ukirc annual report 11 12 · practice: innovation in services – our work on innovation in...

Annual Report April 2 0 1 1 – M a r c h 2 0 12

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Introduction

The Scientific and Knowledge Transfer Programmes

1.1 Major advances are expected in: advancing knowledge of a broad definition of innovation through high quality, independent, research which is fully engaged (i.e. co‐produced) with policy and practitioner communities; ensuring the maximum impact of new knowledge on policy and practice, reaching out to all potential sources of and audiences for new knowledge; developing capacity, in terms of people, data and methods, for future research and knowledge exchange on broader innovation.

1.2 In order to achieve the advances set out above, the Research Centre will be expected to carry out a programme of interdisciplinary research and make significant contributions in the areas of: New modes of innovation; Innovation in services; the links between innovation, human capital, intellectual capital and business performance.

1.3 The Research Centre will be expected to carry out a programme of engagement with policy and practice communities and make significant contributions in the areas of: developing a dynamic and novel forum for stakeholder engagement, knowledge transfer and networking, within the field of broader innovation, working closely with policy and practitioner communities; drawing together research and other kinds of knowledge, within the UK and internationally, to strengthen the evidence base for broader innovation policy and practice; collaboration with communities of research, policy and practice.

Distributed Research Projects

The Centre Director with the Hub Director will be responsible for ensuring that the Principal Investigators of the second wave Distributed Projects have a full opportunity to work with the Knowledge Hub programme of the UK~IRC and that appropriate Knowledge Hub related activities can be co‐developed.

1. Impact and Highlights

Examples of Impact

The UK~IRC follows best practice methods in using multiple pathways to impact based on the relevant

academic research literature in this area (to which it has contributed) and relevant RCUK guidance and

ESRC guidance. It is well known that impact outcomes may take many years to emerge. In the public

policy arena identifying such impacts is also made complex because policy formation is a political

process and policy outcomes are the result of multiple competing inputs of which social science

evidence is one among many. Identifying causal connections in such circumstances involves detailed

process analysis. Intermediate or pathway activities including publications are however essential to

tracking ultimate final outcomes and we draw attention to two pathway contributions of this kind that

we have made. One is in relation to policy formation and the other to industrial practice. We also list

briefly a number of other impact pathway activities.

POLICY: Contributions to new UK innovation policy – the UK~IRC was acknowledged in the

Government’s recently announced ‘Innovation and Research Strategy for Growth’ as providing valuable

assistance in terms of pathways involving people exchange, idea sharing and evidence. This is reflected

in direct references to the pathway event we held in February 2011 to exchange ideas between the

innovation policy and research communities. It is also evidenced by the fact that the Strategy and

supporting documents make 9 references to the pathway of published work of the UK~IRC. These

references include citing our work in relation to new insights on the role of intangibles in productivity

growth, on the challenges for small and medium sized firms using intellectual property, and in relation

to the provision of new and unique evidence on university industry links. These contributions have

widened and deepened the analysis possible of such relationships in the UK policy context, providing

conceptual and evidential impact to the policy domain. For example, in the context our work on

university industry links, the BIS strategy economics paper states ‘these results are important for our

understanding of the role of universities in the innovation system’ (p.84). In regards to the pathway of

the direct provision of personal advice and presentations members of the UK~IRC participated in several

meetings with senior figures within BIS, including Ministers, the Chief Government Scientist, and the

Director and Deputy Directors of the department. Professor Hughes was the also the invited academic

Keynote speaker at the BIS stakeholder conference on implementing the Innovation and Research

Strategy for Growth at the Medical Research Council in London on 13 January 2012.

PRACTICE: Innovation in services – Our work on innovation in services has also made significant

progress. Working closely with The Architects Journal and New Civil Engineering, the research team

collected new and valuable data to help the industry inform itself about its structure and evolution. This

collaboration has led to invitations for members of the team to sit on juries for industry prizes. The

research work has also spawned a wide range of activities, including a batch of conference papers and

journal submissions, invitations to Japan to present on services design and a project with the UKIPO on

design registrations.

Other Pathways to Impact Highlights

Innovation Summit – In December, we co‐organized an Innovation Summit with IBM. This event was

held at IBM Hursley and received 100 delegates, from 60 different organizations. The programme

included speakers from Arup, Pfizer, Xerox, IBM, GSK, Boeing, Nokia, 100% Open, and Vestas among

others, allowing us to present our research alongside industry experience. Over 65% of the delegates

were from industry, with the rest from the policy and academic communities. The feedback received

from the event was overwhelmingly positive, with a total score of 4.6 out of 5 for satisfaction for the

overall event.

Evidence on open innovation among UK firms – Over the past year, we have been publicising our 2010

survey of open innovation. This has included the launch of a major report and presentations at UK and

international events, including TSB’s Innovate conference, Global Economic Symposium (Germany),

Industrial Fellows Forum (US), and the OECD’s NESTI meeting (France). This work has stimulated a raft of

working papers and a forthcoming paper in California Management Review.

CIHE Task Force – The centre is partnering the CIHE (Council for Industry and Higher Education) in an

R&D Task Force to examine the value of publicly‐funded research to the UK’s economic prosperity. A

first report The UK R&D Landscape was published in March 2012 following a series of high level pre‐

publication presentations at BIS, HEFCE and at an Anglo‐American Breakfast Briefing

These selected examples of the Centre’s pathways to impact activities have taken place alongside the

extensive involvement of UK‐IRC team members in multiple high level formal and informal meetings,

engagement and activities including many with our core sponsors at ESRC BIS TSB and NESTA and

strategic partners CIHE and CSaP. These are tracked and documented wherever possible through our KPI

indicators.

The ultimate direct and indirect impact of this extensive pattern of interactions is complex. It will

emerge with variable and typically long time lags and may depend critically on the complementary

actions of many other players in the policy and practice domain. We have however been tracking the

early stage reflections of those who have been involved with UK‐IRC events and related activities using a

survey instrument designed for the purpose. The initial outcomes are very positive and discussed under

the Hub highlights below.

Highlights from the core research programme:

The research team had major impact at a policy level, through the involvement of Keith Smith, a project leader on the Evidence Based project, who worked on secondment to BIS with direct involvement in the in the evidence based input into UK Innovation & Research Strategy for Growth Policy. Professor Hughes continued, through his role as a member of the Prime Ministers Council for Science and Technology to input into high level innovation and science policy advice in a range of issues including the discussion and presentation of evidence in relation to the impact of expenditure on the science base and the development of the ‘Catapult‘ programme announced in the Innovation & Research Strategy for Growth Policy White Paper. Professor Salter continued to support policy development at the EU level through his participation in an EU Expert Group of the Measurement of Innovation, leading to two reports on the measurement of innovation that focused on structural change and research quality respectively.

The Services Project team conducted an analysis of the design industry on behalf of the Design Council and BIS, which has been completed, as well as analyses of the architectural and engineering consulting industries. The project team has also engaged extensively with others in the international policy communities including the National Institute of Science and Technology Policy, Japan, and the UKIPO.

The Open Innovation project team published the first set of results from its ground‐breaking large‐scale survey of UK manufacturing and business services firms’ open innovation practices. The report was published in July 2010, and the research has been presented at a launch event, a special symposium at TSB’s Innovate ’11 conference, and at the UK~IRC Innovation Summit. Other achievements in this theme include several papers accepted to major conferences, including the Academy of Management and DRUID, as well as journal articles in California Management Review. In addition to the second wave of survey data, we are also preparing a number of case studies on the comparative open innovation practices of clean energy companies in the UK and US, engagement and IP practices of technology consultancies, SME innovativeness and Eastern England and maximising sectoral return on R&D.

The Network Evolution project team has developed a number of working papers which we intend to publish in journals and disseminate via conferences and workshops within the next year.

The Evidence Based Policy project published a report on The UK R&D Landscape as part of the collaboration with strategic partner CIHE. In addition in collaboration with the Centre for Science and Policy (CSaP) project members contributed to an open access on‐line article on identifying key questions in science policy. This was based on a novel collaborative consensus methodology involving a workshop and online interaction, with 47 authors drawn from the academic, policy and practitioner communities in UK USA Canada Australia and Europe.

Knowledge Hub Highlights:

The first major report from one of our research projects was launched in June 2011 entitled “Open innovation Choices –What is British Enterprise doing?”. The authors Andy Cosh and Joanne Zhang have presented their finding at number of events involving members of the business, policy and academic communities.

The launch and publicity of a major report “Is the British Economy supply constrained? A critique of productivity pessimism”, as part of the Services and Evidence Based policy projects. The research was carried out by researcher Bill Martin and was published in July 2011. This report was widely featured in the media including coverage in The Economist, The Guardian, The Observer, Sunday Times, Financial Times, The Evening Standard and BBC News.

We held the third UK~IRC Innovation Summit. This year’s topic was “Growing through Innovation” and the event was sponsored by IBM and held at their UK research headquarters, IBM Hursley. The event was mainly aimed at a business audience and attracted 100 people in total. Feedback received from this event reflected the high calibre of attendee and the good balance of time for presentations and networking. A summary report has been produced and can be downloaded from the UK~IRC website (http://ukirc.ac.uk/newsandevents/news/article/?objid=6921).

The Centre co‐sponsored the DRUID Academy Conference 2012, which is a European wide early career researchers event. This was the first time that the winter conference had been held outside of Denmark, which was as a result of previous successful collaborations between DRUID & the UK~IRC. The conference was held in Cambridge and included many members of the UK~IRC team as discussants, with a total of 96 people attending the conference. By holding the conference in the UK, it was possible to ensure interaction and exchange between UK~IRC researchers and early career research working on complementary topics in other parts of Europe. In this respect the UK~IRC identity and its work was promoted to a wider potential audience.

The UK~IRC continually assesses its performance by conducting post activity questionnaires. However this year the Centre conducted a survey to gain more systematic feedback of the UK~IRC’s activities. The results of the survey were very positive and also provided some ideas for future development. A summary can be found on the UK~IRC website (http://ukirc.ac.uk/newsandevents/news/article/?objid=6924).

The UK~IRC looked to broaden its geographical reach both within the UK and on an international basis, to an audience of business, academic & policy making communities. There were co‐sponsored events held across the UK including Manchester, Strathclyde and Hursley. The spread of global interactions have included India, Mexico, Palestine Territories, USA and several European countries. The delegation to India, of which Professor Hughes was a member, was led by Rt Hon David Willetts. It included senior representatives of the UK‐IRC’s major sponsors (Geoff Mulgan (NESTA) Ian Gray (TSB) Sir Adrian Smith (BIS) Professor Paul Boyle (ESRC)). There have been presentations and policy discussions held with senior government ministers and advisers in the UK and a number of discussions have been organised to assist with policy decision making and to discuss evidence based innovation policy trends in the countries visited.

There were 68 presenters, in addition to the UK~IRC presenters, speaking at UK~IRC events from 51 institutions, Government departments and companies, some examples of these include: Boeing, Cass Business School, GSK, Highlands & Islands Enterprise, IBM, innovation Norway, Nokia, Philips, UKTI, Xerox and the Department for Business Innovation and Skills. Speakers were drawn from 15 universities in the UK, Germany, France, Italy, The Netherlands, Scandinavia and the USA.

2. Research ‐ Progress against Objectives

Project 1: New Modes of Innovation: Managerial and strategic Business Practices and Open Innovation

Project Leaders: Andy Cosh, Joanne Jin Zhang (Research Fellow) Other Investigators: Alan Hughes, Michael Kitson, Tim Minshall, Ammon Salter, Oliver Alexy, Gerald Avison (TTP), Chas Sims (TTP)

Period: Oct 2009‐Oct 2012

Progress to date During the period, April 2010‐ March 2011, the team has made significant progress in the following areas: 1. Over twelve hundred companies completed a unique survey at the end of 2010. The report of the

survey findings: “Open Innovation Choices: what is British enterprise doing?” was published in June

2011.

2. There has been considerable engagement with business, policy makers and the global academic

community over the past year. Highlights include a NESTA OI report launch in June 2011 as well as

presentations at the OECD NESTI meeting, Industrial Fellows Forum and Global Economic

Symposium. In addition, we ran a popular interactive session called “Open Innovation: is it a good

thing for your organization” at the TSB conference Innovate ‘11. The team also organized a session

on open innovation at the UK~IRC’s 2011 Innovation Summit.

3. To support the use of the survey, the team held a workshop in Cambridge with the presentation of

six paper drafts utilizing the OI survey to a panel of external discussants: Prof Ellen Enkel, Zeppelin

Univ; Prof Jim Love, University of Birmingham; and Prof Yoshi Nakata, Doshisha Univ.

4. The UK~IRC is hosting and co‐sponsoring an evening seminar with Jim Love (University of

Birmingham) and Stephen Roper (University of Warwick) entitled “Open Innovation in small firms:

positive step or costly mistake?”, building on work supported by NESTA.

5. The analysis of the relationship between open innovation practices and company performance has

led to several papers at advanced stages of preparation for journal submission. These papers

explore how firms use of open innovation practices shapes their ability to generate innovations. The

first set of working papers shows that firms who engage in multiple forms of open innovation have

greater innovative performance than those firms who engage in less broad forms of open

innovation. In addition, this work shows that the adoption of open innovation practices among UK

firms is profoundly influenced by their past performance, prior investments in R&D and age. These

findings have been summarized in several conference papers and submissions to the Academy of

Management conference. In addition, a paper from the project – No Soliciting: Managing

Unsolicited Ideas for R&D by Oliver Alexy, Paola Crisucolo and Ammon Salter – is forthcoming for

California Management Review. This paper examines the ways organizations can successfully use

unsolicited ideas from inventors, customers and others in their innovative efforts, looking the

organizational arrangements that support the effective unsolicited ideas programmes among

leading multinationals. This work builds on case studies as well as an analysis of the open innovation

practices of the world’s largest firms. In addition, Mina, Bascavusoglu‐Moreau and Hughes (2012)

explore open innovation among service firms. They find that services are more active seekers of

external knowledge than manufacturers. Openness is associated with the provision of complex firm

outputs which integrate a service component and this holds true not only for services but for all

businesses. When they look at the likelihood that services cooperate with specific knowledge

sources, they confirm prior results about the role of customers, but when they consider the relative

importance of different sources of knowledge, against expectations, they find that universities and

the public research base are relatively more important than customers as a source of external

knowledge. The paper contributes to the theory of innovation by identifying the sectoral and firm‐

specific drivers of external knowledge searching and fills a very significant gap in the open

innovation literature through its original quantitative and comparative analyses of open service

innovation.

6. In addition, this project is conducting a series of focused case studies.

Nelli Theyel is presently in California carrying out a series of interviews with clean energy companies

about their open innovation practices following interviews with their British equivalents at the end

of last year.

Joanne Zhang and Andy Cosh are examining the engagement and IP practices of a technology

consultancy company.

Tim Minshall is working on several related case studies. One project focuses on location and small

firm innovativeness in East England. Another focuses on how firms change their location to benefit

their innovation. Another examines how two public organisations and two private firms help start‐

ups from product development to commercialisation.

Alan Hughes, Andrea Mina and Jocelyn Probert, as part of the related UK R&D Task force project, are

working on case studies aimed at exploring how the UK can maximise the return to R&D at the

sectoral level (Pharma, Construction, Digital IT and Energy).

Project 2: Knowledge Intensive Business Services (KIBS) and Innovative Performance

Project leader: Bruce Tether Other Investigators: Alan Hughes, Jonathan Haskel, Ken Coutts, Bob Rowthorn, Cher Li (Research Fellow), Stan Metcalfe, Andrea Mina (Senior Research Fellow), Bill Martin, Karl Wennberg, Elif Bascavusoglu‐Moreau (Research Fellow)

Period: Oct 2009‐Oct2012 Progress to‐date During the period, April 2010‐ March 2011, the team has made significant progress in the following areas:

1. The team has achieved several important milestones. The papers from the research have been presented at major conferences, including in at the DRUID conference held in Copenhagen (June 2011), at the Academy of Management meeting in San Antonio TX (August 2011), EARIE and by invitation at a number of international workshops and seminars (Friedrich Schiller University/Max Planck Institute for Economics and INGENIO‐Spanish Council for Scientific Research/University of Valencia Seminar series; AIM/Imperial College London Business School, NESTA, the University of Rome, the University of Padua and the University of Turin. In addition, the project and its findings were presented to John Dodd, Director of Innovation at BIS, at an event in Queens College, Cambridge on 30 September 2011.

2. The team has continued to build links with practitioners, having during the last three years analyzed the size, structure and dynamics of both the engineering consulting industry and the architecture industry for New Civil Engineer and The Architects Journal respectively. We will undertake similar exercises this year. Bruce Tether acts as a judge to identify the consultants of the year and architectural practices of the year for both of these journals. These collaborations allow us to gain access to unique data on professional services and to analyse this data for academic purposes. Furthermore, in November 2011, we organised two events, one in each of Manchester and London, on “Managing successful business model innovation”. In particular, we focused on the challenge of manufacturing firms moving into the provision of services. These events were attended by around 80 people, including many from industry. And we organised a session on servitisation for the 2011 UK~IRC Innovation Summit which included presentations from Xerox Global Services, Vestas wind turbines and the UK~IRC.

3. Bruce Tether has also consulted with Samsung Design Europe concerning how Samsung can compete through service design and innovation.

4. There has been engagement with policy makers. In December 2011, Bruce Tether travelled by invitation of NISTEP (National Institute of Science and Technology Policy) to Japan to present a UK perspective on the emergence and significance of service design. Also, although not directly related to services, the team undertook an analysis of the impact of holding registered designs on company performance. This was work commissioned by the UK’s Intellectual Property Office as a result of the Hargreaves review. We presented our findings in a report published by the IPO and at a workshop (Sept 2011) organized by the IPO in collaboration with the Design Council.

5. Furthermore, and related to the macro picture and the evidence policy project, Bill Martin (Cambridge) produced a report ("Is the British Economy supply constrained? A critique of productivity pessimism", July 2011) which asks whether Britain’s productivity been permanently and drastically impaired by the banking crisis. Martin finds policy makers' structural explanations unconvincing, and argues that productivity weakness licensed by workers' willingness to work for lower real wages is symptomatic of an economy suffering deficient demand and excess indebtedness, rather than as a result of a sudden loss of entrepreneurial flair.

6. Bruce Tether and Elif Bascavusoglu‐ Moreau assisted the UK~IRC team in the co‐hosting of the 2012 DRUID Academy conference, including chairing discussant sessions

7. Also, we note that one of our researchers, Cher Li (gave birth to a son in September 2011) has been on maternity leave for six months from September 2011. She will return to her position as a UK~IRC Research Fellow based at Imperial in March 2012. Her involvement in the project has therefore been extended by six months.

8. Several academic papers are currently under review in leading innovation and management journals (e.g., Research Policy and The Journal of Economic Geography). A summary of some of the teams papers and the issues they are trying to address include:

a. Wennberg, Tether, Li and Mina (2011) ‘Taking or Eschewing Opportunities: The Diversification of Design Consultants into Digital Design’

Innovative firms identify and exploit opportunities, and in this paper we examine the behaviour of design consultancies with regard to the opportunity of diversifying into digital design, a new ‘design space’ which grew rapidly with the emergence of the world‐wide‐web. We find that new firms, those in closely related fields, and those with a wide scope of activities were more likely to engage in digital design, whilst older, specialist firms were more likely to eschew the opportunity. We suggest that older, specialist firms may be aware of opportunities, but may let them pass by because of their strong identity. The paper has implication for understanding industrial dynamics, particular in service industries

b. Tether, Li and Mina (2011) Knowledge Types & Organizational Architecture: Configuring Space to Compete in Symbolic, Synthetic and Analytical Knowledge‐based Services

Knowledge intensive business services (KIBS) are one of the UK’s hidden strengths. These firms, which include consultants of various types, have been growing steadily for 30 years. KIBS are known to cluster spatially, and to make significant contributions to ‘systems of innovation’. In this paper we contribute and we disaggregate ‘knowledge intensive business services’ highlighting the different ‘types of knowledge’ at the heart of these firms. Second, we show that the commercial performance of these firms varies with different spatial arrangements associated with different ‘types of knowledge’. In other words, firms specializing in symbolic knowledge (such as architecture practices) tend to benefit from a different spatial configuration to those specializing in synthetic or analytical knowledge (e.g., engineers and surveyors). For empirical evidence, the paper draws on a panel dataset of architecture, engineering, surveying, multidisciplinary and project management firms spanning 1995‐2010. The paper has implications for policy making and for practitioners, as it focuses on the effective use of spatial strategies, rather than focus on ‘place’, which is the traditional concern of regional and industrial policy.

c. Li, Mina, Tether and Wennberg (2011) Diversification and internationalisation amongst professional service firms.

Knowledge intensive business services (KIBS), or professional service firms (PSFs), are one of the hidden gems of the UK economy. The UK has a financial balance of payments surplus in these activities. However, unlike with manufacturing firms, little is known about the internationalisation of KIBS / PSFs, and in this paper we examine the drivers of internationalisation amongst engineering consultancy firms. We find that prior domestic experience and specialisation in a few activities both enhance internationalisation, whilst engaging in a broad range of activities reduces the extent of internationalisation. Higher human capital, in the form of employing more professional engineers as a share of the workforce, also enhances internationalisation. Most interestingly, however, engaging in activities which are not frequently found together in the same firm enhances internationalisation. It seems the capacity to put together unusual combinations of professional expertise benefits firms when they seek to increase their engagement in international markets. This suggests that some policy support to encourage experimentation with, and the development of, unusual combinations, may be beneficial to ‘UK plc’ in terms of enhancing overseas earnings amongst UK consulting engineers (and possibly other PSFs)

d. Bascavusoglu‐Moreau and Tether (2011) A Different Route to Growth

Manufacturing and services are often said to be converging, with manufacturers in particular providing an increased range of services. In this paper we examine whether goods and service innovations have the same or different routes in terms of the key investments that are associated with each of them. We find that whilst engaging in R&D significantly enhances the probability of introducing a goods innovation, it has no effect on service innovation. Training, meanwhile, significantly enhances service but not goods innovations. We also find that although service innovation does not seem to increase innovative sales, it is associated with higher total sales and labour productivity. This finding accords with the existing servitisation literature, which argues that introducing new services allows manufacturers to increase their revenues.

e. Bascavusoglu‐Moreau and Tether (2011) Holding design rights and commercial performance.

This paper derives from a study commissioned by the UK’s Intellectual Property Office (IPO) as a follow on from the findings of the Hargreaves Review. We examined whether there is or was a performance premium (here measured as income per head) associated with the holding of one or more registered design, either registering this in the UK with the IPO, or in Europe with the Office for the Harmonization of the Internal Market

(OHIM). We find that in the late 1990s there was a performance premium associated with registering designs in the UK, but this disappeared by the early 2000s. Also, initially, there was a performance premium associated with registering designs in Europe with OHIM, but this premium has also since disappeared. We conclude that these patterns are due to two things. First, the most professionally managed firms (which tend to have higher incomes per head) tended to switch from registering designs in the UK (and other national IP offices) to registering in Europe when European Community Design registration became available in the early 2000s. However, changes in the law have also narrowed the gap between the benefits provided to registered over unregistered designs, such that many of the more professionally managed companies do not now register their designs, or are more selective about those that they do. Some of these matters require further detailed investigation, but some adjustment to the UK system of registering designs does appear warranted.

Project 3: Network Evolution in Open Innovation Communities Project Leaders: Ammon Salter, Martin Kilduff

Other investigators: Oliver Alexy, Antoine Vernet Period: Oct 2010‐March 2013

Progress to‐date

1. The project team has focused on studying open source software communities, with a specific focus on SourceForge. SourceForge is the large on‐line repository of open source projects and open source research. In the SourceForge dataset there are over 250,000 unique individuals and 70,000 open source projects. The files include records for all projects from 2006, allowing us to create time‐stamped information on the network affiliations of open source programmers and project teams.

2. Using this database, the research over the past 12 months has focused on three issues: 1) the impact of individuals’ social capital on their ability to anticipate successful projects; 2) the influence of networks on the migration decisions of programmers from project‐to‐project; and the network and social resources of project founders and how these resources shape project success. We have focused on these three issues and how they relate to the time dimension of network formation and innovative outcomes, which remains a critical gap in our understanding of the role of networks in innovation.

3. In the first sub‐project, we have investigated how an individual’s brokerage and closure social capital influences their ability to choose future successful projects. Most open source projects end in failure – the inability to create a functional piece of software. This means that open source developers need to be careful to allocate their time and effort to projects that have a high potential for success or else their efforts will be lost or unnoticed in the wider community. Yet, the factors that enable individuals to anticipate the future direction of the community are unknown. To explore this question, the analysis captures information on individual’s network positions prior to their joining a project and then following the subsequent development of the project. The initial results show that individuals with high levels of brokerage or closure are able to ‘catch the wave’ and anticipate projects that will later become successful. However, individuals with medium levels of closure or brokerage are likely to join projects with much lower chances of becoming successful. This result suggests that individuals gain from their social capital when it is tightly focused around mutual overlapping ties or when they are able to connect the disconnected. Yet, they gain advantages when they are not specialised in either brokerage or closure in their social capital.

4. In the second sub‐project, we have studied the creation and decay of collaborative ties. Distributed innovation communities are associated with fluid movement between projects and it is not clear what drives such movements and how these movements may be shaped by network resources. Using innovative techniques to build a comparative control group, we are able to assess the dynamic of creation and severing of ties within the community. This research is being expanded into a working paper investigating how past project affiliations influence new ones.

5. The third sub‐project investigates the social capital of project founders, exploring how network positions may shape the success of new projects. Building on the literature on entrepreneurial teams, we study how their experience and network position influences the success of their ventures and, additionally, how that position helps them to build a team around their project. Ultimately, we hope to assess the effect of different team building strategies (i.e. reaching for an individual close by or far away in the network) on the outcome of the project.

6. As part of our work, we also established new collaborations, most notably with Trampoline Systems (www.trampolinesystems.com/) a social network data mining company that harvests information contained in email servers to help companies assess the strengths and weaknesses of their internal social network, and take action based on that knowledge. They are also the company behind the Tech city map (www.techcitymap.com/index.html#/) launched in November 2010 by the Prime Minister. We are exploring ways to develop overlapping research with Trampoline Systems over the next few months.

Project 4: Evidence Base for Innovation Policy Project Leaders and Associates: Keith Smith, Alan Hughes, Michael Kitson, Ammon Salter, David Connell and Andrea Mina

Period: March 2012‐December 2013 This project is not supported by funded research fellows. It draws on inputs by senior academics

associated with the UK~IRC programme, including principal investigators linked to other projects, and

other academics and policy makers taking part in the research process. Its objectives are to identify the

principle channels by which the evidence base on innovation informs public policy in its national

comparative context.

Progress to date:

1. A major development in 2011‐12 has been the launch, to support this project, of the joint

UK~IRC CIHE R&D Task Force. This is based on funding and support from TSB, BP, EPSRC, HEFCE

and will produce a final report in June 2012. The work is supported and guided by a high level

steering group drawn from the sponsors, higher education institutes and major businesses and

the policy community and chaired by Dr David Eyton of BP and Professor Shirley Pearce Vice

Chancellor of Loughborough. A first report by Alan Hughes and Andrea Mina was published in

March 2012, following a series of presentations at HEFCE, BIS the Royal Society of Engineering

and to the steering group. A seminar to discuss the report was held at BIS on 31st January 2012.

2. This first report (The UK R&D Landscape) provides an analysis, in an international comparative

framework, of the conduct of R&D expenditure in the UK by the business, government and

higher education sectors and of the funding of such R&D from public, private, charitable and

overseas sources. It uses the most recent UK government and OECD statistics to analyse

changes over time in the scale of R&D in the UK and its distribution across industrial sectors and

size classes of firms. It also analyses the pattern of government policy support for R&D and the

scale of R&D relative to investments in other intangible assets such as software, skills and

training and design as well as investment in capital equipment and other tangible assets. The

objective is to set the scene for further work that will focus on the impact of UK R&D on output

and productivity and qualitative case study research on the main challenges faced in four UK

sectors ((pharmaceuticals, energy, creative‐digital‐and IT, and construction) in enhancing the

value to be gained from UK R&D. The engagement of key industrial players in an interview

programme has been achieved in these sectors and the interview programme is underway. The

R&D landscape report is complementary to and extends the recent economic analysis

supporting the Innovation and Growth Strategy launched by the Government in December.

Key Findings

Business Enterprise Research and Development (BERD) and Gross expenditure on R&D (GERD) in the UK have been decreasing as a percent of GDP since the 1990’s. In contrast to this there has been a considerable increase in higher education expenditure on R&D in the UK (HERD) as a percentage of GDP. The upshot, however, has been an overall fall in total gross expenditure on R&D (GERD) in the UK relative to GDP from the early 1990s to date, despite a modest recovery at the beginning of this century. Moreover, in international comparative terms the overall spend on R&D in the UK relative to GDP seems to be weakening over time.

The business enterprise component of R&D expenditure in the UK is low by international standards even after adjusting for structural difference between countries. It is also concentrated in the hands of a few very large firms and the small number of industrial sectors in which they are based. The official statistics reveal that the largest 10 business R&D spenders accounted for 34% of all UK R&D in 2009 and the largest 50 spenders accounted for 56%. The many thousands of independent small and medium sized businesses employing fewer than 250 people accounted for only around 3.5% of the total R&D spend.

The magnitude of business enterprise R&D as a form of innovation related expenditure differs significantly across UK industrial and service sectors. Sectoral innovation systems in the UK thus vary in the weight to be attached to R&D per se and in their combination of investments in capital goods, software, skills and training, and expenditure on design and business organisation relative to R&D.

The UK has, by comparative international standards, a relatively high share (over 40%) of its business enterprise R&D expenditure carried out by the subsidiaries of overseas firms. Moreover, the share of total business R&D expenditure in the UK funded from overseas sources (over 20% by 2009) increased substantially during the 1990s. It appears that the UK is a comparatively attractive location for funding and carrying out R&D activities. However, the share of overseas funding stopped rising after 2002. Moreover UK businesses have decreased the relative extent to which they fund R&D in the UK. In 2000 R&D expenditure funded in the UK by the UK business enterprise sector was approximately ten times as large as expenditure it funded overseas; by 2009 it was only five times as large. The ‘openness’ of UK R&D activity makes it relatively vulnerable to the strategic investment decisions of overseas funders of UK R&D and of the parent companies of subsidiaries based in the UK as well as the decisions of the major UK based multinationals.

The positive trend in Higher Education R&D in the UK has been weakened in the aftermath of the world financial crisis. Moreover since the crisis began the UK’s principal competitors have increased HERD at a faster rate than the UK. At the same time the relative contribution of business enterprise to the funding of R&D in the UK higher education system has declined significantly.

Government funding of business R&D in the UK is relatively high by international standards, but the majority of other countries have been increasing their commitments since 1999 whilst the UK has marked time. The USA has an exceptionally high level of direct government funding for business R&D and a relatively low tax incentive contribution. In the UK the use of the two R&D funding support streams is more balanced. The domination of R&D expenditure in the UK by a handful of large firms is not surprisingly matched by the extent to which they dominate access to funding designed to support UK R&D. Of the sample of countries we have considered in this report the UK has the lowest share of total government financed support for business R&D going to small and medium sized firms.

These findings raise a number of questions for policies designed to support the performance of the UK

innovation system in the context of global competition. These will be addressed in further quantitative

analyses of aggregate data and the in‐depth qualitative studies of 4 selected sectors (pharmaceuticals,

energy, creative‐digital‐and IT, and construction).

The project members are heavily involved in policy practice and advice in the UK and their input and

advice is internationally sought. Project members took part in policy discussions in Mexico and in several

European countries. Smith played a central role in the production of the economic analysis underlying

the UK Innovation and Growth Strategy. Professor Hughes was a member of a high level innovation

policy delegation to India (Delhi and Bangalore) led by David Willets and including Sir Adrian Smith (BIS)

Dr Geoff Mulgan (NESTA) Professor Paul Boyle (ESRC ) and Ian Gray (TSB). Professor Hughes was also a

member of a CST delegation to a joint meeting in Paris with the French Haut Conseil de la Science et de

la Technologie. Professor Salter was heavily involved in a European Commission’s Expert Group on the

Measurement of Innovation, leading to papers released by the EC on developing measures of research

excellence and structural change. Michael Kitson gave talks on university industry policy in USA Eastern

Europe and the Middle East.

The extensive interactions with leading academics and policy makers in the UK and abroad has led to the

identification by the team of number of issues of common concern across countries and policy

communities and where the opportunity to examine the links between the evidence base and emerging

policy practice are potentially most useful. The UK~IRC team already has a strong research base in each

of the areas identified which arises from multiple projects carried out in recent years including the

UK~IRC portfolio.

The areas identified are

• the evolution of policy towards university funding and the public funding of research more

generally

• the evolution of policy towards the role of small entrepreneurial firms in the innovation process

and in particular support frameworks for financing innovation

• the evolution of policy towards intermediate research and technology organisations (such as the

UK “Catapult” programme.

3. Knowledge Hub ‐ Progress against Objectives The Hub has continued its approach of systematic dialogue with key stakeholders and has forged a range of new alliances and partnerships, with partners in the UK and abroad. The Hub has continued its knowledge exchange including a wide range of research on innovation (including collaborating with other projects commissioned as part of the initiative) and has developed links and relationships with other national and international institutions concerned with innovation policy and practice, including BIS, NESTA, the Technology Strategy Board, the CBI, the Council for Science and Technology, the OECD, the EU, CIHE (Council for Industry and Higher Education), DIME (Dynamics of Institutions and Markets in Europe), DRUID, EU PRO and Centre for Science and policy (CSaP). In 2011 the Hub continued to regularly update the content of its website, including adding new sections, such as media coverage and working papers. There are regular mailings to the centre’s contacts database including newsletters and events news, as well as steady news flow through our Twitter account. The Hub launched and promoted four major reports in the year, “Open Innovation Choices –What is British Enterprise doing?”, “Is the British Economy supply constrained? A critique of productivity pessimism”, “The UK R&D Landscape” and Hidden Connections: Knowledge exchange between the arts and humanities and the private and public and third sectors” Through the centres associated research programmes there is now in place a regular, monthly, seminar series. There is also access to associated Working Papers on the UK~IRC’s website.

The centre has held 13 dissemination and research development events over the year, which were attended by over 605 delegates. After all of our events we request feedback questionnaires to be completed, asking attendees questions such as what their objectives were for attending the event and if these were met. To date the feedback we have received on the events has been very positive. In addition to these specific event based questionnaires the Centre conducted a broader online questionnaire seeking feedback on all of its activities. The questionnaire was sent to the whole of the contacts database and received a 22% response rate. A summary of the responses can be found on the UK~IRC website at: http://ukirc.ac.uk/newsandevents/news/article/?objid=6924. Some of the results from the survey include:

68% of respondents strongly agreed or agreed that they had increased personal and

professional development as a result of participating in UK~IRC activities

79% of respondents strongly agreed or agreed that they had new ideas on innovation policy and

practice as a result of participating in UK~IRC activities

63% of respondents strongly agreed or agreed that they had experienced new research that can

be used in their working environment as a result of participating in UK~IRC activities

66% of respondents strongly agreed or agreed that they had experienced a new network of

contacts as a result of participating in UK~IRC activities

78% of respondents strongly agreed or agreed that as a result of their contact with the UK~IRC

they always read new information about the UK~IRC when it is presented to them

63% of respondents are still in contact with people that they first met as a result of an UK~IRC

activity or event

81% of respondents are sometimes or frequently involved with exchanging information

activities with contacts made as a result of a UK~IRC activity

The Centre has sought to continue to increase its geographical and audience scope throughout the year. This has been done by the team by travelling a lot which includes Brussels, United States of America, India, Mexico, Slovenia, New Zealand, Palestine Territories and Northern Ireland. We have also looked to ensure a good reach within the UK by collaborating and co‐producing events which has included locations such as Winchester, Strathclyde and Manchester. The UK~IRC has through the Hub provided policy briefings and inputs into co‐developed events with DCLG, BIS and TSB (in relation to innovation briefings, commentary on OECD innovation policy and impact evaluation respectively). The UK~IRC team have been involved in many briefings and had significant input into the Coalition Government’s Innovation and Research Strategy for Growth which launched on 8 December. The centre sponsored the launch or publication of 4 major policy reports and had an active Twitter page with 226 registered followers. The website has been used to highlight key events, news and insights from the centre and its partners. The UK~IRC also held its third Innovation Summit in December 2011. For fuller details see Section 4b.

4. Investment Specific Indicators (In Progress – to be completed by 31st March 2012)

a. Investment Specific Indicators In the year 2011‐2012, UK~IRC associated researchers had 8 journal articles published or accepted for publication, 2 books and official research reports and policy submissions, 1 chapter in a book, produced 15 working papers or other publications and gave 42 presentations at universities and policy and practitioner forums. UK~IRC associated researchers published in a broad range of leading journals, such as Research Policy, Research Technology Management, Strategic Management Journal, Strategic Entrepreneurship Journal, Journal of Business, California Management Review and Journal of Management Studies. In addition, the Centre continued to play an important role in building research capacity and supporting dialogue and exchange among early stage scholars of innovation through its support and hosting of the DRUID 2012 Winter Doctoral Conference in Cambridge January, 2012. Following the successful of the UK~IRC hosting the DRUID Summer conference in 2010, this was the first time that DRUID had hosted the winter conference outside Denmark. Moreover, members of the research team have had their work accepted for major international conferences, such as the Academy of Management Conference. Our research has commanded attention in the popular press. In total, 13 newspaper articles and media features have showcased research from the wider programme. Finally, our work has been influential in shaping policy through our engagement in leading policy communities and committees, such as the Council for Science and Technology, the Lead Expert Group for the newly launched UK Foresight Project on the Future of Manufacturing, The Royal Society, Council for Industry and Higher Education (CIHE), HEFCE, RCUK, BIS, TSB and the BIS CIS 6 Project Board and the EPSRC Strategic Advisory Network as well as intensive involvement in international contexts including the EU, the OECD and Japan.

b. ESRC General Indicators for Reporting to Government

Please complete the table below, as well as separately giving more detailed information on indicators A‐D in the format set out below the table.

Indicator Number

Indicator A: Number of activities and events involving the general public

5

Indicator B: Number of projects attracting co‐funding (leveraged funding attracted by the investment)

10

Indicator C: Number of public policy/business orientated seminars and workshops

13

Indicator D:

How many non‐academic users have worked within the investment on a formal basis to complete a specific programme of work?

How many researchers have the investment placed in user organisations on a formal basis to complete a specific programme of work?

NB – placements funded through ESRC placement schemes should not be included.

Number of non‐academic users hosted:

0

(ii) Number of researchers placed in user organisations:

0

Indicator E: Number of non‐academic users on the investment’s Advisory Committee

(i)Total number of Advisory Committee members: 14

(ii) Total number of non‐academic user members: 8

Including:

Number of private sector members: 6

Number of public sector members:

Number of third sector members: 2

Indicator A: Activities and events involving the general public

Title: Date:

Format: [type of event (e.g. lecture/broadcast …)]

Total number of participants:

Number of general public participants

"Open Innovation Choices - What is British Enterprise doing?" Research Report launch

22 June 2011 Presentation /launch 60 30

Innovation Policy Challenges in the Regions of Europe

16 Sept 2011 Conference

53 3

Innovate ‘11 11 Oct 2011 Exhibition & conference

89 30

Innovation Summit 2011: Growing Through Innovation

25 Nov 2011 Conference 100 20

Open Innovation in small firms: Positive step or costly mistake?

9 Feb 2012 Evening seminar 20 2

Indicator B: Number of projects attracting co‐funding (leveraged funding attracted by the investment)

Name of project:

Amount of external funding:

Name of co‐funding body/bodies:

Start and end date of co‐funding:

Specify whether private, public or third sector

The EU-INNO-Partnering Council Meeting

£10,000 TSB 18‐19 May Public sector

Impact of Science & Technology Research Workshop

£4,000 University of Cambridge

20 June Public sector


£1,000 EPRC 16 September Public sector

Managing University-Industry Centres

£600 ‐ AIM AIM and DIME Network

27 September Public and third sector

The Wealth of Universities Implications for Management Research

£2,000 AIM 18 October Third sector


n/a although venue & facilities contributed FOC (value approx £5,000)

IBM and CIHE 25 November Commercial and third sector

DRUID Academy Winter Conference 2012

£40,000 DRUID 19‐21 January 2012

Third sector


£500 University of Birmingham

9 February 2012

Public sector

Business and the Third Mission

£2,000 University of Sheffield

21 March 2012

Public sector

Enhancing Value: getting the most out of UK research

80,000 CIHE and BP Aug 2011‐ June 2012

Third sector

Indicator C: Public policy/business orientated seminars and workshops

Title: Date:

Target audience: [private sector/public sector/practitioners/third sector]

Number of participants:

Open Innovation Research and Practitioners Forum

11-12 April 2011

An interactive workshop open to OI related practitioners/policy makers/public bodies

39

The EU-INNO-Partnering Council Meeting

18-19 May 2011

By invitation only meeting 43

Impact of Science & Technology Research Workshop

20 June 2011 Academic workshop 29

"Open Innovation Choices - What is British Enterprise doing?" Research Report launch

22 June 2011 Research launch event open to all including private sector/public sector/ practitioners/ third sector

60

Open Innovation Workshop 07 July 2011 Academic workshop 12


16 Sept 2011 A workshop aimed at public sector/ practitioners/ policy makers/third sector

53

Managing University-Industry Centres

27 Sept 2011 A workshop aimed at public sector/ practitioners/ policy makers/third sector

25

Innovate ‘11 11 Oct 2011 An open to all exhibition plus conference for private sector/public sector/ practitioners/ policy makers/third sector

89

The Wealth of Universities Implications for Management Research

18 Oct 2011 A workshop aimed at public sector/ policy makers/third sector

20

Managing Successful Business Model Innovation in Manufacturing

01 & 3Nov 2011

A workshop aimed at public sector/ practitioners/ policy makers/third sector

80


25 Nov 2011 An invitation only conference for private sector/public sector/ practitioners/ policy makers/third sector

100


9 Feb 2012 An interactive seminar open to OI related practitioners/policy makers/public bodies

25

Business and the Third Mission

21 March A workshop aimed at public sector/ practitioners/ policy makers/third sector

30

Indicator D: Number of (i) non‐academic users hosted and (ii) number of researchers placed in user organisations NB – Placements funded through ESRC placement schemes should not be included.

Name: Hosted: [Where from?] Placed: [Where to?] Dates: Placement days or hours: Purpose:

None None None None None

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