Month: June 2022
The Innovation Caucus has just published its report exploring the future growth opportunities of place-based innovation clusters in the UK. This study was commissioned by Innovate UK. Download the full report here.
In support of Innovate UK’s continuing mission to enhance place-based innovation, the Innovation Caucus recently completed a report to understand the future growth opportunities of place-based innovation clusters in the UK, and developed a framework to explore what aspects of these clusters merit further investment to strengthen their contribution to GVA, and potentially also contribute to the levelling up agenda.
Clusters are industry or sector specific. They comprise groups of firms and intermediary organisations involved in related activities, and the focus of inquiry is generally on understanding how the group benefits, and contributes to collective benefit, from positive feedback loops associated with collocation with each other. The inherently place-based nature and tendency to lead to increased innovation make clusters, and cluster strategies, attractive policy tools for both innovation and levelling up agendas. Our framework was developed based on a survey of the state of the art in identifying and measuring clusters. It also considered cluster evaluation as conditional on the state of evolution of a cluster and in light of previous and potential cluster growth trajectories. As innovation adoption sits alongside innovation output in successful clusters, the framework additionally proposes methods to evaluate the conditions that contribute to absorptive capacity.
The report surveyed three clusters selected in consultation with Innovate UK – East Midlands medical technologies, Solent marine and maritime, and Belfast cyber security. The cases were intentionally selected to be at different evolutionary stages, based on very different technologies and industries, and are located in different parts of the country. This enabled us to test and refine the framework across a diverse range of cases.
Applying the framework demonstrated the importance of looking beyond the numbers to assess gaps and growth potential. Structurally, these clusters were very different with distinctive growth trajectories and emerging developmental opportunities. The marine and maritime sector in Solent is fragmented and contains what might be characterised as a number of subclusters (freight and logistics; naval defence; leisure craft and luxury vessel design, construction, and outfitting; cruise and marine hospitality; ferries and marine transportation; maritime engineering; marine ecology and biotechnology; and maritime law and regulation), rather than being a cluster itself. Many of these industries are looking to opportunities in net zero (around alternative fuels, production, and operations) and autonomous vessels as shaping their future markets and innovation strategies. By contrast, the medical technologies cluster in the East Midlands is a subcluster of the wider health and life sciences sector in the region. The cluster covers a range of activities (e.g. product development, contract manufacturing, contract research). Future market development will bring medical and digital technologies more closely together, with the potential for leveraging related digitals skills in surrounding regions. The cybersecurity industry in Belfast was regarded by most interviewed as a relatively nascent cluster. Looking to the future, there is both growing domestic and international demand for products and services with diversification opportunities in a variety of other technology specialisms such as fintech, machine learning and AI.
Given the differences in growth stages, core technologies, and cluster structures, it is no surprise that these clusters exhibited different strengths and weaknesses across the four domains surveyed (core assets, skills, knowledge exchange, and governance networks). However, there were some commonalities between them. For instance, each featured relatively strong knowledge generation within local higher education and research labs, but these entities had lower than expected connections with the commercial R&D community. Skills and talent retention are an enduring challenge in all clusters. While each cluster had at least one industry or cluster association performing a convening and foresight role, all reported that these could be better resourced and supported to more effectively engage the cluster community.
While these insights were generated from a limited number of cases, they support an assessment approach that acknowledges and seeks to understand cluster- and place-specific gaps, challenges, and opportunities while also providing an evidence base to gauge national trends.
Next steps might include:
- Developing an evaluative framework for comparing different clusters based on the known information about their emergent characteristics and growth potential;
- Developing a methodology to synthesise lessons across cluster case studies to inform national policy priorities and strategies. For instance, commonalities on skills pinch points seen across clusters could be aggregated to inform national skills and training policies.
Today the Innovation Caucus published their report exploring the innovation intentions of micro, small and medium sized enterprises (SMEs) in foundation industries (FI). Commissioned by Innovate UK. This study was commissioned by Innovate UK. Download the full report here.
Supplying core materials for use in manufacturing cement, paper, ceramics, metals, chemicals and glass, the foundation industries have a combined annual turnover of £67.5 billion, and with 250,000 workers, employ 10% of the UK’s manufacturing workforce. Playing a crucial role in the UK’s manufacturing supply chains, the foundation industries have potential for growth and innovation in the economic sector, and in considerations of the wider impact of their operations on the environment.
The Foundation Industries and Innovation
Despite their key role in the UK manufacturing economy, the foundation industries have seen a sharp drop in their share of UK GDP – declining by 43% between 1996 – 2016. Furthermore, innovation activity in the foundation industries is lower than in other nations. We have found that despite representing over 98% of the foundation industries, FI SMEs (firms with fewer than 249 employees) are less likely than larger FI firms to innovate, invest in research and development, or to adopt new technologies that benefit the environment.
We showed that medium sized FI SMEs report relatively high rates of innovation, while small and micro FI firms are less likely to have innovated over the past five years (a pattern replicated in spending on research and development, where fewer than 14.75% of small and micro FI firms reported spending over £100,000 p/a compared to over 50% of medium sized FI firms).
Our findings show that overly broad perceptions of innovation may be constraining growth and performance. Changes to FI firm products, processes, or practices tend to be driven by customer demand. In this context, ‘innovation’ is understood as adopting a new technology or process that already has a proven track record in the industry, rather than world-leading or transformative initiatives.
The Foundation Industries and the Environment
The foundation industries are currently very energy intensive in producing materials, and also have the potential to contribute to creating greener products, such as to reduce building heat loss. However, our findings show that very few FI firms are currently innovating in response to environmental concerns, suggesting that the Net Zero agenda has not yet stimulated widespread change to production technologies or processes in these industries. There may be opportunities to increase energy efficiencies within the foundation industries and to encourage their contribution to reducing emissions in downstream applications.
In our report, we explore FI firms’ innovation in relation to willingness (openness to change and growth), capability (access to resources) and capacity (ability to commit resources to drive change). Foundation industry SMEs demonstrate strong willingness to innovate frequently, and most have plans for future innovation. However, their tendency to define innovation broadly to include all changes and improvements to products, processes, or practices may mean that they are enthusiastic about incremental innovation, but may be less open to more industry-leading activities in the absence of external incentives.
The innovation capability of foundation industry SMEs is strongly influenced by their suppliers and customers, who can provide valuable incentives to innovate, suggesting that interventions to encourage innovation across the supply chain could potentially enhance performance upstream and downstream. It has been interesting to see that there is relatively low engagement of these firms with other potential innovation partners, such as universities, further education colleges, research organisations, knowledge transfer networks, industry associations, and other government agencies. The question of how to encourage this dialogue is an interesting and important one.
The innovation capacity of micro and small foundation industry enterprises is negatively influenced by instability or unpredictability in customer orders and revenue streams. Cost considerations most often influence hesitancy to innovate: a reluctance to divert resources from existing business streams to research and development or other innovation activity and external grants were not widely seen as suitable for the types of incremental R&D and innovation that firms were undertaking. However, significantly, whether they could allocate time was often a deciding factor in whether these micro and small FI firms took steps to implement innovation in their day-to-day activities. Time was identified as a hidden and valuable resource.
The report identified broad trends. However, it should be noted that FI firms also reported challenges at different stages of the innovation process. Our report delivers a strategy and tool for Innovate UK and their stakeholders to assess FI SME innovation readiness to better target interventions and signpost resources.
Please get in touch with the Innovate UK team if you would like to learn more about using the tool Transforming Foundation Industries Challenge – UKRI.