In 1981 the UK was one of the world’s most research and development intensive economies, with large scale R&D efforts being carried out in government and corporate laboratories in many sectors. Over the thirty years between then and now, this situation has dramatically changed. A graph of the R&D intensity of the national economy, measured as the fraction of GDP spent on research and development, shows a long decline through the 1980′s and 1990′s, with some levelling off from 2000 or so. During this period the R&D intensity of other advanced economies, like Japan, Germany, the USA and France, has increased, while in fast developing countries like South Korea and China the growth in R&D intensity has been dramatic. The changes in the UK were in part driven by deliberate government policy, and in part have been the side-effects of the particular model of capitalism that the UK has adopted. Thirty years on, we should be asking what the effects of this have been on our wider economy, and what we should do about it.

Gross expenditure on research and development as a % of GDP from 1981 to 2010. Data from Eurostat.

The second graph breaks down where R&D takes place. The largest fractional fall has been in research in government establishments, which has dropped by more than 60%. The largest part of this fall took place in the early part of the period, under a series of Conservative governments. This reflects a general drive towards a smaller state, a run-down of defence research, and the privatisation of major, previously research intensive sectors such as energy. However, it is clear that privatisation didn’t lead to a transfer of the associated R&D to the business sector. It is in the business sector that the largest absolute drop in R&D intensity has taken place – from 1.48% of GDP to 1.08%. Cutting government R&D didn’t lead to increases in private sector R&D, contrary to the expectations of free marketeers who think the state “crowds out” private spending. Instead the business climate of the time, with a drive to unlock “shareholder value” in the short-term, squeezed out longer term investments in R&D. Some seek to explain this drop in R&D intensity in terms of a change in the sectoral balance of the UK economy, away from manufacturing and towards financial services, and this is clearly part of the picture. However, I wonder whether this should be thought of not so much as an explanation, but more as a symptom. I’ve discussed in an earlier post the suggestion that “bad capitalism” – for example, speculations in financial and property markets ,with the downside risk being shouldered by the tax-payer – squeezes out genuine innovation.

UK R&D as % of GDP by sector of performance from 1981 to 2010. Data from Eurostat.

The Labour government that came to power in 1997 did worry about the declining R&D intensity of the UK economy, and, in its Science Investment Framework 2004-2014 (PDF), set about trying to reverse the trend. This long-term policy set a target of reaching an overall R&D intensity of 2.5% by 2014, and an increase in R&D intensity in the business sector from to 1.7%. The mechanisms put in place to achieve this included a period of real-terms increase in R&D spending by government, some tax incentives for business R&D, and a new agency for nearer term research in collaboration with business, the Technology Strategy Board. In the event, the increases in government spending on R&D did lead to some increase in the UK’s overall research intensity, but the hoped-for increase in business R&D simply did not happen.

This isn’t predominantly a story about academic science, but it provides a context that’s important to appreciate for some current issues in science policy. Over the last thirty years, the research intensity of the UK’s university sector has increased, from 0.32% of GDP to 0.48% of GDP. This reflects, to some extent, real-term increases in government science budgets, together with the growing success of universities in raising research funds from non UK-government sources. The resulting R&D intensity of the UK HE sector is at the high end of international comparisons (the corresponding figures for Germany, Japan, Korea and the USA are 0.45%, 0.4%, 0.37% and 0.36%). But where the UK is very much an outlier is in the proportion of the country’s research that takes place in universities. This proportion now stands at 26%, which is much higher than international competitors (again, we can compare with Germany, Japan, Korea and the USA, where the proportions are 17%, 12%, 11% and 13%), and much higher now than it has been historically (in 1981 it was 14%). So one way of interpreting the pressure on universities to demonstrate the “impact” of their research, which is such a prominent part of the discourse in UK science policy at the moment, is as a symptom of the disproportionate importance of university research in the overall national R&D picture. But the high proportion of UK R&D carried out in universities is as much a measure of the weakness of the government and corporate applied and strategic research sectors as the strength of its HE research enterprise. The worry, of course, has to be that, given the hollowed-out state of the business and government R&D sectors, where in the past the more applied research needed to convert ideas into new products and services was done, universities won’t be able to meet the expectations being placed on them.

To return to the big picture, I’ve seen surprisingly little discussion of the effects on the UK economy of this dramatic and sustained decrease in research intensity. Aside from the obvious fact that we’re four years into an economic slump with no apparent prospect of rapid recovery, we know that the UK’s productivity growth has been unimpressive, and the lack of new, high tech companies that grow fast to a large scale is frequently commented on – where, people ask, is the UK’s Google? We also know that there are urgent unmet needs that only new innovation can fulfil – in healthcare, in clean energy, for example. Surely now is the time to examine the outcomes of the UK’s thirty year experiment in innovation theory.

Finally, I think it’s worth looking at these statistics again, because they contradict the stories we tell about ourselves as a country. We think of our postwar history as characterised by brilliant invention let down by poor exploitation, whereas the truth is that the UK, in the thirty post-war years, had a substantial and successful applied research and development enterprise. We imagine now that we can make our way in the world as a “knowledge economy”, based on innovation and brain-power. I know that innovation isn’t always the same as research and development, but it seems odd that we should think that innovation can be the speciality of a nation which is substantially less intensive in research and development than its competitors. We should worry instead that we’re in danger of condemning ourselves to being a low innovation, low productivity, low growth economy.

I have been in & out of Spain, running companies, getting married, having children, closing companies and more for almost two decades, so the unrelentingly grim news from the Spanish economy is particularly unwelcome.

While I was living in Spain I argued vociferously for more investment in translational research, but found myself working with two communities with no incentive to change.

Soon after arriving in Spain I received a call from a local academic who informed me “In this country, research is done in Universities, not companies so please go back to wherever you came from!” This, more than any other event, indicated the cultural problems encountered when translating from a system in which academic research is pursued for its own sake to one where it supports the needs of the wider economy.

Translational research was also a low priority for regional and local governments. Construction was booming, the EU was funding massive infrastructure projects and tax revenues were up. While there was funding for the education system, there wasn’t too much interest in starting new technology businesses.

A decade and a half later the landscape looks very different.  Much of the old guard, the Franco era administrators who had their secretaries print out emails so as to avoid having anything to do with computers are long gone. For decades Spanish mothers advised their offspring to get a safe job in a bank or the government, stifling entrepreneurship, but those jobs are no longer secure. Universities are building technology parks and encouraging spin outs.

The current economic situation is giving a boost to entrepreneurs – with virtually no jobs for Spanish graduates more and more are creating their own jobs.  In a tough economic climate many will fail, but plenty will survive.

For Spain to recover, there is no need for more grandiose projects.  There are roads and houses enough for twice the population. What the country should be doing is encouraging the current crop of entrepreneurs, making it easier to hire and fire, set up businesses and change attitudes to failure.

While things may be tough at the moment it will take a change in political mindsets to move away from ‘safe’ industries such as construction and tourism to riskier high tech ones.  Spain has the talent and the enthusiasm to reinvent its economy, let’s hope the dead hand of political conservatisms doesn’t waste this opportunity.

Two weeks ago I received a press release from Konarka’s PR company announcing that the company’s power plastic products had been integrated into another company’s wall panel systems. As with many of the previous announcements it was greeted by the incredulity that they the company was still going, running around making deals, as they have been tipped for disaster for most of the past decade.

Unlike many Nanotech failures where sound technology has been misexpoloited by poor management, Konarka’s management spent the past decade trying to make a silk purse out of a sows ear, and more importantly keeping investors convinced that they could pull it off. Howard Berke may now be the CEO of a bankrupt company, but he is also a great example of how grit and determination distinguishes entrepreneurs from the rest of us.

I spend a huge amount of time discussing entrepreneurship with various academic institutions and government agencies, all looking for a magic bullet which will turn scientists into entrepreneurs. After ten thousand years of trying to make a buck, shekel, cow or ear of corn there is still no formula for entrepreneurship, whether commercialising the plough or organic photovoltaics. All you can say is that entrepreneurs, for better of worse, just don’t give up, so before the sniping at Konarka starts, just remember that that tried, tried very hard, and raised the best part of a hundred million dollars along the way.

Of course the sniping is opportune, “Mitt Romney’s Solyndra” is one of the phrases being bandied around by people trying to score a cheap political point, but the state of Massachusetts only provided a fraction of the money raised, most of which was clawed back in income taxes and knock on effects in the local economy.  Konarka was so much more than a political failure.

When I first met Bill Beckenbaugh and Howard Berke back in 2002 they were a couple of guys with a vision of using the then emerging Nanotech enabled organic electronics to harness solar energy. Like many of their contemporaries looking at Nanotech to replace then current data storage technologies they could not predict a)that it would take ten years to get close to market  and b) that cost cutting by Chinese solar suppliers would remove their cost advantage over silicon based technologies.

I’ve followed Konarka closely through the past decade. Through their original idea, commercialising Nobel laureates Alan Heegers ideas through to licensing Michel Graetzels  dye cell technology. A great idea in principle, but it was one where the the market got way from them, and while the technology worked, producing commercial devices that could deliver on cost, efficiency and lifetime proved elusive. It’s standing joke that most organic thin film solar technologies work fine under vacuum and in the dark (moisture and UV radiation kill the devices quickly) and Konarka were not the only ones taking this approach.

Last time I suggested that a company was badly run with failing technology and was heading for failure I got sued (unsuccessfully) for defamation by a company that ceased to exist soon afterwards, so I’ll refrain from naming some of the other companies who will be soon following Konarka into bankruptcy. Suffice it to say that this won’t be that last organic electronics company we see fail, although I’m equally convinced that some will survive and do exceedingly well.

So how did Konarka last so long despite being six months away from shipping product since 2003?

Successful entrepreneurs don’t just put in the hours, they tell the story that investors want to believe in. In the early part of the  last decade investors wanted a piece of nanotechnology in the latter half they wanted to invest in renewables. Konarka gave investors what they wanted and told the story well.

So before we write this one off as another Nanotech  failure, remember this. Someone has to see the potential in new technologies and work their butts off to realise that potential. Sometimes its hard to remember that when sniping from the sidelines, but was we saw with the whole molecular nanotechnology and NanoBot scene last decade, talking is much easier than doing.

What Konarka had was a brilliant and potentially world changing idea. The technology didn’t fail, it was just that their version of it didn’t work out. At least they tried.