The 17th annual Science and the Parliament event concentrated on Science, Innovation & the Economy.

Below my talk, which was part of the panel discussion on Science & Industrial Strategy where I was given the question: Do we have the right policies in place to foster innovation that leads to economic growth?

A staggering number of reports and statistics try to answer that question. I have read quite a few and here is my two pennies’ worth.

First I will present my assumptions. Innovation is an overloaded term and here I mean technical innovation, which is by many considered an important route to grow the economy. Innovation needs investment, and this is measured in GERD and BERD, which broadly means government investment and business investment respectively. In Scotland BERD is and has been very low compared with OECD and EU28 countries and this is not improving. It is reported as a key indicator by the Scottish Government. What can we do to increase BERD in Scotland?

Let us dig deeper into statistics reported for Scotland as per 2015.

• In Scotland we had 325,000 small and medium enterprises, but fewer than 2,500 large businesses.
• The top 20 of these large businesses made up half of all BERD in Scotland.
• In the period 2005–2015, we had an increase in the number of SMEs of 16%, but only a 2% increase in the number of large companies.
• Only 7% of BERD originated from the government.

So, if BERD mostly happens in large businesses through non-government funds then a less abstract question is: how does Scotland get more large business and how do we get these businesses to invest in R&D?

My first proposal is to add larger venture capital investments for growth of innovative companies. In 2014, the Royal Society of Edinburgh reported in on the lack of growth capital for businesses in Scotland. Leading innovation countries such as Germany and the Netherlands are adding long-term investment models. The government grants capital to investment funds who in turn invest risk capital in innovative entrepreneurs. In 2005, the Netherlands started the Seed Capital programme where business growth can be supported up to twelve years. After running for ten years this policy has been so successful that in 2015, the annual input from the government was equal to its annual earnings from previous investments as a result of many businesses that had flourished. Scotland pioneered a similar model through its Scottish Investment Bank, which started in 2003. Although it invests more than the Dutch Seed Capital per annum, we have neither seen this translate into a significant increase in large companies nor in BERD. One explanation may be that larger individual investments and longer commitment are necessary to sustain the growth needed to a become a large company.

My second proposal is to invest in skills relevant to technology innovation. Students graduating from universities and colleges should be equipped with skills to grow successfully the businesses they work for or start themselves. At this point I can start talking about vague concepts such as entrepeneurship, but I will not. Instead I will focus on only one skill that is key to the successful exploitation of technology innovation: the ability to protect intellectual property. I refer to the low number of high-tech patents filed from Scotland. A number that is several times lower then high-performing areas in the EU. It becomes more than ten times lower when comparing with leading areas such as South Sweden, Helsinki and Stockholm. Universities and colleges must prepare students for the simple fact that intellectual property must be protected.

The journey to a growing and inclusive economy is more complicated than these two pennies’ worth. One fact is that Scotland has decided innovation is one of its four key drivers to a successful economy. Therefore we must ensure the people who are to undertake innovation are adequately funded and skilled.