddressings; F2G developsnovel agents to treat seriousungal disease; MuscagenLtd, a joint Universityo Cardi/University oManchester spinout (basedin Cardi) develops selectivecompounds or therapeuticuse in treatmentscovering disorders such asdementia, incontinence andcardiovascular disease.

51. See http://www.nesta.org.uk/spin-out-venture-und-achieves-rst-close/

Figure 4: Cluster evolution in North West England: 1700 onwards

Source: Oakey, R (2003) North West clusters: a timeline evolution study. Manchester: Manchester Business School,University o Manchester.

1700 1750 1800 1850 1900 1950 2000 2050

Creative/digital

industries

multimedia

Specialist

textiles

Environmentally-

friendly power

Recreation/

lifestyle

activities

Specialist

chemicals

Niche markets(e.g. luxury cars)

Bio-medical

Joint-ventures

CML MOD

Contracts

Financialservices

Highereducation Media, I.T.

Biotechnolo

gy

Salt andminerals

Food&drink Tourism

Early water-poweredlocations

Steampower

coalfieldorientation

Nuclearpower

Cleanenergy

Textile

mach

inery

Contro

l

instru

mentsMOD

Rese

archacadem

i

cs

pino

f

f

Cotto

nexch

ange

Relocated

automotive

prod.

Cottontextile

Geology,climate

& culture

Chemicalsproduction

Urbanisedservice

activities

Energyenv. tech

Biosciencesresearch

Strategicallylocatedaircraft

production

Mechanicaland maritimeengineering


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23

Figure 5: The biomedical cluster in the North West o England today

Central ManchesterUniversity HospitalNHS Trust

Christie Hospital andThe PatersonInstitute for CancerResearch

Manchester CancerResearch Centre

North West GeneticsKnowledge Park(Nowgen)

The University ofManchester Facultyof Life Sciences

The University ofManchester Facultyof Medical & HumanSciences

Wolfson MolecularImaging Centre(WMIC)

NW Institute forBio/HealthInformatics (NIBHI)

Organic MaterialsInnovation Centre(OMIC)

3rd GenerationProteomics (3GP)

Centre for IntegratedGenomic MedicalResearch (CIGMR)

MicrofluidicsAnalytical& ScreeningTechnology Centre

CoEBio3

Wellcome TrustClinical ResearchFacility

ManchesterInterdisciplinaryBiocentre (MIB)

NW Embryonic Stem

Cell Centre

UK Centre for TissueRegeneration

South ManchesterUniversity NHS Trust

Manchester MentalHealth and SocialCare Trust

BiomedicalKnowledge:Universityof Manchester

Biomedical Firms inthe ManchesterCluster

4-Front Research Ltd

Acumen Pharm

Advanced BiomedicalLtd

AstraZeneca

Avecia

BiOracle

Bio-Tag

Cardinal HealthChimatica

ClaydonBioinformatics

CuMedica Group

Cyprotex

GenencorInternational

Iduron

Intercytex

Intertek ASG

Kratos

MedChemCo

Micap

Myconostica

Orion MolecularServices

Photo Therapeutics

Shimadzu Biotech

Shimadzu ResearchLabs

SAFC Pharma

SSL International

Tepnel

Waters Corporation

Manchester MedicinesNetwork

Manchester Biotech

3Bs - Building BiotechBusinesses

(UMIC Bio-mentoring)

UMIP*

UMIC

Trustech

MIDAS

Manchester SciencePark

Manchester Incubator(UMIC)

Core Technology

Facility (UMIC)BluemantleInvestments

Stem Cell Clean Room

Intermediaries

Microarray Ltd

CTC Ltd

Ai2

AldezonConformetrix Ltd

DxS

Epistem Ltd

F2G

Gentronix

Myconostica

Oncoprobe

Orion MolecularServices

PhotoMedex/PhototherapeuticsLtd

RenovoTDL Sensors

Manchester

Incubator

Agri-Biotech

Air Dispersions Ltd

Colgate Palmolive

Galen Research

ICON/Medeval

Imorphics

Motac Neuroscience

Neutech Pharma

Research TriangleInstitute

SAFC Pharma

Semiramis GeneticsLimited

Smerud MedicalResearch UK Ltd

Synexus

Trial Form Support

MSP

* Black text dentotes Manchester spin-out

Source: UMIP (2006) Manchester Bio Community University o Manchester Incubator Company.


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The microelectronics industry in theSouth West

The thriving semiconductor cluster that hasemerged in the Bristol-Swindon corridor andbeyond owes much to the eorts o localuniversities. Universities have contributed

not only intellectual property and spin-outs,but also a host o skilled employees, inormalboundary-spanning knowledge and clustersupport skills. The result has been a wealth ostart-ups, and a number o high-prole spin-ins semiconductor rms choosing to locatein the area because o the attraction o thecluster.

There has been a long tradition o innovationin the Bristol area going back to Brunel,Concorde and, more recently, Wallace andGromit (produced by Bristol-based Aardman

Animations). The area is now home to theUKs largest concentration o silicon designers,double the size o that in Cambridge, theclosest domestic competitor, and second onlyto the USA. Currently, the cluster consists oaround 50 companies that directly employapproximately 5,000 people. Figure 6 showsa map o the rms across the region. Asupportive ecosystem and inrastructure, inparticular support rom the Universities oBristol and Bath, combined with a highly skilledworkorce that the universities have helped

create and attract, has ostered an activestart-up culture. Figure 7 shows that in thelast decade, start-ups in the South West haveattracted more than $550 million in investmentand have returned more than $800 million toshareholders.

Cluster development a skilled labour pool

The origins o the cluster can be tracedto the development o the specialist skillsbase in the local labour market. This skillspool developed at Inmos in Bristol andGEC-Plessey Semiconductor in Swindon inthe 1980s, trained a generation o silicondesigners. Although these companies havechanged radically they have let a legacy olocal skills that has helped to transorm thelocal economy they have been an importantinput into innovations in microprocessors,telecommunications and networking systemdesign.

The knowledge base and knowledge

exchange

The Bristol city-region has our major

universities: Bath Spa University, and theUniversities o Bath, Bristol and the West oEngland. There are many areas o research

strength including digital technologies(especially in relation to computing and thecreative and sector), advanced engineering(including aerospace), environmentaltechnologies, and medical technologies andlie sciences. A range o knowledge exchangemechanisms are being used in the Bristol city-

region.

Bristol was made one o the UKs science citiesin November 2005 to help the developmento stronger links between business and thescience base and ensure that innovationsucceeded in becoming the engine o localeconomic growth. SETsquared, as describedin more detail in the Southampton case study,actively supports business incubation throughthe co-ordinated range o support services itoers. Silicon South West provides supportand networking opportunities or start-up and

early-stage companies through its networko 1,300 members. Established our yearsago, it is managed by the University o Bathstechnology transer oce (Bath Ventures), isunded through industry sponsorship and alsocollaborates with SETsquared. Links betweenthe microelectronics sector and the regionsuniversities also exist at a aculty level. Notably,David May, the lead architect o Inmostransputer and the current Chie TechnologyOcer o the semiconductor rm XMOS, hasbeen a proessor at Bristol since 1995 and has

in that time played a undamental, boundary-spanning role in developing the sector.

Knowledge Transer Partnerships (KTPs) haveprovided expertise to regional companieswho wish to innovate or expand, notablySMEs. There are 20 KTPs in the Bristol city-region, helping to connect local companiesto the knowledge base. In 2004, the ouruniversities in the city-region combined withthe University o Gloucestershire, the RoyalAgricultural College and Business Link to ormKnowledge West. This consortium bringsbusiness and higher education communitiestogether through collaborative initiatives,networks, events and a continuing proessionaldevelopment programme, producing qualitativeimpacts that support knowledge exchange,such as increasing university links to businessand the development o companies.52 Eventhough this HEIF-unded project will end soon,many o the schemes will carry on and continueto benet the region.

Attractor o global business and spin-ins

The cluster has helped to attract high levels oinward investment rom large multinationalssuch as Orange, Toshiba, HP Labs, Motorola,

4

52. Forthcoming Evaluation oKnowledge West Project,Summer 2009.


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Panasonic and ST Microelectronics all havecorporate R&D sites based in the region.Other international electronics companiessuch as Intel and Broadcom have a signicantpresence in the region, while semiconductordesign companies such as Wolson and DialogSemiconductors have set up design centres in

the South West in order to tap into the localskills. Companies spun-in have been attractedby the knowledge base as well as skills oer,including Systems4Silicon, Sidonis, Power Oasisand Xintronix. Silicon South West also supportslinks with international partners, marketing theregion as widely as America, France, Taiwan,Japan and Israel.

Supporting and expanding the Silicon South

West

Innovation, knowledge exchange andrecruitment rom the local universities, buildingon local strengths, have helped build thediversity o the region and increase economicgrowth both by encouraging new rm

ormation and by acting as an attractor omajor international companies.

This case study demonstrates the impact andimportance o developing synergies betweenthe university research and skills base,associated business support mechanisms andlarge and small rms. It demonstrates goodpractice in knowledge exchange and businessinnovation, and the non-academic role auniversity can play in the regional ecosystem.

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Gnodal

Founded in 2008, Gnodal developsinnovative networking technologyto improve the perormance o nextgeneration data centres. The potential to

develop Ethernet switches that exceed theperormance o supercomputer networksgives the company high growth potential.In April 2008 Gnodal secured a 1.1munding round rom the YFM Group, SouthWest Ventures Fund and NESTA. Themarket research company Dell Oro predictsthat in 2011 the companys addressablemarket will be worth $4.8 billion.

Gnodal is a third generation Silicon SouthWest company, in that the sta have 20years sectoral and regional experience,having worked in Inmos, STMicroelectronics

and associated spin-os in the region,such as Meiko and Quadrics. It is theconcentration o such companies, andthe accompanying support network thatattracted Gnodal to locate in the area.

Gnodal is housed in the SETsquaredincubator at Bristol University, and theagglomerated support services allowed thecompany to keep initial costs down andbuild a strong business case. Two o theounders, the CEO and Vice President oMarketing and Business Development, arealumni o Bristol and Bath Universities, andare maintaining links with the research basethrough Proessor Alistair Munroe (BristolUniversity), an important relationshipor the potential development o nextgeneration technologies and urtherstudent recruitment.


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6

Figure 6: Firms across the region

Figure 7: Start-up investment and trade sales exits

Bath

Cirencester

Isle of Wight

Malmesbury

Cheltenham

Ledbury

Chepstow

Dorchester

Plymouth

Ashburton Newton Abbot

Paignton

Dartmouth

Chippenham

Midsomer Norton

Shepton Mallet

Southhampton

Bristol

Swindon

Amdocs

Apex Optoelectronics

Camitri Technologies

Cellular 3G

Kitna

Intohand

IPL

Mirifice

Nujira

picoChip

Power Oasis

Silicon South West

Bluestone Technology

Moortec

Syntech Technologies

Xfab UK

Air Semiconductors

Dialog Semiconductors

EnSilica

Fairchild Semiconductors

Intel Corporation

Maxim

MotorolaNational Microelectronics Institute

National Semiconductor

Riverbeck

Semtech

Si-Connect

Swindon Silicon Systems

Telelogic

Tomkins

Ubiquisys

Wolfson

Zarlink ACW

Dolphin IP

Ericsson Southampton

Innos

Korusys

NXP Semiconductor

Perpetuum

Philips

TANDBERG television

Deltenna

IP Wireless

Westcode Semiconductors

Dexdyne

GarfieldInnovision

Phasor Solutions

Bookham

Spirent Communications

Software Radio Technology

MPC Data

Analog IntegrationMimosys

Imagination Technologies

Zarlink

Motorola

MMIC Solutions

Artisan Software

Applied Technology (UK)

Eltek Semiconductors

RF Microwave Designs

Connective Logic

RF Engines

3D Labs

Apertio

Art of Silicon

Audium SemiconductorBroadcom

Clearspeed Technology

Digital TV Labs

Gnodal

HP Labs

Icera

Infineon

Inviro

Nanotech Semiconductors

Nokia Siemens Networks

Ocean Blue Software

Oxford Instruments

Panasonic

Phyworks

Provision Communications

Pulsic

Quadrics

Silicon Basis

ST MicroelectronicsSystems4Silicon

Test & Verification Solutions

Toshiba

Wittenstein High Integrity Systems

Xintronix

XMOS Semiconductor

Zuken

MMIC Solutions

Air Semi

Xintronix

SiliconBasis

Kitna

PowerOasis

Geonix

Gnodal

ProVision

NanoGan

Early-StageStart-Ups:


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Shefeld Hallam University: supportingregional growth in the creativeindustries

Regenerating Shefeld through growth o

the creative industries

Sheeld Hallam University has played an

important role in the development o thecreative industries in Sheeld and SouthYorkshire, as a collaborator in new initiativesand as a producer o human capital througha range o sector-specic courses. Itdemonstrates the role that new universities canplay in local economic growth.

For decades Sheelds economic ortunewas dominated by heavy manuacturing. Inthe 1980s, in the ace o severe internationalcompetition, the traditional regional industrieso steel, cutlery and coal collapsed, with

a loss o a quarter o all jobs in the city.Rebuilding and re-branding Sheeld becamean urgent priority. As part o the response tothis challenge, in 1988 Sheeld City Councilembarked on a course o action to turn aderelict industrial area into a new growthhub or businesses in the emerging creativeindustries sector, known as the CulturalIndustries Quarter (CIQ). Yorkshire Forwardhas also championed the transormationo Sheeld, with strategy to support thegrowth o knowledge-based regional clusters,

including creative and digital industries, withuniversities at the heart o economic growth.53

By 1998 the CIQ had become recognised asa leading centre or the creative industries,helping support regeneration. To consolidatethis position and support urther growth,in 1999 the CIQ Agency was ormed, apartnership between the Council, SheeldHallam University (SHU) and businesses thathad located there. In 2000 the rst sta wereappointed, to support growth o businesses,encourage private investment, champion thesector and build up the regional network.

Creativesheeld, a publicly unded CityDevelopment Company, also supports businessinnovation in the creative industries. Its2008 economic master plan aims to supportinvestment-marketing drives, inrastructuredevelopment and promote science and researchacross the sector. In March 2009, the SheeldDigital Campus was opened, to provide ocespace and business support or start-up andearly-stage companies. The 110 million

e-Campus is supported by a range o publicsector organisations and is closely located toSHU, as well as a transport hub. While there

is no ormal link with SHU, it seems likely thatmany students and spin-outs will locate there.

Impacts

By 2005 over 9,000 people in 1,248 businesseswere employed in Sheeld in the creativeand digital industries, generating 700 million

in turnover, equivalent to 9 per cent o thecitys total.54 Across the South Yorkshire regionthe sector employs in excess o 123,000employees in more than 13,000 businesses adding 5.21 billion gross value added tothe region.55 The region is home to many highperorming home-grown businesses, such asThe Designers Republic, Zoo Digital and Sumo,and international market leaders, or exampleAutoDesk, Ansys and OCLC.

It is predicted that the combined strength othe design, interactive media, mobile, ICT and

healthcare technologies sectors will help createa urther 4,000 jobs and 250 companies by2015.56

SHU is an important partner in the creative

industries cluster

In 2006/07 SHU received over 8.5 millionin total collaborative income, 75,000 romIP. SHU generated our licences, but did notcreate any spin-outs, although it does haveeight active spin-out companies.57 However,SHU supports the development o the creative

industries through other unctions: it is acentral partner in regional initiatives; andprovides a range o courses and training thatsupport the development o human capital,producing industry-skilled graduates.

The university is a central collaborator in

regional initiatives

SHU has been involved in the growth o thecreative industries sector over the last decade,as a stakeholder on the governing board oCIQA and as part o the Steering Group othe Digital Campus. Through its EnterpriseCentre, co-located in the CIQ, SHU runs anumber o knowledge transer activities. Twohundred SMEs are assisted annually throughconsultancy projects and numerous nationaland international companies such as Braun,Philips, Pzer, Marks and Spencer and the BBChave accessed specialist university expertise.In computing and IT there are strong links withSAP, Oracle, Microsot and Cisco, supporting arange o product developments.58

SHU provides acilities and training or the

creative industriesTo improve the attractiveness o the locationas a centre o excellence there has been an 81

27

53. Yorkshire Forward (2006)The Regional EconomicStrategy 2006-2015. Leeds:Yorkshire Forward.

54. Renaissance SouthYorkshire (2007) SouthYorkshire Creative & DigitalIndustries Study, Section1 Perormance & Potential2000-2015. Rotherham:

Renaissance South Yorkshire.55. Sheeld Digital Campus.

See http://www.sheelddigitalcampus.com/%20location/sheeld_acts_and_gures

56. Renaissance SouthYorkshire (2007) SouthYorkshire Creative & DigitalIndustries Study, Section1 Perormance & Potential2000-2015. Rotherham:Renaissance South Yorkshire.

57. HEFCE (2008) Highereducation-business andcommunity interactionsurvey: 200607. Availableat: http://www.hece.ac.uk/

pubs/hece/2008/08_22/

58. For example, design andinnovation consultancy orindustry leaders includingCoca-Cola, Umbro, Marks& Spencer and Britvic; workon advanced design omobile technologies or ruralworkers in the Indian sub-continent, enabling workersto develop greater economicindependence.


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million investment in physical inrastructure, toprovide learning and teaching acilities that canattract the best students. A similar amount hasbeen earmarked or projects due or completionby 2010.59

SHU has established various new degrees

tailored to meet the needs o the creativeindustries. Various undergraduate programmessuch as the BA Games Design, BA Animation,BA Film and Visual Eects and BA DigitalMedia Production degrees enable a uturegeneration o technical artists to use a vastresource o specialist expertise. More recentlySHU launched an MSc entertainment sotwaredevelopment course

the connected university

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