What is the character of UK innovation policy?

I argue that innovation policy is in the process of being re-characterised as a joint venture of public-private enterprise with justification from government found in rhetoric for innovation to overcome Grand Challenges. To demonstrate my thesis, I will consider how the United Kingdom Research and Innovation (UKRI) policy works: the objectives, policies, institutions, and funding bodies involved, what incentives are offered, and how funds are distributed. I will critique and contextualise this new, supposedly statist, policy regime “where profit seeking entrepreneurs as well as an entrepreneurial state” are policy axioms.

How the UKRI functions

On the advice of Sir Paul Nurse’s 2014 report, the government merged the following research councils to form the UKRI: theArts and Humanities Research Council (ARHC), Biotechnology and Biological Sciences Research Council (BBSRC), Engineering and Physical Sciences Research Council (EPy FRSC), Economic and Social Research Council (ESRC), Medical Research Council (MRC), Natural Environment Research Council (NERC), Science Technology Facilities (STFC), Innovate UK, and Research England. The seat of authority and funding for all of these councils is in Whitehall at the Department for Business, Energy, and Industrial Strategy (BEIS). The concerted effort of BEIS in influencing the direction of research councils’ priorities and objectives exemplifies the recent re-charateristion of innovation policy: historically, research councils were left to innovate and share of their own accord, in line with the Haldane Principle whereby politicians never sway researchers’ objectives. The onus is now placed into a national effort and moonshots. Despite embracing Haldane in Principle the new arrangement corners councils into obeying BEIS goals in practice; with the Secretary of State entitled to attendance and all materials except the lower executive committees; the UKRI CEO entitled to lead the executive committee and chair the board. The 2021 R&D roadmap, moreover, demonstrates a heavy-hand, mentioning ‘moonshot’ eleven times. The 2014 Department for Business Innovation and Skills report Our Plan For Growth: Science and Innovation meanwhile never mentions moonshots at all but soft-touch Grand Challenges instead. The ethos for state-led collaboration is present in 2014 but more modest and reserved. I quote:

It is not the job of a strategy for science and innovation that will last for 10 years to specify in detail the scientific questions to be answered. And when it comes to fundamental research it remains the case that those at the ‘coal face’ of research are best placed to identify the key questions and opportunities to advance knowledge. However, many of the ‘grand challenges’ for society, the ultimate customer for research, are obvious: developing cost effective low carbon power sources and storage solutions for energy-hungry economies; harnessing and managing scarce resources; improving human, animal and plant health.

Our Plan For Growth: Science and Innovation

A confluence of business, government, university, and think-tank advocacy is behind the change of language from hesitant ‘grand challenges’ to moonshots. Mariana Mazzucato advocated moonshots in an entrepreneurial state pamphlet for the think tank Demos in July 2011. Part of the Roadmap is the creation of an Innovation Expert Group (IEG) including Mazzucato as an adviser. In 2018, a mission orientated commission at the Institute for Innovation and Public Purpose (IIPP) “interacted directly with policy teams in BEIS to help develop these [Theresa May’s] missions into viable project plans”. And in 2014, Business Secretary Vince Cable celebrated her Entrepreneurial State citing the common ground between her facts and his policy making: the Catapult network to commercialise science-into-industry, tax incentives for R&D, public investment to solve private sector underinvestment, long-termist industrial strategy “whose commitments go much further than narrowly ‘addressing market failures’”, patient capital through the Business Bank, all feature. Vince Cable embodies the re-characterisation of UK innovation policy in one sentence: “Innovation needs a mixed economy: profit seeking entrepreneurs as well as an entrepreneurial state.” Nurse’s report and Cable’s speech formed premises which has UKRI turned into practice.

Compare the above quoted policy passage to the UK R&D Roadmap and the UKRI objectives and it demonstrates how mission-led innovation policy has become. Whereas before innovation was viewed as more local and organic, up to those at the “coal face”. Now the efforts of the roadmap and UKRI are towards Entrepreneurial State ambitions. Part of that mission is mediating the objectives, priorities, and policies for its institutions.

How UKRI uses objectives, policies, and institutions

The UKRI publishes its objectives in its Corporate Plan, Annual Report, Delivery Plans, and Five Year Plan for Sustainability, to name a few. By coordinating through documents which list objectives for each council, economic actors can decide and align their research, career, investment, and institution priorities accordingly. The list of objectives include: countering COVID-19; innovators at UN climate conference; diversity and inclusivity; humane work culture; strengthening interconnections; attracting talent; implementing human resources; fostering business-led innovation. Many of these ‘objectives’ are vague and lack rigour. For example humane work culture and inclusivity are never paired with money or affirmative action schemes. Whereas interconnectivity and talent are fostered through Knowledge Exchange Framework and Skill Visa support. The disparity in investment suggests that UKRI values business and collaboration above equity. 

What flagship policies do UKRI wield to turn objectives into practice? The biggest policy is corporatisation. Whereby each council is akin to a division in the company with strategy and objectives mediated for the greater purpose and consideration of all, especially financial, stakeholders. By corporatisation I mean the new management policy and structure which models itself on corporate management. The management structure, notably without CEO and the BEIS’ Secretary of State, is illustrated below:

Policy wonks, Paul Nurse and John Kingman commend that the UKRI board is “responsible for holding the research councils, Innovate UK and Research England (the nine ‘Councils’) to account, it must be independent of them.” The function of the board is keeping funding and priorities in check. The upper management include Nominations and Remunerations, Board Investment Committee, Audit Risk and Performance Committee. This is a structure reminiscent of Bupa (a private medical company) with its Audit, Risk, Nomination & Governance committees. The UKRI upper management and board however is the same as the Wellcome Trust in name; more corporate than private companies, with its larger size, multi divisions, and investment portfolio prominence. Despite the Wellcome being a charity, and UKRI a public body, both structures have imitated industry management. The embrace of a CEO, a board, investment committee, and corporate human resources (to come), reveals business (private sector) influence. Much as the onus on business and industrial strategy in the ‘BEIS’ name implies the same.

UKRI sub-policies are also corporatised: competitiveness based grants, a massive investment portfolio, and private stakeholders. The Industrial Strategy Challenge Fund (ISCF), for example, hosts competitions for companies to suggest how they can best contribute to one of the strategy challenges and thereby gain funds; the ISCF boasts £2.6 billion in public investment and £3 billion from industry; National Research Campuses garner private investment. Corporatisation supports the argument that innovation policy encourages public-private hybridisation. Even publicly funded research institutes are industry collaborative. Not one research institute works without industry collaboration or investment and the onus in the UKRI Corporate Plan 2020-2021 is on examples where private companies and semi-private stakeholders have put in the most money. The flagship Babraham Centre, moreover, boasts stakeholders like Cambridge University and 60 bioscience companies. The Francis Crick Institute boasts stakeholders like University College London, Wellcome, Cancer Research UK, and the Medical Research Council. For the few UKRI research institutes to be networked with universities and private companies demonstrates the omnipresence of public-private hybridisation; instead of being purely state led. Even national institutes are public-private hybrids, and even partner universities and charities like UCL and Wellcome work like corportaised businesses. For example, money from international students is consumers’ money and Welcome attains revenue from its investment portfolio. With its corporate policies, incentives are also modelled on what works in business with the offer of money and prestige—“symbolic capital”—an obvious incentive to innovate. What other incentives, then, are offered?

How UKRI wields incentives

Incentives include funding, networking opportunities, and good public relations. Funding allows for new projects to be taken and secured for a long run; partnerships across institutions allows for more opportunities for funding, prestige, and efficient knowledge transfer; de-risking incentivises otherwise unappealing enterprise; working on human-need challenges is a good way to bolster a positive public relations image. To fulfill UKRI goals, however, incentives such as funding, network opportunities, de-risking, and good public relations depend on meeting UKRI goals. Those goals are thereby incentivised. For example, excellence in research for UKRI depends on a. Impact b. Commercial viability c. Openness d. Public-private co-investment. Bear in mind however that these criteria are still forming and debated. Broadly speaking, incentives entice researchers, companies, and public institutions to work on projects that have impact, start-up potential, transparency and industry-university stakes.

The UKRI creating suitable conditions and taking on much of the risk allows for businesses to comfortably join them—hence the UKRI corporate plan speaks of de-risking as a prized goal. Yet ‘de-risking’ is merely the transfer of innovation risk, as Mazzucato explains, in incentivising businesses they stand to profit whilst the state loses. All the aforementioned incentives aim to translate innovation into economic growth and effect economies of scale across the industry. The telling aim of de-risking however shows the state fails to be so entrepreneurial, instead taking on risk whilst outsourcing gains: innovation is therefore not inevitably more efficient or incentivised but often stymied in the misplaced emulation of prestigious and fashionable private institutions’ techniques. A major flaw in UKRI is not emulating where it counts: in gaining royalties to further fund innovation within public institutions. UKRI’s ESRC for example is lackadaisical about royalties; inferably, in the belief that innovation benefit diffuses through business and back to tax and thereby can fuel the innovation budget. That is a misguided belief. Patents, when protectionist, have historically stifled innovation and when private business is free to patent from the output of public endeavour they thereby stifle innovation still. Temporary patents would provide revenue for more public innovation to keep the innovation cycle re-spinning—as it already does in nations like Denmark and Germany. Whereas private patenting is liable to lead to less investment in public innovation and less investment in innovative high risk discovery at all. The history of state-led innovations like the internet, that was never capitalised on by the state, and states founding markets to begin with, attests the merit of refunding the state. The Knowledge Exchange Schemes and BEIS’s framework for UKRI nevertheless echo the ESRC diffusion proposition. The BEIS’s UKRI framework mentions intellectual property once, in a footnote—“to a lesser extent UKRI also supports commercialisation of research directly through its own IP (Intellectual Property) portfolio.” And the UKRI corporate plan mentions “intellectual property” and “patent” once, both in reference to industry collaboration and business spin-offs from academia. Research England data confirms the minor incentive of IP in UK innovation policy. “80 percent” of IP belongs to six English institutions; illustrated below:

IP assets per institution, Research England

And what is more, to incentivise excellence and innovation, excellent research and innovators must be distinguished – from mediocre research and renovators – for grant funding to be allocated. But by that very logic genuinely new innovative ground and research centres are seldom trodden or established, but old effective methods and innovation centres consolidated instead. So, how does UKRI select and invest in innovation candidates?

How UKRI distributes funds

Funds from the research and innovation budget and science infrastructure budget are portioned out to the nine councils. As shown below:

These demonstrate that Research England, Innovate UK, and EPSRC are major beneficiaries and further suggest that priorities are in seeding innovation in businesses (Innovate UK), and fostering Engineering and Physical Science (EPSRC, STFC). Meanwhile little money is apportioned to social sciences and humanities. True, sciences are literally more expensive to fund but, even with infrastructure discounted, the favour for STEM funding is evident within individual universities and within the BEIS budget. Surprisingly little goes to biotechnology (BBSRC) or medical research (MRC) perhaps because funds from the private sector and charities, such as Wellcome, bear the brunt—and innovation happens transnationally. The Financial Times (FT) issue on The Future of AI and Digital Healthcare, for example, details billions of investments from McKinsey, Amazon, and Google into UK AI in hope of innovative disruption with health providers, such as the NHS, providing data instead of money. As for biotechnology, being an emerging sector, a relatively small amount can be explained when you consider how additional funding does not automatically equate to more innovation. Indeed, the quality and suitability of funding locations and centres matters. Consider the UKRI institutes mapped below:

UKRI research institute locations

Funding allocations for research and development distributed across the UK regions appear surprisingly equitable. Northern Ireland being the greatest per-researcher benefactor, and the South East bearing more research and development expenditure than London or the East of England. However the UKRI national institutes cluster around productive urban knowledge centres. Note how concentrated the institutes are in the map above. Three centres are neighbours in one Research Park in Norwich, another three in Cambridge Research Park, in the capitals Edinburgh and London, and a belt of institutes in the north. Moreover, favourable regional distribution isn’t the same as equitable local distribution; most R&D concentrates. UKRI R&D funding positively correlates with business funding across the board. I provide 2018-2019 overview data for perusal here and a background of R&D ‘activity’, by ‘sector’, in general:

Considering the total amounts of UKRI funds tells a story of inequitable consolidation. The UKRI institutes, being a state body, provide an opportunity for establishing innovation in areas where it is lacking. However, the reality is yet more concentration in already innovative areas—they cluster in the North Belt and The Golden Triangle. Universities, too, have a concentrated R&D system. As The Economist attests, “Nearly half of public r&d money ends up in the “Golden Triangle”, as Oxford, Cambridge, and London’s best universities are commonly known”. I illustrate the disparity below for 3167 grants totalled by amount per institution through councils. Then I illustrate the Research England inequity.

Funding is distributed to winners through a. competitive project proposals to individual councils b. Research England’s research excellence framework assessments weighted by “outputs (65 per cent), impact (20 per cent) and environment (15 per cent)”. C. Knowledge exchange collaboration and—not included above—research capital grants. (Innovate UK meanwhile has £1154M in 2021 to invest in facilitating businesses.) Precedent reigns for previously high performing R&D streams and institutions are likely to receive more funding and thereby perform better and thereby receive more funding. 

The sociologist of science Robert K Merton identified and named this cumulative advantage the Matthew Effect specifically for science publishing and multiplier claims on intellectual property from previous intellectual property (IP). The effect remains pertinent to IP and in the cumulative advantages of compounded enterprise via network effects. For example, Cambridge city boasts the most patents per-person because public and private research and development and innovation coalesce and compound each others’ advances in a geographic public-private business network. Yet Cambridge University doesn’t boast many patents for its performance levels—the relationship of Research Park to University, judged by IP metrics, is parasitic. The 2021 Roadmap confirms enthusiasm for research intensity above research distribution:

UKRI, then, demonstrably hasn’t levelled up the rest of the UK to the R&D innovation standards of East England. The policy whereby “The highest-ranked research receives four times as much cash as the next best under the main funding stream” may appear meritocratic. But it precludes other institutions and other towns gaining a world-leading prominence. Despite rhetoric in UKRI and its Places Fund about the public good, levelling up the UK, and moonshot targets the reality on the ground looks far different. Indeed, The Financial Times cautions that the UK won’t even fulfill its national R&D budget-raise. The strategy towards Grand Challenges and equitable distribution is already questionable at the local, communities, level. 

Critique and Classify: Rhetoric Versus Practice

The UK R&D Roadmap 2021 characterises innovation as “the process by which ideas are turned into economic growth – where discoveries are translated into new products, services and jobs, creating positive change in businesses, public services, government and wider society”. The roadmap is definitively pro-innovation since it defines innovation as only “positive change”, and assumes that change diffuses throughout “wider society” for the public good. Innovation, however, does have negative changes and often concentrates in narrower society. For example, Mazzucato explains that high-risk innovations have profited share beneficiaries more than public servants who have invented them. Regionally, too, those better off tend to get better off. Contrary to “levelling up” across the UK the strategy for places fund, is predicated on the idea of “building on strengths”, an approach which precludes new opportunities being explored in areas where innovation is needed to attract private enterprise. The move towards public-private hybridisation maintains a dogma that allocating funding for  infrastructure and R&D, where there is little already, is inefficient and thereby an ‘impossible’ allocation. The Economist for example maintains that elitist concentration of R&D is behind UK university success in global rankings—and should keep at it—stipulating that Tories offer the rest of the UK R&D as a political token to merely sway voters. Albeit a view characteristic of contemporary innovation policy in the UK, it is a ruthlessly marketist view. Total growth is no advantage unless it is actually distributed across civil society; the wider society growth that innovation, remember, UKRI ostensibly serves. And innovation, moreover, depends on the networked exchange of public-private enterprise but the state can lead the way in making markets, not just in facilitating them. A public institution royalties system would allow for sufficient return directly to a national innovation fund, as Mariana Mazzucato recommends. 

Presently, however, the onus in UKRI is on fostering businesses in partnership rather than commercialising publicly-funded output itself for direct return. Without discoveries legally claimed by public institutes, private partners are those who stand to benefit from the investment and work despite a lionshare performed by publicly funded researchers. The UKRI consolidation is a step in the right direction—allowing for more interconnections and streamlined communications is a good thing. But a concerted IP system fund would allow UK innovation policy to deliver on its challenges for the sustainable long-run. Presently UKRI policies still over-prioritise short term business in universities rather than making good business of universities; UK innovation policy has made a loss-leader of the state but not yet a benefactor entrepreneur. In conclusion, I have argued that innovation policy is in the process of being re-characterised as a joint venture of state-market enterprise. I argue that while this re-characterisation is overall a good move, the government’s grand challenge rhetoric promises more than it delivers in practice. My exploration of how the UKRI works, its objectives, policies, institutions, and funds, incentives and fund distribution showed a UK innovation policy converged on state-market innovation. Given the recent 30 years of the UK R&D portfolio this recharacterisation is a remarkable shift. Despite failures to level up the rest of the UK, fulfill much in moonshot goals, or make markets for public goods like equitable distribution, all of these now at least make the agenda. The incipient framing offered by Vince Cable, “where profit seeking entrepreneurs as well as an entrepreneurial state” prosper, has it the wrong way round; a prospering state makes markets for profit seeking entrepreneurs to emerge. UKRI policy is arguably unsustainable in valuing entrepreneurs and companies without valuing a sustainable statist innovation circle in turn. Whitehall wishes to make Britain an entrepreneurial state but so far has prioritised making it a facilitator for opportunistic entrepreneurs.

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