The document provides an overview of the UK's science and innovation system compared to other countries. It finds that the UK has strengths in areas like the quality of scientific research and supportive business environment, but weaknesses in overall investment in R&D, human capital issues, and less innovative small and medium enterprises. The analysis uses frameworks to benchmark different elements of science and innovation systems, including money invested, talent/skills, knowledge assets, structures/incentives, and outputs, to evaluate the UK's performance in an international context.

1. Global leadership in
science and innovation:
international comparative evidence
on UK performance
Tera Allas
March 2014

2. 2
The evidence project focused on international
benchmarking, not recommendations
Exam question for the project on international comparative evidence
on the performance of the UK’s science and innovation system
"What does international
comparative evidence tell us about
the key challenges we need to
address in order to maintain and
develop the UK's global leadership
position in science and innovation?"

3. 3
Comparative evidence on UK science and
innovation performance: outline
• Context: importance of science and innovation for
productivity, competitiveness and growth
• Science and innovation systems: what “good”
looks like and implications for benchmarking
• UK’s performance: international benchmarking of
key elements of science and innovation systems
• Implications: broader issues for industrial strategy
and BIS

4. 4
A large proportion of productivity growth is
associated with science and innovation
Sources of growth in UK labour productivity 2000-2008
Health warning: these figures are volatile from year to year
Captures the impacts
of the science and
innovation system
Key input into
innovation activities
Source:UKInnovationIndex:ProductivityandGrowthinUKIndustries,NESTAWorkingPaper12/09,(NESTA,2012)

5. 5
The UK’s comparative advantage derives from
knowledge intensive innovative sectors
UK revealed comparative advantage* in selected sectors 2011
** = R&D intensive sector; *** Highly innovation active sector
Source:BIScalculationsbasedonUNCOMTRADEandIMFdata;BISEconomicsPaper15Figures34and35
*Apositiverelativecomparativeadvantage(RCA)valueindicatesthatcomparedtotherestoftheworld,
asectorrepresentsadisproportionatelylargeshareofacountry’soverallexports;1wouldimplyacountryis
completelyspecialisedinaspecificsector;-1thatthecountryhasnoexportsinthatsector;and0thatthe
shareofthesectorinthecountry’sexportsisexactlythesameastheworldshareofthatsector
**
**
**
**
**
**
*****
***
***
***

6. 6
Comparative evidence on UK science and
innovation performance: outline
• Context: importance of science and innovation for
productivity, competitiveness and growth
• Science and innovation systems: what good looks
like and implications for benchmarking
• UK’s performance: international benchmarking of
key elements of science and innovation systems
• Implications: broader issues for industrial strategy
and BIS

7. 7
Science and innovation systems are complex
and can contain virtuous or vicious circles
Illustrative map of the UK’s science and innovation system
Source:https://www.gov.uk/government/publications/science-and-innovation-system-international-benchmarking

8. 8
For example, more public money for science
can “buy” more than just better research
Illustrative example of what public sector science funding can “buy”
Source:https://www.gov.uk/government/publications/science-and-innovation-system-international-benchmarking

9. 9
Indeed, there is a strong correlation between public
and private sector R&D investment
Government and business expenditure on R&D 2011
% of GDP
*GovernmentfinancedGrossExpenditureonR&D;**TotalGrossExpenditureonR&D(GERD)minusGovernmentfinancedGERD
Source:OECD,BISanalysis

10. 10
Effective S&I systems rely on a large number
of elements that work well together
Money (investment, expenditure, financing)
• Sufficient public sector funded research
(often performed in HE institutions)
• Strong private sector funded and performed
research (relative to industrial structure)
• Funding from other sources (charity/third
sector and overseas)
Talent (human capital, absorptive capacity)
• Population instilled with intellectual curiosity
and inspired by science
• Ability to grow, attract and retain world-class
researchers
Knowledge assets (science base, IP)
• World-class, internationally collaborative,
highly cited published research
• High-quality research facilities
Structures and incentives
• Competitive excellence driven funding, with
sufficient stable investment in new areas
• Balance between curiosity-driven (“pure”)
and needs-driven (“applied”) research
• Balance between deep expertise and inter-
disciplinary research
• Meaningful (public/private) career paths for
world-class researchers
Broader environment
• Sufficient number of companies willing and
able to invest in knowledge creation
Money
• Effective funding for applied research and
innovation investment (public and private)
Talent
• Sufficient quantity of individuals in firms and
public sector with right absorptive capacity
‒ Specific science and technology
understanding
‒ More generic basic, STEM,
knowledge management and
business translation skills
Knowledge assets
• Strong business/academia co-authorship
• High-performing clusters with world-class
research institutions and and critical mass
Structures and incentives (institutions,
collaboration, co-ordination)
• Incentives for business/researcher
collaboration, co-creation and mobility
• Sufficient co-ordination and strategic
alignment among key actors
• Effective challenge-led programmes
Broader environment (structure of the
economy, tax and regulation)
• Open markets encouraging innovation as a
source of competitive advantage
• Mutually reinforcing activities within and
links between science base and firm base
Money
• Timely access to risk capital (alongside
advice, skills, networks, market disciplines)
• Exit routes that provide access to markets
and finance for growth companies
Talent
• Entrepreneurial aspirations and business
building skills
• General business skills (e.g., strategy,
management, marketing, production)
Knowledge assets
• Patents, trade-marks and other
commercialisable IP
Structures and incentives
• Sufficient intellectual property protection to
incentivise innovation and capture value
Broader environment
• Productive dynamic between large firms
and vibrant growth companies
• Sophisticated demand, including from public
sector (procurement)
• Generally positive business environment
(tax, regulation, planning, etc.)
Innovation outputs
• Revenues, exports, profits, productivity and
growth derived from science and innovation
• Improved societal outcomes due to better
level and application of knowledge
*Thisisnotacomprehensivelistbutonewhichaimstocapturethemostimportantfeatures;whilethekeycharacteristicsarecategorisedhere
inanecessariy2-dimensionalway,theactualsystemismulti-dimensionalandnon-linear,wheretheconnectionsbetweenelementsarecritical
Knowledge
creation
Knowledge
diffusion and translation
Knowledge
application and value capture
Key characteristics* of an effective science and innovation system

11. 11
We have used a 6-part framework for the main
features of science and innovation systems
Framework for assessing science and innovation systems
2.
Talent
1.
Money
5.
Broader
3.
Knowledge
Assets
6.
Innovation
Outputs
4.
Structures
and
Incentives
Environment
2.
Talent
1.
Money
5.
Broader
3.
Knowledge
Assets
6.
Innovation
Outputs
4.
Structures
and
Incentives
Environment
Source:https://www.gov.uk/government/publications/science-and-innovation-system-international-benchmarking

12. 12
Comparative evidence on UK science and
innovation performance: outline
• Context: importance of science and innovation for
productivity, competitiveness and growth
• Science and innovation systems: what good looks
like and implications for benchmarking
• UK’s performance: international benchmarking of
key elements of science and innovation systems
• Implications: broader issues for industrial strategy
and BIS

13. 13
Share of global exports by sector* 2010
Source:BIScalculationsbasedonInternationalTradeCentredataandIMFWorldEconomicOutlookdata
*Weightedbysizeofeconomy
6. Innovation outputs
The UK’s export performance is strong in
knowledge-intensive goods and services

14. Overall performance on innovation outputs is
mixed*, with apparent weaknesses in SMEs
UK relative score on a number of innovation output indicators
10 = highest ranking comparator country; 0 = lowest ranking comparator country
Source:BISanalysisusingOECDandIUSdata
6. Innovation outputs
*Therearefewreliablemetricsofinnovationoutputacrosscomparatorcountries;forsome
oftheindicatorsbelow,areducedlistofcountries(Germany,France,Finland,UK)wasused

15. 15
Gross Expenditure on Research and Development (GERD) 1991-
2011
% of GDP
Source:OECD(2013)Science,TechnologyandIndustryScoreboard
1. Money
0
1
2
3
4
5
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Per cent
Canada Finland France Germany
Japan South Korea United Kingdom United States
The UK’s investment in R&D has been static and
below comparators since early 1990s

16. Public and private sector GERD as a % of GDP, 2011
1.0 0.9
0.6
0.8 0.9 0.8 0.8
0.6 0.7
3.0
2.8
2.8
2.0 1.8
1.4 1.4
1.2 1.1
0
1
2
3
4
5
South Korea Finland Japan Germany United States France Australia United
Kingdom
Canada
Per cent
Private and third sector GERD
Government financed GERD
16
The UK appears to significantly under-spend on R&D
relative to comparator countries
Public and private sector gross expenditure on R&D 2011
% of GDP
1. Money
*GovernmentfinancedGrossExpenditureonR&D;**TotalGrossExpenditureonR&D(GERD)minusGovernmentfinancedGERD
Source:OECD,BISanalysis
4.0
3.7
3.4
2.8 2.7
2.2 2.2
1.8 1.8

17. 17
Only part of the lower private sector R&D spend is
explained by industrial structure
1. Money
Business Enterprise R&D (BERD) adjusted for industrial structure 2011
% of GDP
Source:OECDScience,TechnologyandIndustryScoreboard2013

18. 18
The UK’s innovation body is significantly smaller
than those in Germany and Finland
Comparison of innovation bodies
1. Money
Source:TSB,FraunhoferandTEKESwebsites,Eurostat(forGDPandexchangerates)
Country
Innovation
body
Budget
2013, £m*
Budget as
% of GDP
UK
Technology
Strategy
Board
440 0.03
Germany
Fraunhofer
Institutes
1600 0.07
Finland TEKES 490 0.29

19. 19
Even with private sector innovation included,
UK’s total investment is only average
Estimated total R&D and innovation investment 2011
% of GDP
1. Money
*GovernmentfundedGrossExpenditureonResearchandDevelopment(GERD);**GERDminusGovernmentfunded
GERD(unadjustedforindustrialstructure);***Seeseparatemethodologicalnote(unadjustedforindustrialstructure)
Source:OECD,IMF,Corradoetal2010data,BISanalysis

20. 20
The UK’s performance in science and innovation
related human capital is mixed
UK relative score on a number of talent indicators
10=highest ranking comparator country, 0=lowest ranking comparator country
2. Talent
Source:,BISanalysisusingOECD,UNESCO,WEF,CEPandIMDdata

21. 21
University qualifiers in
STEM subjects 2011-12
Source:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249720/bis-13-1241-
encouraging-a-british-invention-revolution-andrew-witty-review-R1.pdf
2. Talent
The UK’s STEM graduates tend to be
concentrated in life science fields

22. 22
Proportion of tertiary degrees awarded to women 2000 and 2009
Source:http://www.forbes.com/sites/brycecovert/2013/03/08/seven-ways-women-are-still-falling-behind-on-
international-womens-day/;http://www.wisecampaign.org.uk/about-us/wise-resources/statistics-2013
2. Talent
Women’s participation in STEM education is high
but concentrated in health related fields
In the UK in 2011/12,
53% of all STEM
graduates were female

23. 23
UK’s field-weighted citation impact across ten research
fields in 2002 and 2012
Source:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263729/bis-13-1297-
international-comparative-performance-of-the-UK-research-base-2013.pdf
3. Knowledge assets
The UK’s science output is strong across a
broad range of research fields

24. UK relative score on a number of indicators relating to
structures and incentives operating in the system
1=worst comparator country; 10=best comparator country
Structures and incentives in our science and
innovation system are mostly fit-for-purpose
Source:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/277043/bis-14-
544an-insights-from-international-benchmarking-of-the-UK-science-and-innovation-system-annexes-bis-
analysis-paper-03.pdf;*Surveyquestion
4. Structures and incentives24

25. 25
Different indicators provide a mixed picture of
university-business collaboration in the UK
4. Structures and incentives
Relative UK score on indicators of university-business collaboration
% of comparator** countries’ average
Source:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/277043/bis-14-544an-insights-from-
international-benchmarking-of-the-UK-science-and-innovation-system-annexes-bis-analysis-paper-03.pdf;
*http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf
**Australia,Canada,Finland,France,Germany,Japan,SouthKorea,UnitedStates

26. 26
The UK’s business environment is relatively
favourable to science and innovation
5. Broader environment
UK relative score on a number of broader environment indicators
10=highest ranking comparator country, 0=lowest ranking comparator country
Source:https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/277043/bis-14-544an-insights-from-
international-benchmarking-of-the-UK-science-and-innovation-system-annexes-bis-analysis-paper-03.pdf

27. 27
The UK business environment produces new
businesses at a high rate compared to others
EXAMPLE: New business registrations per thousand population* 2011
5. Broader environment
10.4
7.6
6.2
3.6 3.1
1.8 1.4 1.1
UK
Canada
(2009)
Australia
Finland
France
South
Korea
Germany
Japan
Source:http://data.worldbank.org/indicator/IC.BUS.NDNS.ZS;*Peopleaged15-64

28. 28 5. Talent5. Broader environment
Mid-sized businesses are more innovative but a
smaller share of UK business population
Mid-sized businesses are more
innovative in the UK….
Source: Mid-sized Businesses in Finland, France, Germany, Sweden and the UK – General Statistics, NIESR, December 2011;
Future champions: Unlocking growth in the UK’s medium-sized businesses, CBI, October 2011
% of revenue derived from innovation
by company size in the UK 2009
Mid-sized businesses as % of
turnover of all businesses 2009
32.8
32.0
31.5
30.5
19.7
Sweden
Finland
Germany
France
UK
…but make up a relatively small
part of the UK business population

29. 29
In sum, the UK’s main weaknesses are overall
under-investment and human capital issues
Summary of the relative performance of the UK’s S&I system
Element
Relative
performance Comments
Money Medium / Low • Public sector support for both R&D and innovation low (but data imperfect)
• Private sector R&D investment low even after adjusting for industrial structure
• Relatively high private investment in innovation does not outweigh low R&D
Talent Medium / Low • Long-standing issues in basic numeracy and literacy, STEM and especially
engineering disciplines, and management skills
Knowledge
assets
Medium / High • Extraordinary productivity of science system as measured by highly quoted
articles and field-weighted impact
• Relatively poor performance on patents not a good indicator of value added
Structures and
incentives
Medium / High • Excellence driven competitive system praised by other nations
• Questions about whether science portfolio and incentives balanced enough
Broader
environment
Medium / High • Overall business environment positive in comparison to non-US comparators
• Issues around ability of business population to fully exploit science and
innovation
Innovation
outputs
Medium
(mixed)
• Export performance and general competitiveness relatively high
• Low levels of innovation active SMEs and questions about innovativeness (and
productivity) of sectors less exposed to global competition

30. 30
Comparative evidence on UK science and
innovation performance: outline
• Context: importance of science and innovation for
productivity, competiveness and growth
• Science and innovation systems: what good looks
like and implications for benchmarking
• UK’s performance: international benchmarking of
key elements of science and innovation systems
• Implications: broader issues for industrial strategy
and BIS

31. 31
Emerging thinking on maximising S&I value
suggests a number of policy links to explore
Emerging thinking on issues that need addressing in order to further
maximise the value of the UK science and innovation system
Element Potential priority issues to address (FOR DISCUSSION)
Money • Addressing under-investment in non-incremental way
Talent • Addressing basic numeracy and literacy, STEM, management skills
• Considering government levers to raise aspiration and entrepreneurship
Knowledge
assets
• N/A
Structures and
incentives
• Linking innovation support more seamlessly into other business support
• Managing science and innovation investment as a balanced portfolio
• Further aligning Industrial Strategy with science and innovation strengths
Broader
environment
• Attracting R&D intensive corporations to locate and stay in the UK
• Ensuring access to finance interventions are of sufficient scale and co-
ordinated with industrial strategy and science and innovation policy
Innovation
outputs
• Understanding drivers of innovation in service sectors
• Understanding whether competition policy drives enough innovation

32. Global leadership in
science and innovation:
international comparative evidence
on UK performance
Full report and annexes available at:
https://www.gov.uk/government/publications/science-and-innovation-system-
international-benchmarking