Clash over ownership makes for start-up stalemate

ONE OF THE ENDURING mysteries about the Scottish economy is the chronic mismatch between the level of innovation in our universities, which is world class, and the level of innovation in our wider economy, which remains stubbornly poor.

It is widely accepted that the international quality of the UK’s academic research is superb and, within the UK system, the Scots do particularly well. With less than 9 per cent of the UK’s population, Scotland competitively wins over 14 per cent of the UK’s research budget. Scottish research in fields such as life sciences, informatics, optoelectronics and renewable energy are all relevant to today’s and tomorrow’s economy.

You might expect that all of these skills and knowledge developed in Scotland would lead to the generation of innovative start-up companies. But this has just not happened. Business start-ups remain close to the bottom of every league table.

You may find this puzzling — the Scottish Executive does. So it has set up a variety of schemes to encourage the generation of new businesses from our academic research base. But these very systems conspire to stop the generation of such companies.

It is unusual to find that new companies spring fully formed from the research bench. If you look at the huge variety of technology businesses, you find that the key innovations are much more complex: some ideas may have been created in the university laboratory, but most are created when a company starts to engage with customers.

In many cases, a very early prototype may provide the original inspiration for the business, but in almost all cases it provides a relatively small proportion of the final offering. Often the people involved in creating a start-up simply left their university to do so.

The new schemes set up to support such efforts are developed and delivered by the Scottish Funding Council (SFC) and Scottish Enterprise, both of which come under the remit of Nicol Stephen, the Minister for Enterprise and Lifelong Learning.

The SFC has set up a funding stream called Knowledge Transfer grants which the universities use to recruit staff that look after their commercialisation activities. This grant is currently around £12m and is set to rise. Scottish Enterprise has Proof of Concept funds and the Enterprise Fellowship scheme. Both provide grants and management support for individual projects which show real commercial promise.

But, because much of the innovation leading to a successful company happens outside of the university including the recruitment of commercial management, marketing and the level of technical engagement with real customer situations, most companies don’t feel that the university should ‘own’ much of the resulting business.

However, both the Proof of Concept and Enterprise Fellowship schemes require the innovator to acknowledge the ownership position of the university, and the Knowledge Transfer grants have ensured that there are officials within the universities dedicated to enforcing that.

The resulting clash is blocking the creation of potential new businesses.

The schemes dedicated, with the best of intentions, to growing our crop of new innovative companies are actually leading to the opposite result.

Ian Ritchie is a member of the Scottish Funding Council, and was a board member of Scottish Enterprise until November 2006.