Developing regional and sectoral innovation capabilities: the role of intermediate research, development & innovation institutes

National innovation systems are a complex landscape of different types of research institutes with different missions and goals. These include both research universities and institutes devoted to fundamental science, and public sector research establishments (PSREs) which support government strategic goals. A majority of research, development and innovation takes place in the private sector, in firms’ own laboratories, and in for-profit contract research organisations. It is this private sector innovation that most directly drives productivity growth. Public and private sector R&D can be connected in intermediate RD&I institutes, which carry out more applied research, often as public/private partnerships, as well as taking a wider role in building regional and sectoral private sector capability, through the promotion of innovation diffusion and skills development. 

In the UK, basic research is carried out in a strong university base, supplemented by some standalone institutes, such as the Laboratory of Molecular Biology at Cambridge and the Crick Institute in London. The PSRE sector has diminished in size over the past few decades, because of privatisations and absorption of some institutes into universities, but it retains some strong institutions such as the National Physical Laboratory and the Meteorological Office 

The activities of intermediate institutes in the UK are largely focused on the generation of applied research knowledge (mid-technology readiness levels, TRLs) generally in collaboration with industry partners or other stakeholders. Their missions are typically defined in terms of particular scientific fields (e.g., molecular biology), technology domains (e.g., compound semiconductors), industrial sectors (e.g., aerospace), or societal challenges (e.g., ‘connected places’). The criteria by which these mission topics were selected for Catapult Centres - large potential global market, UK global lead in research capability, and the necessary absorptive capacity for commercial exploitation in the UK - presuppose existing capability. Taken literally, these criteria suggest that Catapults should not have a role addressing challenges of slow innovation diffusion or creating new innovation capabilities in economically lagging regions (where firms don’t always have the absorptive capacity to benefit fully from new tech). While, in practice, some do undertake wider capability development activities, there remains a need for intermediate institutes that perform this role. 

In other countries the missions of intermediate R&I institutes are often framed more broadly in terms of developing national or regional capabilities. There is an understanding that new technological knowledge is not sufficient for industrial competitiveness and economic value capture. New technologies need to have a workforce that can develop them into applications and deploy them in real industrial contexts. Furthermore, regional competitiveness will require supply chains with the required engineering competences, facilities and resources. 

Intermediate research institutes will only be able to make a significant impact on regional economic growth if they embrace a wider range of activities than applied research. Locally created R&D-based value can only lead to local industrial economic value capture if technical knowledge resources are translated into industrial capabilities that are competitive with other national and international clusters pursuing the same opportunities. 

A more complete categorisation of the different combinations of innovation activities and functions would include the following: 

• Knowledge development: basic science, applied science, technology development, technology demonstration, application demonstration and product/solution scale-up, 

 • Knowledge deployment/ capability development: Skills & education (graduate students, vocational training, management programmes…); access to facilities & experts (testbeds, contract manufacturing...); manufacturing advisory & incubation services; and  

• Knowledge diffusion: Network building (community seminars, consortium development…); system intelligence (e.g. roadmapping, benchmarking...); standards & regulations (working groups, certification…). 

In our view, the missing elements in the UK landscape of RD&I institutions are regional institutes with a specific mandate to enhance and fill gaps in regional innovation capabilities. Addressing this gap would support high value industry clusters across the country that are crucial for productivity growth and reducing regional inequality. For the UK, it could be that institutions that are part of, or allied to, the Catapult Network can fill this role (although this would need some explicit modifications of their mission and the criteria for creating new ones). 

Such regional institutes would support existing and developing clusters by targeting those innovation bottlenecks that prevent firms from taking advantage of existing and new technologies to capture high-value opportunities. These institutes need to be configured to respond to the existing business base, aligning distinctive local R&D strengths with distinctive industrial value capture opportunities. 

They must work with the grain of existing regional economies, avoiding the tendency, seen too frequently in the past, to establish generic R&D institutes in fashionable areas such as nanotech, biotech and ICT, which fail to take root locally. The missions of these institutes need to be defined more broadly than simply in terms of applied research at mid-TRLs. An explicit regional mission should be supplemented with programmes for workforce development and innovation diffusion to ensure they can connect into and drive the development of their regional economies and attract investment from outside.