INTRODUCTION

  1.  The IEE is the largest professional engineering institution in Europe with some 140,000 members. It represents the electrical, electronic and manufacturing science and engineering sectors in matters of public concern, as well as accrediting degree courses and promoting science and engineering education in schools. Our members work in both the research and industry sectors and can thus comment with some authority on innovation and technology transfer.

SUMMARY

  2.  The inquiry into the innovation and technology transfer in the fields of engineering and physical sciences covers a wide spread of Government funded research ranging from Government contributions to EC programmes, DTI funded initiatives, MoD research and work sponsored by other Government Departments such as Department of Transport and the Home Office. Companies develop new products in three principal ways: as an extension or development of an existing product, where little help is sought in product definition but Government sponsorship may play a role; as a new idea to meet a previously unsatisfied requirement, where Government funding of pre competitive research may have an influence on this area of activity; or as a result of customer funded product development, where Government funding may have been very beneficial. There is no doubt that Government programmes have a beneficial effect on the development of key processes and products in industry. Industrial laboratories focus on the business case for their internal research and development programmes seeking a strong internal justification for their activities. It is also apparent that the larger companies, to a varying degree, see themselves as international players and they do not look solely, or in some cases even predominantly, to the UK for their sources of technology, inspiration and innovation. Against this background, it is difficult to answer many of the questions raised since they appear to be framed upon assumptions that may be incorrect.

  3.  However, the availability of funding from Government sources and the benefits of collaboration as a means for widening their knowledge have frequently influenced the pattern of their R&D programmes. The greater part of the Government sponsored programmes are currently collaborative in nature. This has the advantage of widening the intellectual base of the programmes and of creating networks of scientists working in similar fields. However, it has the disadvantage of considerably increasing the administrative overheads in establishing the programmes. This is because it is difficult to generate programmes in which a disparate set of organisations each benefit equally; the intellectual property and exploitation rules must be established between the parties before the programmes can be launched; many of the programmes operate over several years and companies operate over a one year budgeting cycle. Hence funding difficulties can arise within one or more of the participating companies which affect the whole programme after the first year. For EC sponsored programmes, management and reporting of an international collaborative programme create a major overhead on the programme.

  4.  Other than at the basic components end of the sector, the technology based industries sell products or services which rely on the assembly of many components derived from many core technologies to form complex systems. As a result, it is unusual for a single advance in basic research, leading to a better or new component, to lead directly to a new product or service. Nevertheless, without continuing advances in components and core skills, competitiveness of products or service offerings would not be maintained. Nor do such developments occur without innovation and breakthrough at the material and device level. However it does mean that a given company must focus its attention on the critical core competencies for its product or service and not attempt to duplicate those which it can buy in via a multi-vendor market. As a result of this, it is particularly difficult to identify what basic research is important in support of a given sector since even similar companies within that general sector will often have chosen to focus on different core skill sets in order to enhance their own chosen access to that market. Their choices are based upon assessment of their product offerings, their assessment of how they can fit into the market against other competitors, how they can differentiate themselves from competitors, what technologies they can acquire by strategic alliance or straight purchase and what traditional strengths they have developed. Such decisions are very company dependent and even large companies (in UK terms) show very clear evidence of such focusing in the R&D portfolios and thus differences in positioning.

Industrial Application of Government Funded Research

  5.  Government funded research in the Defence sector is clearly influential in the decision process for new products in that field. But, with the total Defence R&D budget decreasing in real terms, the UK is in a disadvantageous position with respect to its international competitors. The result is that insufficient research and feasibility demonstration is done at the early stages of a programme, which can give rise to technical difficulties and consequent delays later in the programme. In other sectors industry is tending to fund the research itself. This gives industry much more control over what is done, ensures that it is well defined, and provides unique access to designs, patents and intellectual property. Individual companies do establish working links with university research departments which are doing exploratory basic or strategic work relevant to their interests. This serves to give them a longer term and sometimes wider International window on the subject. This gives them the opportunity to seek answers to questions that they cannot take time to evaluate themselves. They also benefit from wider collaborative groupings. In addition to outcome in the form of Patents or other IPR there are also valuable elements such as better product development decisions by the company, which result from a wider understanding. These elements may be of great value to a company but do not show in its portfolio. Effective application could be improved through a sharper market focus, and better balance and coordination of technology transfer and postgraduate training within universities.

The respective roles of Government Laboratories and independent research and technology organisations

  6.  Government laboratories have a role in carrying out work that for reasons of National Security, to meet regulatory requirements or efficiency of resource utilisation cannot be done elsewhere. These operations may be conducted under high security which is not necessarily conducive to easy technology transfer.

  7.  The independent research and technology organisations (IRTO) do have a clear role as contract research organisations, providing a service to industrial companies, many of whom may not be able to justify their own in house research. Their activities are frequently short term and they can respond quickly. The independent laboratories are able to provide specialist input in their areas of expertise. It is of concern to industry that these organisations are increasingly taking on overseas contracts. The distinction between Government laboratories, particularly those which now operate as Agencies and the IRTOs is becoming increasingly blurred as they both seek contracts from industry on a strictly commercial basis.

  8.  Priority in both cases should be to meet "Customer Needs" for knowledge and skills. Excellence, relevance and lack of direct duplication should be the key determinants of programmes.

Operation of Government Schemes Designed to Promote Collaboration in an Industrial Application of Research

  9.  These schemes can be very useful but to draw maximum benefit from them the schemes should be run by people with industrial experience. However, evidence shows that the EU collaborative research schemes are rather inefficient and slow moving and the requirement for "juste retour" is a major distorting factor, detrimental to rapid progress. We have no argument with the principle of collaborative schemes, but the proliferation of very small tightly focused programmes, involving many participants, each with its own set of particular rules, including deadlines, programme guide etc, is extremely damaging and counter-productive. Many of the schemes require around 50 per cent input by the collaborating industrial body. In some circumstances the industrial bodies have seen the government funding as a way of off-setting their potential costs rather than a way of technology transfer from the location of the initial research, often in Universities. Simplification of the whole programme structure would be helpful. Government should be prepared to fund a greater part of the applied research (near market) and postgraduate teaching load, neither of which sit comfortably in industry in a competitive world market.

Intellectual Property Rights and Patenting

  10.  Patenting is hugely expensive and many companies choose not to go down this route. Software is covered by copyright rather than patent law which is much cheaper and since much research presently entails design, simulation and software rather than hardware development, it is much easier to retain the intellectual property rights on such research. However this mitigates against a culture of manufacture and production and instead guides research towards software development and simulation. In the current climate this may be the correct thing to do but Government ought to be aware of the direction in which research is going. The use of IPR varies widely from industry sector to sector and company to company. With many sectors speed to market and the associated "know-how" is a more important factor. HEIs should have the opportunity to exploit IPR, thus generating royalty revenue, but it should also be recognised that real return is via the manufactured service or product.

  11.  Government generated intellectual property should be protected and should be made available for exploitation as appropriate. Royalties and other terms and conditions would need to be agreed in advance taking full account of commercial considerations and opportunities.

Provision of Finance to Support Enterprises Involved in the Application of Research and Innovation

  12.  Although financial support may be considered poor when compared with European countries the Enterprise Investment Scheme has been a good source of finance for high-technology start ups and should be simplified and extended. Funding should be via the Venture Capital market. If the conditions of this are too onerous, then there may be a case for examining tax-incentives to encourage investors to invest in more speculative ventures. Currently much luck is involved in the inventor of a particular process, component or piece of software achieving industrial backing to develop the product to marketplace. The old system, of what was essentially a venture capital fund administered by government, was not perfect but certainly provided a focus and a direction in which the inventor could go to try to obtain financial support for further development of his invention. Funding should be such that it does not encourage the establishment of companies, by academic departments, without a sound business case.

  13.  Capital markets will fund innovation but not postgraduate training and applied research. The knowledge and skills base required by industry is largely a community responsibility. Much of industry is becoming global and companies are moving their R&D activities to countries where knowledge and skills are most readily available.

The Role of the Foresight Programme in fostering networks and identifying priorities

  14.  The Foresight programme has been fragmented within the Universities and has been largely ignored by industrialists. There is a view that industrialists will undertake work defined under the Foresight programme if such work coincides with their interests. They are unlikely to alter the direction of industrial development or to adopt new areas of technical enterprise merely because of the Foresight programme. The Foresight scheme has provided some additional networking opportunities, especially for those invited to join the panels. But overall there has been little relevance to the innovation process. It has had no significant impact on identifying priorities although it is obviously a matter of concern that the Research Councils claim that it has and act on this assumption. This concern arises from the now very outdated conclusions of the exercise and their generality. The reports, although interesting reading, contained little that was innovative and gave no new deep insight into the future. This was, perhaps to be expected as it is unlikely that researchers and industrialists would have given away their best ideas. Foresight's strength was in networking and has led to a move towards improved business processes. There is a need for Government to move closer to the market in research and training and an important role for the future Foresight exercise is to help Government with the industrial policy and investment decisions involved.

Role of Engineering and Physical Sciences Research Council in Fostering Technology Transfer

  15.  Although the EPSRC has recognised the importance of industry/university interactions in recent years, more could be done. It is probable that new centres for training and applied research are needed, with a strong element from industry, in the appropriate market sector. There is a need for members of assessment panels to have in depth knowledge of the appropriate sector. Many university-based inventors have moved away from EPSRC for technology transfer support because of the time-scales involved. Industrialists want a fast turn around and reduced time to market in order to ensure market share of products developed. Direct funding by industrialists or by venture capitalists is often the preferred method. We would recommend that the EPSRC evaluates its procedures to ensure the most effective route for industry/university collaboration.

Progress made towards implementing those recommendations of the science and technology Committee in the previous Parliament in their report on the Routes Through Which the Science Base is Translated into Innovative and Competitive Technology[27] relevant to the fields of engineering and physical sciences

  16.  There do seem to have been some areas of progress. However it is regrettable that Science and Technology no longer rates a ministerial position exclusively devoted to it, and this has led to a lack of focus. The OST and Foresight have helped but industrial R&D has declined as Government has continued to withdraw from near market research. There is a belief that by starving the ducks, only the really fit will survive; this ignores the truth that not even half starved ducks compete successfully with well fed ones. There is a danger that the HEI research base is being rapidly eroded.

March 1998