Introduction

60. In its recent consultation paper taking forward the Science and Innovation Investment Framework 2004 - 2014, the Government indicated that it "believes there is scope to review the effectiveness of the Research Councils' existing structure and operations, to maximise opportunities for knowledge transfer and increase the impact of excellent research on the wider economy".[142] We therefore, sought to examine the effectiveness of current Research Council mechanisms in support of knowledge transfer.

Knowledge transfer schemes

61. The Research Councils support research and training across a wide range of academic disciplines and have developed an array of approaches to support knowledge transfer which, according to RCUK "reflect the breadth of science and research supported".[143] We were told by RCUK, in reference to the specific challenges which must be addressed for successful knowledge transfer that "the interplay between creativity and technology in the creative industries requires different knowledge transfer models than those of traditional manufacturing industries" and that "there is strength in the diversity of this system, with each Council providing a strong focus for their research and user communities".[144] Since they have taken this approach to focus on specific requirements of their respective communities, between them the Councils fund a significant number of knowledge transfer activities, which they group under four headings:

●  Co-operation in education and training at masters and doctoral level

●  People and knowledge flow

●  Collaborative research with users

●  Commercialisation including IP exploitation and entrepreneurial activities.[145]

62. We agree with the Lambert Review that one of the most effective forms of knowledge transfer is through the flow of personnel between industry and academia. Lambert said that "the most exciting collaborations arise as a result of like-minded people getting together—sometimes by chance—to address a problem. Encouraging academics and business people to spend time together should be a high priority".[146] We were, therefore, encouraged to hear strong support for Research Council activity in this area. QinetiQ told us that "The RCs [Research Councils] are doing much more than previously to promote knowledge transfer between university researchers and industry".[147] Research Council efforts to improve co-operation in education and training at masters and doctoral level also received praise, for example from AstraZeneca who told us of the significant benefits "in terms of quality of research project and training, experience of working in an industrial environment and promoting links between academia and industry" that current schemes bring. We also received positive comment on Research Council schemes directed at boosting commercialisation of research, for example from the Association of Research and Industrial Links (AURIL) who told us that schemes such as "the Research Councils' Business Plan competition and the Follow-On Fund have been highly successful and of major benefit to UK universities".[148] We were impressed by the evidence we have received and welcome such clear Research Council successes in supporting knowledge transfer.

63. Whilst the Research Councils have clearly made some positive moves toward supporting knowledge transfer, we are concerned about the potential for confusion surrounding the considerable array of knowledge transfer schemes that they offer. For example, we heard from CaSE who told us that "even within the Research Councils, small pots of money appear as a bewildering array of fragmented initiatives", pointing out that the BBSRC website shows 14 different schemes relating to knowledge transfer and innovation.[149]

64. The Research Councils, however, did not appear at all concerned about such perceptions from the research community. We are disappointed by the apparent reluctance of the Research Councils to accept criticism in this area. Professor O' Nions told us that although there are "quite a number of schemes [which] vary according to the area […] the general picture makes good sense".[150] Professor O'Nions did, however, subsequently agree that the Research Councils should look toward simplification of the funding structure once a better understanding of the impact of different schemes had been gained.[151] We also heard from Professor Diamond that he does not consider that the Research Councils' strategy for knowledge transfer is fragmented and confused but that by "having a wide variety of schemes what one is able to do is to identify areas which we know have been seen to work in the past and which are useful in moving forward".[152] Professor O'Reilly however, took a different approach telling us that in his view "an ideal Research Council has only one scheme […] but it is infinitely flexible".[153] Professor Mason supported this view telling us that "In PPARC we operate exactly such a thing, a single fund with infinite flexibility".[154]

65. We too have found it difficult to ascertain a clear understanding of the many schemes the Councils support. Presentation across the Councils, of the many different knowledge transfer schemes, varies greatly and we did not find it at all easy to navigate and clarify which programmes are most suitable for different requirements. We commend PPARC for the approach that they have taken to develop a single, flexible scheme. We recommend that the other Research Councils, with support from RCUK, apply this simplification to their own knowledge transfer funding strategies. Communication of Research Council knowledge transfer funding strategies should be improved. We recommend that RCUK develops a single, simple web portal through which information on all Research Council knowledge transfer schemes can be easily accessed.

FULL ECONOMIC COST

66. In September 2005, following consultation between the Government, funding bodies and Higher Education Institutions (HEIs), the Research Councils changed the way in which they fund research. This change was brought in to redress the imbalance of significant increases in the volume of research in UK HEIs set against smaller increases in contributions towards indirect costs and to ensure sustainability of the research base.

67. Previously, Research Councils paid Higher Education Institutes (HEIs) all the direct costs of a research project such as materials but they only paid a contribution towards the indirect costs such as the salary-related costs of researchers or the resources to build research capabilities. The remainder of the indirect costs of research were met by the block grant awarded to individual institutes by the Funding Councils (Quality-Related Research Funding). The total cost, indirect and direct, of research is known as the full economic cost (FEC). FEC is derived from the Transparent Approach to Costing (TRAC). Under FEC, all HEIs will need to ensure that over their activities as a whole, their full economic costs are being recovered.

68. From September 2005, in accordance with 'The Ten-year Science and Innovation Investment Framework', Research Councils have paid 80 per cent of the full economic cost and where equipment, survey or similar costs exceed £50,000 on a grant, then the amount above this figure has been paid in full. The Government is providing extra funds to back the change: £120 million a year from 2005-06, rising to £200 million a year from 2007-08, for Research Council projects, as well as increased block grants for HEIs from Funding Councils, including £90 million to support charity-funded research.

69. The implementation of FEC as a mechanism for increasing the sustainability of the research base is still in early stages. During this inquiry we have heard suggestions that FEC may inhibit the development of collaborative work between UK universities and business. The Association of British Pharmaceutical Industry (ABPI) told us: "[FEC] has forced up the costs to industry of collaborating with British universities, and is likely to lead to a reduction in such collaborations", warning that "within a competitive and global market for research, industry will place contracts according to where it can get the greatest value for money". Furthermore, the ABPI said that "the move to full economic costing in the science base may not be helpful to the UK if it is used rigidly to set the price for work by academia for industry". According to ABPI, "the policy of charging Full Economic Cost has further increased the already high cost of collaborative research in the UK, while ignoring the value to academia of access to pharmaceutical R&D facilities and other 'in kind' contributions. Recent experiences indicate that post doctoral collaborations in the UK are becoming as expensive as those in the US, and significantly more expensive than in several other European countries".[155] This view is shared by the CBI who state "The comparative competitiveness of the UK science base as a partner for innovation activity, is further highlighted by the introduction of Full Economic Costing, the short-term impact of which is likely to be a reduction in the volume of R&D conducted in the UK".[156]

70. When asked about this issue, Professor O'Nions told the Committee that "the huge benefit of Full Economic Costs is that it is a methodology which enables universities to know actually what it costs them to run their business. In terms of how then universities price research with business, there is no mandate that they have to recover 100 per cent of the full economic costs, 80 per cent of them or 50 per cent of them. The important thing is that they know what their costs are so universities have to make the decision, but, if they know what their costs are, then they can price accordingly […] if a business thinks that the only way it can do a deal is if it pays 100 per cent of full economic costs, that may not necessarily be the case, and a university may, for strategic reasons, charge more or less".[157]

71. We do not believe that industry opinions on the implications of FEC, necessarily reflect the true situation. We aim to examine the impact of FEC when there is more evidence available. In the meantime, we urge the Research Councils to take a proactive approach toward communicating the FEC principle to industrial stakeholders. We also suggest that a close watch on the impact of FEC should be maintained and that effects on collaborative research are monitored.

Capacity for knowledge transfer

Research Council Expertise

72. If the Research Councils are to be effective in supporting knowledge transfer, then it is essential that their staff are adequately skilled. The expertise of the Research Councils in knowledge transfer has, however, been questioned. QinetiQ commented that "the RCs [Research Councils] need to understand the cost and complexity of issues of knowledge transfer" and "they should bring in experienced practitioners from outside and train their staff […]to embrace new knowledge transfer activities".[158] We were also told by the CBI that "it is essential that Research Council staff understand both academic and industrial needs" and that "the perception from industry is that the balance of experience within the Councils tends to the academic sector".[159] Concerns of lacking expertise within the Research Councils in knowledge transfer were shared by the External Challenge Panel who found a "reliance on key individuals or organisations to provide leadership or services" and that arrangements for skills transfer should be made to reduce the risk to the Research Councils knowledge transfer teams and long term abilities.[160] We accept the view of Professor Brook that "there is a shortage of skilled and experienced knowledge transfer people in the country as a whole".[161] We also consider that, as primary funders of public sector research, it is essential that the Research Councils build a skill base sufficient to enable them to work effectively toward delivering added value from the research they support. Since effective knowledge transfer may encompass many different stakeholders including academia, policy makers and industry, it is important that the Research Councils fully consider the expertise they need to build to operate successfully.

73. A major element required for the creation of expert knowledge transfer teams is consideration of the experience that future and current employees bring to the organisation. We therefore noted with interest the strategic decision taken by EPSRC to accept the need for "a breadth of expertise within our staff", acknowledgement of which led the Council to recruit primarily from a broad spectrum of sectors. Consequently, EPSRC now maintains a staff base which currently consists, primarily, of employees from the industrial sector (indeed, only two of EPSRCs 300 staff were actually recruited from the academic sector).[162] An additional element required in building staff base expertise is in the training and experience a staff member receives whilst in post. We were therefore interested to note the active engagement by EPSRC in seconding staff to and from industry.[163] We commend EPSRC for the strategic approach it has taken in developing a broad skills base. We encourage the other Councils to use recruitment and secondments to strengthen knowledge transfer expertise.

IN-HOUSE STRUCTURE

74. The Councils employ very different structures to support their innovation and knowledge transfer activities. Whilst some Councils have developed small knowledge transfer teams (for example, BBSRC) others have either contracted out knowledge transfer activities to external brokers (for example, NERC and PPARC) or sought to embed knowledge transfer across the full remit of their activities (for example, EPSRC). In addition, some Research Councils such as the Medical Research Council (MRC), and more recently the BBSRC, have set up centres that manage the exploitation of technology generated by their institutes. MRC Technology (MRCT) exploits the Intellectual Property (IP) arising from MRC investment through the development and commercialisation of know-how from MRC-funded Units and Institutes. We have heard much positive support for the management of IP by this mechanism. For example, GSK have told us that "the MRC are professional with their MRCT group and their licensing activity".[164] However, we also recognise that, as explained by Professor Sir John Chisholm, that "The MRC has a different place because […] in the life sciences actually there is more value in the original invention" and that "MRC are better organised than the other Research Councils, possibly because they have a clearer job to do there".[165] We commend the steps taken by MRC to actively exploit the research resulting from their investment and we urge RCUK and the other Councils to follow the example of MRCT where appropriate.

Performance management

Scheme evaluation

75. During the inquiry, we learnt from Professor O'Nions that the Councils are not currently reviewing the schemes they support, but that they "might be a bit closer to creating schemes".[166] In fact, other than through the efforts of the External Challenge panel, we have seen little evidence of any effort from the Research Councils to determine how well their schemes are serving the research community or the impact they are having. We therefore decided to carry out our own brief evaluation of the costs and impact of a small selection of current Research Council knowledge transfer schemes and requested further information on the following:

a)  RCUK Business Plan Competition;

b)  CASE studentships; and

c)  NERC Connect A & B and Partnership Research Grants.

76. The information we were given included data on the full range of the Business Plan Competitions, some promotional case studies of entrants[167] and data on the home institution and department of entrants. Full information was also provided on expenditure for CASE studentship and NERC schemes along with some data on the partners involved in the schemes and the graduating destinations of students.[168] The NERC data also included, after additional requests, the Output and Performance Measures for Connect A & B (Partnership Research Grants have not been running long enough for such data to be available).

77. Unfortunately, we did not find the additional data supplied by the Councils to be particularly helpful in determining the impact of their knowledge transfer spending. We were somewhat surprised to find that the Councils have such scant data on impact readily available. Several of the Councils asserted that collection of this information lies outside their remit and that they rely on information supplied by other agencies. For example, graduating student destinations are collected by the Higher Education Statistics Authority[169] which does not make distinction between those graduating from collaborative studentships and from other studentships.

78. For both the Business Plan Competition and CASE Studentships, the only information given on impact was in the form of case studies. These suggested very positive outcomes for the schemes, but we are concerned that more comprehensive and systematic evaluation is not normal practice. Case studies should be used in conjunction with full surveys of participants, not as a stand-alone method of evaluation. The paucity of recent information provided for the Business Plan Competition indicated that this scheme has not been effectively analysed, with many costs unknown and little investigation of the future successes or failures of entrants, qualifiers and finalists. We understand that a retrospective review of the Business Plan Competition is currently underway which will, in part, rectify this problem. It would seem sensible, however, to continually monitor income and expenditure on a more detailed basis, and to regularly gather feedback from participants both during and after the competition. The Output and Performance Measures supplied for the NERC schemes included numbers of patents, publications and information about the sale of products resulting from the scheme, inputs to policy-making and prizes awarded to academics. This information is much closer to what we would expect in terms of impact measurement.

79. We find it surprising that the Research Councils have not actively evaluated the impact of the schemes they support, particularly in the case of the Business Plan Competition which is now supported across them. It is difficult to see how the Research Councils can effectively allocate funding to different knowledge transfer activities in the absence of comprehensive data on their impact. We recommend that the Research Councils proactively seek out information required to evaluate impact and that, once such data has been obtained, full impact analysis of all Research Council knowledge transfer schemes is conducted. In addition, we recommend that Research Council funding for knowledge transfer is neither increased or decreased until more is known about the impact of the schemes.

External Challenge

80. The External Challenge Panel was commissioned by RCUK to provide the Research Councils and OST with an external assessment of each Council's portfolio of knowledge transfer activities and future plans in this area. Each Council submitted information on the knowledge transfer activities they support. This information was then presented to and questioned by the Panel.

81. This was the first attempt of a review of this kind and there were clearly problems, illustrated by significant delays with respect to publication of the report. The terms of reference were not followed and the Panel did not focus on specific Research Council knowledge transfer schemes, as indicated by RCUK who said that "the primary purpose of this exercise was to provide the Research Councils with constructive feedback on their knowledge transfer plans and goals. By focusing instead on the wider economic agenda and the role of HEIs in knowledge transfer, the resulting report conveys a less comprehensive assessment of Councils' activities than anticipated".[170] Members of the External Challenge Panel challenged this, reporting that "the RCs [Research Councils] had unrealistic expectations of what could be achieved from such a rapid review".[171] When asked for greater clarity on this issue, we were told that "it is a combination of things: partly the coherence of the material, so that people can get their heads around it, but also partly the availability, if you like, of free resource within a limited timescale to get some real content in the report".[172] This was followed with the explanation that "people on the Panel all have employment elsewhere, so you have to fit this in; some businesses are not willing to give up the free time, so people have to do it at evenings and weekends; so it has taken from December until now to get a report with some real substance in".[173] We were also told that "reviewing eight different bodies under one banner has highlighted the difficulties for the Panel in providing a single view about KT [knowledge transfer] without these becoming eight separate reviews".[174]

82. We have concerns regarding RCUK management of this review. According to Professor John Murphy, the Panel chair, they were "pressured to release drafts of the report to the Research Councils"[175] who then gave feedback. Although in main, feedback was in correction of inaccuracies, there were a "few elements which [noted the Panel Chair], tended to steer the findings of the report".[176] The Panel had not been previously aware that RCUK had reserved the right to amend the report[177] or that they could expect "aggressive feedback" on report content.[178] The Research Council view on this is somewhat different. When asked about problems encountered on drafting of the External Challenge report, Professor Diamond told us of numerous factual inaccuracies about Research Council activity which were contained in the initial report. We were then assured that corrections made by the Councils were only of "factual inaccuracies of what we did, not on the recommendations".[179] Professor Diamond still felt that this was "an independent report,[180] a view shared by the Panel chair who also indicated that they have provided some "fairly strong messages [in the report]".[181]

83. We welcome the idea behind conducting an External Challenge of Research Council activity in support of knowledge transfer. We consider that the processes employed led to a report with questionable independence. RCUK did not fully consider the resources required for a full review of this area, giving the External Challenge Panel a near impossible task. We recommend that the Councils conduct a detailed review of the processes involved in this External Challenge. Such a review should take account of problems such as provision of appropriate resources and timescales, and should enable the development of best practice to inform future exercises of this nature.

Further encouraging exploitation

Business skills development

84. Many academics are unclear on 'how to' transfer their knowledge. Despite clear intention from the Research Councils to encourage researchers to appropriately transfer the knowledge that they produce, we have seen limited evidence for provision of training (on a broad scale) to give them the skills to do so. A recent study by the University of Nottingham has indicated that reasons for failure of university spin-outs include: not properly estimating, planning and managing financial needs; poor business management skills and resistance to recruiting such skills; and not placing enough value on marketing as a necessary competence.[182] The study also showed that venture capitalists were less interested in university spin-outs because it was recognised that they would need to build a management team around the academics (because they lacked required business skill). We consider that possession of commercialisation skills is important and we were encouraged to hear, from the External Challenge Panel, that the Research Councils have made a start in providing training of this type as part of their effort to move to a more knowledge transfer aware culture.[183] We welcome recognition by the Research Councils of the importance of enhancing business skills and we encourage them to further develop training activities in this area, making them available to as many researchers as possible.

INTELLECTUAL PROPERTY

85. Universities usually hold and manage the Intellectual Property (IP) from Research Council funded research. However, the Councils play a part in encouraging commercialisation, for example, by funding an annual 'Business Plan Competition' to help UK based researchers develop their ideas for commercialising research outputs by providing training and mentoring in the development of business plans and entrepreneurial skills. In addition, BBSRC, EPSRC, NERC and PPARC invest in the 'Follow on Fund'. This scheme provides funds to enable researchers to demonstrate the commercial potential of their ideas, supporting them with salary and training costs whilst they commercialise work originally supported by the Research Councils.

86. The Lambert Review suggested that the Research Councils, in consultation with universities, the CBI and other industry groups, should agree a protocol for the ownership of IP in research collaborations.[184] The Government has recently commissioned a review of the UK's IP framework,[185] which we await. Some of the evidence we received suggested there was indeed scope for improvement in IP arrangements with overwhelming support for universities to relinquish their hold on the IP if a more appropriate option is available. For example, the Institute of Physics claimed that "Intellectual Property needs to be managed sensibly by recognising that it is best owned and managed by the exploiting party, while ensuring that collaborating parties receive appropriate rights and returns that reflect their contributions".[186] QinetiQ said that "the cost of transferring research outcomes into the market is very high. Intellectual property may be overvalued by universities, a 'new' piece of knowledge may not add significant value for industry: in some instances it may threaten existing business, in others a new market must be created"[187] and "the recent emphasis on the universities' Intellectual Property has not always been helpful. In particular, it has tended to encourage overambitious valuations and too many immature companies. The award of capital to new ventures must be accompanied by rigorous commercial disciplines if it is not to be misallocated".[188] We also heard from Dr Ian Ritchie, who took a slightly stronger view, telling us that "usually, universities will have a fairly unrealistic view of the value of a potential spin-out business. In most cases the research team will have identified a potential commercialisation area, but will not yet have a product" and that it is "quite usual that the final product owes little more than an 'original concept' to the research team".[189]

87. The External Challenge Panel believes that the Research Councils should take more of an interest in university-held IP, stating that "Some RCs are using brokering to actively mobilise the transfer of IP to the user base but we were concerned that there appears to be little or no monitoring of projects, i.e. the investment made by the RC, emerging IP or how that IP is used or transferred to the user base […] in cases where significant levels of funding are made available (e.g. projects of £3M/yr and above) the Councils should have closer involvement in the project management, and exploitation strategy, in order to help and provide best practice for the commercialisation of that IP".[190]

88. RCUK refute the view that there is a role for more active engagement of the Research Councils in IP saying that "whilst the Councils do have a responsibility for helping to create the climate and culture in HEIs to enable [exploitation] this to happen, we believe that direct intervention is undesirable".[191] We agree with RCUK on this issue. Whilst it is natural for industry and academia to have different expectations, we do not consider that it is the role of the Research Councils, to oversee IP arrangements. In addition, as shown earlier, the Research Councils do not necessarily have the appropriate expertise to enable them to work effectively in this area. We believe that the Research Councils should maintain a 'hands off' approach to management of Intellectual Property within universities.

143   Ev 55 Back

144   As above Back

145   As above Back

146   Richard Lambert, Lambert Review of Business-University Collaboration, December 2003, chapter 1, para 1.24 Back

147   Ev 135 Back

148   Ev 138 Back

149   Ev 121 Back

150   Q 30 Back

151   As above Back

152   Q 250 Back

153   Q 252 Back

154   As above Back

155   Ev 117 Back

156   Ev 130 Back

157   Q 52 Back

158   Ev 135 Back

159   Ev 133 Back

160   External Challenge Panel, Independent External Challenge Report to Research Councils UK, "Knowledge Transfer in the Eight Research Councils", April 2006, para 4.5 Back

161   Q 112  Back

162   External Challenge Panel, Independent External Challenge Report to Research Councils UK, "Knowledge Transfer in the Eight Research Councils", April 2006, p 18 Back

163   Q 246 Back

164   Q 162 Back

165   Q 187 Back

166   Q 31 Back

167   Not published Back

168   As above Back

169   Ev 150  Back

170   Ev 166  Back

171   External Challenge Panel, Independent External Challenge Report to Research Councils UK, "Knowledge Transfer in the Eight Research Councils", April 2006, Annex 4.1 Back

172   Q 88 Back

173   As above Back

174   External Challenge Panel, Independent External Challenge Report to Research Councils UK, "Knowledge Transfer in the Eight Research Councils", April 2006, Annex A4.1 Back

175   Q 90 Back

176   Q 92 Back

177   Q 100 Back

178   Q 103 Back

179   Q 196 Back

180   Q 198 Back

181   Q 104 Back

182   Binks, M. et al. Venture Capital Finance and University Spinouts, Nottingham University Business School, Nottingham, UK, 2004  Back

183   Q 146 Back

184   Richard Lambert, Lambert Review of Business-University Collaboration, December 2003, p 122 Back

185   Due Autumn 2006 Back

186   Ev 125 Back

187   Ev 137 Back

188   As above Back

189   Ev 141 Back

190   External Challenge Panel, Independent External Challenge Report to Research Councils UK, "Knowledge Transfer in the Eight Research Councils", April 2006, para 4.3 Back

191   Ev 167  Back