Can commercialisation solve Scotland’s productivity puzzle
The importance of understanding productivity, commercialising research, and the necessity of patient, integrated policy efforts.
It was fantastic to hear Professor Bart Van Ark from the Productivity Institute speak at the Royal Social of Edinburgh last month.
The lack of consensus over why we are lagging, and gaps in evidence, is why the work of the Productivity Institute is so important.
Thousands of pages have been written about the UK’s – and Scotland’s – productivity performance. Various reasons have been put forward to explain our ‘productivity puzzle’. Explanations range from concerns over low levels of investment and poor rates of innovation to long-term scarring effects from the global financial crisis, Brexit and Covid-19.
The lack of consensus over why we are lagging, and gaps in evidence, is why the work of the Productivity Institute is so important. Established in 2019, the institute is the largest investment ever made by the Economic and Social Research Council. It brings together world-renowned experts to diagnose the UK’s productivity performance and – most importantly – to advise businesses and policymakers on best practice.
Whilst the Institute’s Hub is in Manchester, it draws upon research partners from around the UK including at Glasgow, Cambridge, Kings College London, Warwick and the National Institute for Economic and Social Research.
One important point that Professor Van Ark made was that for many businesses, the concept of productivity can be ‘fuzzy’. This can make it difficult to get buy-in for changes in behaviours or policy reform. In the language of economists, productivity compares the value of goods and services produced with the inputs used to produce those goods and services. But what does this mean in practice?
As I wrote for the Herald this month, if you think of the ‘value of goods and services’ in terms of a business’s annual sales performance, the quality of a product coming off a production line, or the level of health care that we receive. And of ‘inputs’ as the amount of hours we work or the effort that we put in. Then, the economist’s woolly explanation of productivity becomes much more meaningful.
Another interesting insight was that one reason for our weak productivity growth over the last decade has been the poor performance of the average or slightly above-average business in the UK. Whilst the best UK companies can compete with the best in the world, we have many – typically medium size – businesses who should be becoming more productive but are not.
One important area for focus is the need to better commercialise the research activity from within our Universities and Research Institutes. And, crucially, to better share their knowledge and expertise to help local firms adopt and commercialise new technologies and ideas.
Back in 1996, the Royal Society of Edinburgh (under President Tom Johnston) and Scottish Enterprise (led by Crawford Beveridge) published a remarkable 200-page report into the commercialisation of research and knowledge exchange in Scotland. Colleagues at the RSE were kind enough to dig out a copy of a project I’m working on with colleagues at Glasgow and Strathclyde. On reading this report, it is remarkable how the issues identified nearly 30 years ago remain relevant: from the need to align academic incentives with innovation activities to questions over ownership of intellectual property and the need to form closer connections between Scotland’s business community and academia.
Since then, we’ve had various initiatives promising to upscale the commercial and industry value of academic research and knowledge exchange. These have ranged from targeted investment from the Funding Council and universities to major national policy programmes, including the ill-fated £450m Intermediate Technology Institutes. Some initiatives have worked some have not. Whilst there have been improvements, we still lag behind the best countries in the world.
This agenda seems to be back in vogue.
Three lessons can be drawn from this early RSE/SE work on commercialisation through to today’s productivity debate.
Firstly, there is the need to be patient. If we are to turn around Scotland’s (and the UK’s) productivity performance it will take time and trusted partnerships across industry, academia and government. Policies need to be backed up with sustained and predictable investment over many years. Too often we stop and turn to something new.
Secondly, we cannot solve the productivity puzzle by looking at innovation, investment, or skills in isolation. Efforts to boost innovation and commercialisation of research, for example, will fail if they are not underpinned by a strong entrepreneurial pipeline of local businesses and individuals tied to (and flowing from) universities.
Finally, for all the spin of a ‘new idea’, the chances are someone has thought of a variation of that ‘next big thing’ before. A failure of policymaking in the UK (and Scotland) is that it is often fragmented and disjointed, and it fails to learn from the past. We’ve had innovation clusters, enterprise areas and all manner of funding initiatives. You name it, we’ve tried it. Understanding what history can teach us about today is something we sadly often fail to appreciate when the next new idea or initiative comes along.
Professor Graeme Roy FRSE, Dean of External Engagement and Deputy Head of College in the College of Social Sciences, University of Glasgow
The RSE’s blog series offers personal views on a variety of issues. These views are not those of the RSE and are intended to offer different perspectives on a range of current issues.
