measuring Scotland's progress towards A SMART, SUCCESSFUL SCOTLAND
increased research and commercialisation
LEAD INDICATOR
4A - BUSINESS RESEARCH AND DEVELOPMENT EXPENDITURE AS A PROPORTION OF GDP
Why this measure?
Research and development and productivity are closely linked, with R&D being essential to ensure long-term productivity growth. It also serves as a measure of how effectively businesses exploit existing technology and strive to develop new products and processes. For Scotland to continue to grow, its businesses have to make the investments now that will ensure jobs, prosperity and continued economic growth in the future.
How does Scotland perform?
Business research and development investment as a proportion of GDP (1999)
The latest data available (1999) indicate that Scotland is in the third quartile of 30 OECD countries. Sweden, Finland and Japan lead the first quartile while Scotland ranks above countries such as Mexico, Portugal and Greece. Against the comparator countries Scotland does not perform well with business R&D just over 0.5% of GDP, over 1.5% less than the leader Finland and 0.75% behind the UK as a whole. Evidence suggests, however, that both the UK and Scotland perform considerably better on R&D investment by the government and education sectors. The high level of R&D investment of the education sector is reflected in Scotland's strong performance in terms of academic spinouts (Indicator 4b).
What does this mean for Scotland?
Scotland has a historically low level of business R&D investment, partly as a result of the routine production processes carried out by many of Scotland's businesses. This low level may be in part to blame for Scotland's low productivity growth. The concentration of the headquarters of many UK corporations in the South East of England also tends to result in R&D departments being located there. Companies therefore need to be encouraged to undertake R&D in Scotland, or at the very least encourage technology transfers from within the company to Scotland, the successful implementation of which will usually require some local R&D to be undertaken. More recent figures for Scotland (2001) indicate that Scotland is increasing its expenditure on business R&D and at a faster rate than the UK, though no international comparison is at present available.
4B - NUMBER OF ACADEMIC SPINOUTS
Why this measure?
Universities not only help train much of the workforce of tomorrow, they also create knowledge that can be commercialised and add to economic growth. A spinout is determined as an enterprise where higher education institutions or employees hold equity stakes, allowing them to exploit the knowledge arising from academic research.
How does Scotland perform?
Number of academic spinouts per million of the population (1999-2000)
Data on this indicator are difficult to determine so as a proxy indicator the number of spinout companies per million of the population is used. Scotland performs well, though comparisons are only possible with a limited number of comparison countries: the UK, the USA and Canada. Over the period 1999-2000, 38 spinout companies were determined as coming from Scotland with evidence to suggest that this represents a significant increase on previous years. Each of the 38 companies identified cost on average 5.9 million of research expenditure to establish compared with 8.6 million for each UK company In Canada and the US the sums were 13.9 million and 53.1 million respectively.
What does this mean for Scotland?
Though with such small numbers there must always be an element of caution, the rate of increase in the number of firms, their number given the size of Scotland and the quite substantially lower research costs involved in establishing each firm are a positive indicator for Scotland. They also appear to confound the conventional wisdom that the higher education system in Scotland, and the UK as a whole, lags behind North America, at least in terms of spinout productivity per pound of research expenditure.
4C - NUMBER OF PATENTS FILED (ACADEMIC AND INDUSTRY)
Why this measure?
The number of patents filed gives an indication of how successful Scotland is at converting the knowledge it creates into products or processes. That does not mean, however, that the number of patents is a direct, or the sole, reflection of success - many products are not patented or may have separate patents for each part of one whole product or process - but as a comparison with other parts of the UK it does indicate how Scotland fares.
How does Scotland perform?
Patents filed per ten thousand of the population (2000-01)
The number of patent applications filed in The Patent Office per 10,000 of the population by region of the UK for 2000-2001 is used as the measure of comparison. A total of 1198 patent applications were made from Scotland - representing 5.8% of the UK total. Scotland does not perform well, though it does perform better than both Wales and Northern Ireland. There is no information from the last report to compare Scotland's current patent rate with that last year, but there is evidence that the UK as a whole performs poorly internationally in terms of the number of patents filed. Information compiled by the DTI suggests that the UK under-performs nearly all its major competitors in terms of patents granted to UK firms by the US and EU patent offices - given Scotland's position relative to the UK average Scotland would not perform well by this measure. This statement must be conditioned by remembering that US patents in the US patent office are domestic patents - this is not the case for the other countries studied in the DTI report as they are registering either in the US or at the EU patent office, neither of which are domestic patent offices for any of the other countries. However, both Germany and France outperform the UK at the EU patent office.
What does this mean for Scotland?
It should not be surprising that Scotland has a lower patenting rate than the South East and East of England and London, but it does lag behind areas with a broadly similar economic structure such as the South West of England and West Midlands. A gap of such magnitude as that between the South East of England and Scotland probably reflects the location of headquarters and corporate R&D departments but may also indicate that Scotland is failing to capitalise fully on converting knowledge into successful products and processes.