Innovation and supply-chain development in UK regions: What role can universities play? Geoff Mason NIESR and LLAKES LLAKES Conference on Lifelong Learning, Crisis and Social Change October, 2012

Potential contributions by universities to regional growth and innovation Supply of highly-qualified personnel to innovative enterprises Provision of technical problem-solving, consultancy and training services to industrial clients Research carried out jointly with industrial partners Participation in industrial supply-chains and networks engaged in innovation Vehicles for publicly-funded regional institutions to promote research collaboration, knowledge transfer and networks

Weaker regions more dependent on universities Huggins and Johnston (2009): Regions with relatively low gross value added per capita tend to be the most dependent on their universities for income and innovation and for new business formation (measured by university spin-offs as % of all new VAT registered firms) Yet these regions tend to lack universities with high research ratings that attract the most research-active firms

Average collaborative research income per student, 2008 (Source: Higher Education-Business and Community Interaction Survey)

Average contract research income per student, 2008 (Source: Higher Education-Business and Community Interaction Survey)

Average consultancy income per student, 2008 (Source: Higher Education-Business and Community Interaction Survey)

University-business interactions: how much does proximity matter? Laursen et al (2011): For R&D-intensive firms in particular, the perceived quality of university research matters more than geographical proximity when forming relationships Firms are more likely to collaborate with local universities if they also meet their quality criteria Community Innovation Survey 2006: About 10% of firms actively cooperate with innovation partners (eg, suppliers, customers and universities), of which: 2/10 relied solely on partners within their region – defined as within a 100 mile distance of each business 4/10 had a mix of regional and extra-regional partnerships 4/10 of firms only had extra-regional partnerships

Focus on renewable energy technologies Onshore wind and biomass (eg, landfill gas) now well established Technological opportunities in offshore wind in UK which now has as much offshore wind capacity installed as rest of world in total In 2011 offshore wind contributed 1.5% of net UK electricity production, expected to rise to 7-8% in 2016 and perhaps double that by 2020 Still dependent on government financial subsidies, now subject to reconsideration by Coalition government  uncertainty for wind farm developers and their suppliers

Fieldwork in offshore wind and marine energy technologies 5 research-active university departments (South East, East Midlands, North Wales) 10 firms (South East, East Midlands, North Wales, South West, West Midlands) 4 agencies involved in regional development (Scotland, South East, North of England) 10 middle- and lower-tier university departments near to major wind farm sites (Scotland, Kent, East Anglia, Humberside, Teesside)

Phases in renewable energy development 1.R&D 2.Demonstration 3.Pre-commercial 4.Supported commercial 5.Fully commercial Market penetration proceeds slowly through Phases 2-3, then takes off towards end of Phase 4 Research opportunities for universities greatest in early phases but still many technical problems to be solved in Phase 4

Offshore wind innovation challenges Wind farms: Turbines  Undersea cables  On-shore substations  Grid connections Turbines made up of foundation, tower, blades and nacelle (which contain gears, generator, control systems, electronic components, etc) Key aim is to take advantage of faster offshore winds and opportunities for large-scale turbines to offset higher installation costs in difficult environment Aim for cost reductions at every stage through clever designs, new materials, improved turbine reliability, etc Plus improved efficiency in installation, Grid connections, operation and maintenance Multitude of specialised suppliers have to innovate in order to meet requirements of lead contractors responsible for systems integration – not enough to be able to ‘produce to blueprints’ Opportunities for firms in oil/gas, automotive and aerospace industries to diversify into components and sub-systems for offshore wind

University-industry collaborative research Closest research relationships involve RAE Tier 1 university departments Leading firms look nationwide and internationally for departments with different kinds of specialist expertise Some key relationships developed through government-funded ‘match-making’ [Energy Technologies Institute] Proximity helpful for collaboration but never a pre- condition for either firms or top-rated universities

University-industry contract research and consultancy Where top-rated universities have local industrial clients, they tend to be small and medium-sized firms Contract research and consultancy opportunities tend to flow from relationships established through collaborative research Similarly income from patents and spin-out firms often has roots in previous research with industrial partners Hard for universities without strong research background to bid for research funding or attract industrial clients – although some success stories in niche areas Also hard for firms without track record in innovation to identify gaps in knowledge and ways of filling them Key role for brokers/intermediaries to try and bring less experienced firms and universities together in response to market opportunities and help secure access to funding

Regional supply-chain development (1) Regional growth potential in supply-chains for offshore wind farms Clear opportunities for local provision of installation, operation and sea-going maintenance services Large-scale turbines and their components need to be assembled (if not designed and developed) near to wind farm locations Local universities and colleges now involved in several skills development initiatives – but most are poorly placed to assist local firms to break into offshore wind supply-chains

Regional supply-chain development (2) Intense competition from Danish, German and other foreign suppliers Scotland doing well to achieve 35% UK content in some wind farms, aiming for 50% Scottish Enterprise continues to engage in well-planned industrial support activities Contrast with cuts in resources for Local Economic Partnerships in England (following abolition of Regional Development Agencies)

Assessment Low-productivity regions rely heavily on local universities for income and innovation and new business formation Yet these regions tend to lack universities with high research ratings that attract the most research-active firms This contributes to weak university-business relationships in some regions and missed opportunities in growing areas like offshore wind energy Important role for regional agencies to help bring firms and universities together in search for research funding and joint involvement in innovation and technical problem-solving