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Global leadership in science and innovation:
international comparative evidenceon UK performance
Tera Allas
March 2014
2
The evidence project focused on international benchmarking, not recommendations
Exam question for the project on international comparative evidence on the performance of the UK’s science and innovation system
"What does international comparative evidence tell us about
the key challenges we need to address in order to maintain and
develop the UK's global leadership position in science and innovation?"
3
Comparative evidence on UK science and innovation performance: outline
• Context: importance of science and innovation for productivity, competitiveness and growth
• Science and innovation systems: what “good” looks like and implications for benchmarking
• UK’s performance: international benchmarking of key elements of science and innovation systems
• Implications: broader issues for industrial strategy and BIS
4
A large proportion of productivity growth is associated with science and innovation
Sources of growth in UK labour productivity 2000-2008Health warning: these figures are volatile from year to year
Captures the impacts of the science and innovation system
Key input into innovation activities
Sou
rce:
UK
Inn
ovat
ion
Inde
x: P
rodu
ctiv
ity a
nd G
row
th in
UK
Ind
ustr
ies,
NE
ST
A W
orki
ng P
aper
12/
09,
(NE
ST
A,
2012
)
5
The UK’s comparative advantage derives from knowledge intensive innovative sectors
UK revealed comparative advantage* in selected sectors 2011** = R&D intensive sector; *** Highly innovation active sector
Sou
rce:
BIS
cal
cula
tions
bas
ed o
n U
NC
OM
TR
AD
E a
nd I
MF
dat
a; B
IS E
cono
mic
s P
aper
15
Fig
ures
34
and
35*
A p
ositi
ve r
elat
ive
com
para
tive
adva
ntag
e (R
CA
) va
lue
indi
cate
s th
at c
ompa
red
to t
he r
est
of
the
wor
ld,
a se
ctor
rep
rese
nts
a di
spro
port
iona
tely
larg
e sh
are
of a
cou
ntry
’s o
vera
ll ex
port
s; 1
wou
ld im
ply
a co
untr
y is
co
mpl
etel
y sp
ecia
lised
in a
spe
cific
sec
tor;
-1
that
the
cou
ntry
ha
s no
exp
orts
in t
hat
sect
or;
and
0 th
at t
he
shar
e of
the
sec
tor
in t
he c
ount
ry’s
exp
orts
is e
xact
ly t
he s
ame
as t
he w
orld
sha
re o
f th
at s
ecto
r
**
**
**
** **
**
****
*
***
***
***
6
Comparative evidence on UK science and innovation performance: outline
• Context: importance of science and innovation for productivity, competitiveness and growth
• Science and innovation systems: what good looks like and implications for benchmarking
• UK’s performance: international benchmarking of key elements of science and innovation systems
• Implications: broader issues for industrial strategy and BIS
7
Science and innovation systems are complex and can contain virtuous or vicious circles
Illustrative map of the UK’s science and innovation system
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/pu
blic
atio
ns/s
cien
ce-a
nd-in
nova
tion-
syst
em-in
tern
atio
nal-b
ench
mar
king
8
For example, more public money for science can “buy” more than just better research
Illustrative example of what public sector science funding can “buy”
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/pu
blic
atio
ns/s
cien
ce-a
nd-in
nova
tion-
syst
em-in
tern
atio
nal-b
ench
mar
king
9
Indeed, there is a strong correlation between public and private sector R&D investment
Government and business expenditure on R&D 2011% of GDP
* G
over
nmen
t fin
ance
d G
ross
Exp
endi
ture
on
R&
D;
** T
otal
Gro
ss E
xpen
ditu
re o
n R
&D
(G
ER
D)
min
us G
over
nmen
t fin
ance
d G
ER
DS
ourc
e: O
EC
D,
BIS
ana
lysi
s
10
Effective S&I systems rely on a large number of elements that work well together
Money (investment, expenditure, financing)• Sufficient public sector funded research
(often performed in HE institutions)• Strong private sector funded and performed
research (relative to industrial structure)• Funding from other sources (charity/third
sector and overseas)Talent (human capital, absorptive capacity)• Population instilled with intellectual curiosity
and inspired by science• Ability to grow, attract and retain world-class
researchersKnowledge assets (science base, IP)• World-class, internationally collaborative,
highly cited published research• High-quality research facilitiesStructures and incentives• Competitive excellence driven funding, with
sufficient stable investment in new areas• Balance between curiosity-driven (“pure”)
and needs-driven (“applied”) research• Balance between deep expertise and inter-
disciplinary research• Meaningful (public/private) career paths for
world-class researchersBroader environment• Sufficient number of companies willing and
able to invest in knowledge creation
Money• Effective funding for applied research and
innovation investment (public and private)Talent• Sufficient quantity of individuals in firms and
public sector with right absorptive capacity‒ Specific science and technology
understanding‒ More generic basic, STEM,
knowledge management and business translation skills
Knowledge assets• Strong business/academia co-authorship• High-performing clusters with world-class
research institutions and and critical massStructures and incentives (institutions,
collaboration, co-ordination)• Incentives for business/researcher
collaboration, co-creation and mobility• Sufficient co-ordination and strategic
alignment among key actors• Effective challenge-led programmesBroader environment (structure of the
economy, tax and regulation)• Open markets encouraging innovation as a
source of competitive advantage• Mutually reinforcing activities within and
links between science base and firm base
Money• Timely access to risk capital (alongside
advice, skills, networks, market disciplines)• Exit routes that provide access to markets
and finance for growth companiesTalent • Entrepreneurial aspirations and business
building skills• General business skills (e.g., strategy,
management, marketing, production)Knowledge assets• Patents, trade-marks and other
commercialisable IPStructures and incentives• Sufficient intellectual property protection to
incentivise innovation and capture valueBroader environment• Productive dynamic between large firms
and vibrant growth companies• Sophisticated demand, including from public
sector (procurement)• Generally positive business environment
(tax, regulation, planning, etc.)Innovation outputs• Revenues, exports, profits, productivity and
growth derived from science and innovation• Improved societal outcomes due to better
level and application of knowledge* T
his
is n
ot a
com
preh
ensi
ve li
st b
ut o
ne w
hich
aim
s to
cap
ture
the
mos
t im
port
ant
feat
ures
; w
hile
the
key
cha
ract
eris
tics
are
cate
goris
ed h
ere
in a
nec
essa
riy 2
-dim
ensi
onal
way
, th
e ac
tual
sys
tem
is m
ulti-
dim
ensi
onal
and
non
-line
ar,
whe
re t
he c
onne
ctio
ns b
etw
een
elem
ents
are
crit
ical
Knowledgecreation
Knowledgediffusion and translation
Knowledgeapplication and value capture
Key characteristics* of an effective science and innovation system
11
We have used a 6-part framework for the main features of science and innovation systems
Framework for assessing science and innovation systems
2. Talent
1. Money
5. Broader
3. Knowledge
Assets
6. Innovation
Outputs
4. Structures
and Incentives
Environment
2. Talent
1. Money
5. Broader
3. Knowledge
Assets
6. Innovation
Outputs
4. Structures
and Incentives
Environment
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/pu
blic
atio
ns/s
cien
ce-a
nd-in
nova
tion-
syst
em-in
tern
atio
nal-b
ench
mar
king
12
Comparative evidence on UK science and innovation performance: outline
• Context: importance of science and innovation for productivity, competitiveness and growth
• Science and innovation systems: what good looks like and implications for benchmarking
• UK’s performance: international benchmarking of key elements of science and innovation systems
• Implications: broader issues for industrial strategy and BIS
13
Share of global exports by sector* 2010
Sou
rce:
BIS
cal
cula
tions
bas
ed o
n In
tern
atio
nal T
rade
Cen
tre
data
and
IM
F W
orld
Eco
nom
ic O
utlo
ok d
ata
* W
eigh
ted
by s
ize
of e
cono
my
6. Innovation outputs
The UK’s export performance is strong in knowledge-intensive goods and services
Overall performance on innovation outputs is mixed*, with apparent weaknesses in SMEs
UK relative score on a number of innovation output indicators10 = highest ranking comparator country; 0 = lowest ranking comparator country
Sou
rce:
BIS
ana
lysi
s us
ing
OE
CD
and
IU
S d
ata
6. Innovation outputs*
The
re a
re f
ew r
elia
ble
met
rics
of in
nova
tion
outp
ut a
cros
s co
mpa
rato
r co
untr
ies;
for
som
e of
the
indi
cato
rs b
elow
, a
redu
ced
list
of c
ount
ries
(Ger
man
y, F
ranc
e, F
inla
nd,
UK
) w
as u
sed
15
Gross Expenditure on Research and Development (GERD) 1991-2011% of GDP
Sou
rce:
OE
CD
(20
13)
Sci
ence
, T
echn
olog
y an
d In
dust
ry S
core
boar
d
1. Money
0
1
2
3
4
5
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Per cent
Canada Finland France Germany
Japan South Korea United Kingdom United States
The UK’s investment in R&D has been static and below comparators since early 1990s
Public and private sector GERD as a % of GDP, 2011
1.0 0.90.6
0.8 0.9 0.8 0.80.6 0.7
3.02.8
2.8 2.0 1.8
1.4 1.4
1.2 1.1
0
1
2
3
4
5
South Korea Finland Japan Germany United States France Australia UnitedKingdom
Canada
Per cent
Private and third sector GERD
Government financed GERD
16
The UK appears to significantly under-spend on R&D relative to comparator countries
Public and private sector gross expenditure on R&D 2011% of GDP
1. Money*
Gov
ernm
ent
finan
ced
Gro
ss E
xpen
ditu
re o
n R
&D
; **
Tot
al G
ross
Exp
endi
ture
on
R&
D (
GE
RD
) m
inus
Gov
ernm
ent
finan
ced
GE
RD
Sou
rce:
OE
CD
, B
IS a
naly
sis
4.03.7
3.4
2.8 2.7
2.2 2.2
1.8 1.8
17
Only part of the lower private sector R&D spend is explained by industrial structure
1. Money
Business Enterprise R&D (BERD) adjusted for industrial structure 2011% of GDP
Sou
rce:
OE
CD
Sci
ence
, T
echn
olog
y an
d In
dust
ry S
core
boar
d 20
13
18
The UK’s innovation body is significantly smaller than those in Germany and Finland
Comparison of innovation bodies
1. MoneyS
ourc
e: T
SB
, F
raun
hofe
r an
d T
EK
ES
web
site
s, E
uros
tat
(for
GD
P a
nd e
xcha
nge
rate
s) CountryInnovation body
Budget 2013, £m*
Budget as % of GDP
UKTechnology Strategy Board
440 0.03
GermanyFraunhofer Institutes
1600 0.07
Finland TEKES 490 0.29
19
Even with private sector innovation included, UK’s total investment is only average
Estimated total R&D and innovation investment 2011% of GDP
1. Money*
Gov
ernm
ent
fund
ed G
ross
Exp
endi
ture
on
Res
earc
h an
d D
evel
opm
ent
(GE
RD
); *
* G
ER
D m
inus
Gov
ernm
ent
fund
ed
GE
RD
(un
adju
sted
for
indu
stria
l str
uctu
re);
***
See
sep
arat
e m
etho
dolo
gica
l not
e (u
nadj
uste
d fo
r in
dust
rial s
truc
ture
)S
ourc
e: O
EC
D,
IMF
, C
orra
do e
t al
201
0 da
ta,
BIS
ana
lysi
s
20
The UK’s performance in science and innovation related human capital is mixed
UK relative score on a number of talent indicators10=highest ranking comparator country, 0=lowest ranking comparator country
2. TalentS
ourc
e:,
BIS
ana
lysi
s us
ing
OE
CD
, U
NE
SC
O,
WE
F,
CE
P a
nd I
MD
dat
a
21
University qualifiers in STEM subjects 2011-12
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/up
load
s/sy
stem
/upl
oads
/att
achm
ent_
data
/file
/249
720/
bis-
13-1
241-
enco
urag
ing-
a-br
itish
-inve
ntio
n-re
volu
tion-
andr
ew-w
itty-
revi
ew-R
1.pd
f
2. Talent
The UK’s STEM graduates tend to be concentrated in life science fields
22
Proportion of tertiary degrees awarded to women 2000 and 2009
Sou
rce:
htt
p://
ww
w.f
orbe
s.co
m/s
ites/
bryc
ecov
ert/
2013
/03/
08/s
even
-way
s-w
omen
-are
-stil
l-fal
ling-
behi
nd-o
n-in
tern
atio
nal-w
omen
s-da
y/;
http
://w
ww
.wis
ecam
paig
n.or
g.uk
/abo
ut-u
s/w
ise-
reso
urce
s/st
atis
tics-
2013
2. Talent
Women’s participation in STEM education is high but concentrated in health related fields
In the UK in 2011/12, 53% of all STEM
graduates were female
23
UK’s field-weighted citation impact across ten research fields in 2002 and 2012
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/up
load
s/sy
stem
/upl
oads
/att
achm
ent_
data
/file
/263
729/
bis-
13-1
297-
inte
rnat
iona
l-com
para
tive-
perf
orm
ance
-of-
the-
UK
-res
earc
h-ba
se-2
013.
3. Knowledge assets
The UK’s science output is strong across a broad range of research fields
UK relative score on a number of indicators relating to structures and incentives operating in the system1=worst comparator country; 10=best comparator country
Structures and incentives in our science and innovation system are mostly fit-for-purpose
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/up
load
s/sy
stem
/upl
oads
/att
achm
ent_
data
/file
/277
043/
bis-
14-
544a
n-in
sigh
ts-f
rom
-inte
rnat
iona
l-ben
chm
arki
ng-o
f-th
e-U
K-s
cien
ce-a
nd-in
nova
tion-
syst
em-a
nnex
es-b
is-
anal
ysis
-pap
er-0
3.pd
f; *
Sur
vey
ques
tion
4. Structures and incentives24
25
Different indicators provide a mixed picture of university-business collaboration in the UK
4. Structures and incentives
Relative UK score on indicators of university-business collaboration% of comparator** countries’ average
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/up
load
s/sy
stem
/upl
oads
/att
achm
ent_
data
/file
/277
043/
bis-
14-5
44an
-insi
ghts
-fro
m-
inte
rnat
iona
l-ben
chm
arki
ng-o
f-th
e-U
K-s
cien
ce-a
nd-in
nova
tion-
syst
em-a
nnex
es-b
is-a
naly
sis-
pape
r-03
;*h
ttp:
//w
ww
3.w
efor
um.o
rg/d
ocs/
WE
F_G
loba
lCom
petit
iven
essR
epor
t_20
13-1
4.pd
f**
Aus
tral
ia,
Can
ada,
Fin
land
, F
ranc
e, G
erm
any,
Jap
an,
Sou
th K
orea
, U
nite
d S
tate
s
26
The UK’s business environment is relatively favourable to science and innovation
5. Broader environment
UK relative score on a number of broader environment indicators10=highest ranking comparator country, 0=lowest ranking comparator country
Sou
rce:
htt
ps:/
/ww
w.g
ov.u
k/go
vern
men
t/up
load
s/sy
stem
/upl
oads
/att
achm
ent_
data
/file
/277
043/
bis-
14-5
44an
-insi
ghts
-fro
m-
inte
rnat
iona
l-ben
chm
arki
ng-o
f-th
e-U
K-s
cien
ce-a
nd-in
nova
tion-
syst
em-a
nnex
es-b
is-a
naly
sis-
pape
r-03
27
The UK business environment produces new businesses at a high rate compared to others
EXAMPLE: New business registrations per thousand population* 2011
5. Broader environment
10.4
7.66.2
3.6 3.11.8 1.4 1.1
UK
Can
ada
(200
9)
Au
stra
lia
Fin
lan
d
Fra
nce
So
uth
Ko
rea
Ger
man
y
Jap
an
Sou
rce:
htt
p://
data
.wor
ldba
nk.o
rg/in
dica
tor/
IC.B
US
.ND
NS
.ZS
; *
Peo
ple
aged
15
-64
28 5. Talent5. Broader environment
Mid-sized businesses are more innovative but a smaller share of UK business population
Mid-sized businesses are moreinnovative in the UK….
Source: Mid-sized Businesses in Finland, France, Germany, Sweden and the UK – General Statistics, NIESR, December 2011;Future champions: Unlocking growth in the UK’s medium-sized businesses, CBI, October 2011
% of revenue derived from innovation by company size in the UK 2009
Mid-sized businesses as % of turnover of all businesses 2009
32.8
32.0
31.5
30.5
19.7
Sweden
Finland
Germany
France
UK
…but make up a relatively smallpart of the UK business population
29
In sum, the UK’s main weaknesses are overall under-investment and human capital issues
Summary of the relative performance of the UK’s S&I system
ElementRelative performance Comments
Money Medium / Low • Public sector support for both R&D and innovation low (but data imperfect)• Private sector R&D investment low even after adjusting for industrial structure• Relatively high private investment in innovation does not outweigh low R&D
Talent Medium / Low • Long-standing issues in basic numeracy and literacy, STEM and especially engineering disciplines, and management skills
Knowledge assets
Medium / High • Extraordinary productivity of science system as measured by highly quoted articles and field-weighted impact
• Relatively poor performance on patents not a good indicator of value added
Structures and incentives
Medium / High • Excellence driven competitive system praised by other nations• Questions about whether science portfolio and incentives balanced enough
Broader environment
Medium / High • Overall business environment positive in comparison to non-US comparators• Issues around ability of business population to fully exploit science and
innovation
Innovation outputs
Medium (mixed)
• Export performance and general competitiveness relatively high• Low levels of innovation active SMEs and questions about innovativeness (and
productivity) of sectors less exposed to global competition
30
Comparative evidence on UK science and innovation performance: outline
• Context: importance of science and innovation for productivity, competiveness and growth
• Science and innovation systems: what good looks like and implications for benchmarking
• UK’s performance: international benchmarking of key elements of science and innovation systems
• Implications: broader issues for industrial strategy and BIS
31
Emerging thinking on maximising S&I value suggests a number of policy links to explore
Emerging thinking on issues that need addressing in order to further maximise the value of the UK science and innovation system
Element Potential priority issues to address (FOR DISCUSSION)
Money • Addressing under-investment in non-incremental way
Talent • Addressing basic numeracy and literacy, STEM, management skills• Considering government levers to raise aspiration and entrepreneurship
Knowledge assets
• N/A
Structures and incentives
• Linking innovation support more seamlessly into other business support• Managing science and innovation investment as a balanced portfolio• Further aligning Industrial Strategy with science and innovation strengths
Broader environment
• Attracting R&D intensive corporations to locate and stay in the UK• Ensuring access to finance interventions are of sufficient scale and co-
ordinated with industrial strategy and science and innovation policy
Innovation outputs
• Understanding drivers of innovation in service sectors• Understanding whether competition policy drives enough innovation
Global leadership in science and innovation:
international comparative evidenceon UK performance
Full report and annexes available at:
https://www.gov.uk/government/publications/science-and-innovation-system-international-benchmarking