Why isn’t the UK more successful at converting its excellent science into wealth creating businesses? This is a perennial question – and one that’s driven all sorts of initiatives to get universities to handle their intellectual property better, to develop closer partnerships with the private sector and to create more spinout companies. Perhaps UK universities shied away from such activities thirty years ago, but that’s not the case now. In my own university, Sheffield, we have some very successful and high profile activities in partnership with companies, such as our Advanced Manufacturing Research Centre with Boeing, shortly to be expanded as part of an Advanced Manufacturing Institute with heavy involvement from Rolls Royce and other companies. Like many universities, we have some interesting spinouts of our own. And yet, while the UK produces many small high tech companies, we just don’t seem to be able to grow those companies to a scale where they’d make a serious difference to jobs and economic growth. To take just one example, the Royal Society’s Scientific Century report highlighted Plastic Logic, a company based on great research from Richard Friend and Henning Sirringhaus from Cambridge University making flexible displays for applications like e-book readers. It’s a great success story for Cambridge, but the picture for the UK economy is less positive. The company’s Head Office is in California, its first factory was in Leipzig and its major manufacturing facility will be in Russia – the latter fact not unrelated to the fact that the Russian agency Rusnano invested $150 million in the company earlier this year.
This seems to reflect a general problem – why aren’t UK based investors more willing to put money into small technology based companies to allow them to grow? Again, this is something people have talked about for a long time, and there’ve been a number of more or less (usually less) successful government interventions to address the issue. Only the latest of these was announced at the Conservative party conference speech by the Chancellor of the Exchequer, George Osborne – “credit easing” to “help solve that age old problem in Britain: not enough long term investment in small business and enterprise.”
But it’s not as if there isn’t any money in the UK to be invested – so the question to ask isn’t why money isn’t invested in high tech businesses, it is why money is invested in other places instead. The answer must be simple – because those other opportunities offer higher returns, at lower risk, on shorter timescales. The problem is that many of these opportunities don’t support productive entrepreneurship, which brings new products and services to people who need them and generates new jobs. Instead, to use a distinction introduced by economist William Baumol (see, for example, his article Entrepreneurship: Productive, Unproductive, and Destructive, PDF), they support unproductive entrepreneurship, which exploits suboptimal reward structures in an economy to make profits without generating real value. Examples of this kind of activity might include restructuring companies to maximise tax evasion, speculating in financial and property markets when the downside risk is shouldered by the government, exploiting privatisations and public/private partnerships that have been structured to the disadvantage of the tax-payer, and generating capital gains which result from changes in planning and tax law.
Most criticism of this kind of bad capitalism focuses on issues of fairness and equity, and on the damage to the democratic process done by the associated lobbying and influence-peddling. But it causes deeper problems than this – money and effort used to support unproductive entrepreneurship is unavailable to support genuine innovation, to create new products and services that people and society want and need. In short, bad capitalism crowds out good capitalism, and innovation suffers.
In short, and to focus on the positive side: Competition breeds competitiveness.
Indeed. The issue is how to achieve the competitive environment that’s needed for good capitalism to thrive, and which provides fewer incentives for bad capitalism.
This is a very thought provoking and well-argued piece, but I think that the key question that is missing here is:
“Given that UK universities educate the leaders of industry and of government, what is it about the education that they provide that fails to inculcate an appropriate culture of innovation in government and industry?”
For the arts graduates in government I think that it is a lack of exposure to science-as-creative endeavour that is the problem. Science is the boring stuff, while English is where one talks about ideas. An American style first year where scientists take some arts courses and arts students some ideas-driven popular science courses would really help here.
For the science graduates in industry I think that it is a lack of exposure to science-as-creative endeavour that is the problem. They gain a scientific training similar to that in school but at a more advanced level, but their exposure to the original literature comes, in general, too late and is insufficient for them to develop a critical and creative approach to science without higher study. Hence, the notion of innovation- or ideas-driven science is problematic for them.
With the demise of funding to support a strong tutorial system in all but Oxbridge, this has to be done by throwing students in at the deep end and getting them to engage with the original literature from year 1 at the same time as they are supported in learning the fundamentals. Individual academics and individual departments strive to do this, but in a culture where the comparative analysis of National Student Survey scores dictates that you must keep students happy and give them what they think they want, it takes a brave university, department and/or academic to do this. (I was very pleased to find my new department assert very strongly that it wished to place greater emphasis on these aspects from this year).
More lobbying of government concerning educational policy and leadership in general from UUK, relevant position statements from the Russell Group as well as changes to QAA benchmark statements would help to ensure that we foster a view of science-as-ideas across industry and goverment. From such a culture, the conditions for the emergence of the right kind of capitalism are in place.
Chris, I have a great deal of sympathy with what you say. As you know, we are trying at Sheffield to introduce a number of measures to engage our students earlier with the creative side of science, but as you identify there are some barriers to this. But I’m not sure I’m as confident as you that this will be enough to make our innovation system work better.