Risk & Economy » Regulation » Unlocking mid market innovation

A CHANGE in emphasis from grants to innovation contracts has been very beneficial in supporting early-stage companies but extending this concept to mid-market companies could make a lasting contribution to the UK’s competitiveness.

The Small Business Research Initiative (SBRI) programme is designed to help early-stage, high-technology small and medium enterprises (SMEs) gain greater access to research and development (R&D) opportunities supporting unmet needs of government departments. A key difference to earlier methods of support is that these are competitive R&D contracts, with a clearly defined need, not grants or loans. The contract provides a discerning end-user and considerable feedback, which is crucial in helping the SME define its product or service.

A similar scheme aimed at supporting open innovation between mid-sized businesses and early-stage companies would allow UK plc to derive greater benefit from its thriving technology sector.

Every year we support early-stage technology companies across the region with a showcase event to which we invite journalists and potential investors. This year, the event ‘Meerkats and Avatars’ has been oversubscribed, showing the wealth of innovation across the region.

For the first time this year we have also invited some multinationals with a known interest in open innovation to meet the demonstrators. These mainly US-based companies have the structures necessary to engage with early-stage companies, something that is often lacking in the UK mid-market companies.

A recent CBI report ‘Future Champions – unlocking growth in the UK’s medium-sized businesses’ identified that mid-sized businesses (MSBs) were crucial to the prosperity of the UK. Although they represent less than 1% of the total number of companies, they employ 16% of employees and account for more than one fifth of the UK’s total revenues. However, their contribution could be much greater as their French and German counterparts show.

Additionally, the 2008 Community Innovation Survey reveals that only 62.5% of UK MSBs describe themselves as innovating, compared with 84 per cent in Germany, and they spend less on R&D.

Support and wider understanding of ‘Open Innovation’ could help to de-risk innovation for MSBs. We have seen entrepreneurs become increasingly commercially aware over recent years. With a lack of buoyancy in the financial markets they are also looking to grow organically by generating early sales revenues where possible. This could provide a dividend for investors and reduce the pressure for a quick exit.”

Tax structures such as the R&D tax credits could be used to support innovation. R&D tax credits are skewed towards research. If they were made easier to understand and applicable to investment in the development of technologies that added value to new products then this might make innovation more affordable for MSBs.”

Innovation centres too have a much wider role to play. They have proved successful in stimulating innovation at the SME level. Here at the St John’s Innovation Centre we have almost full occupancy at present.

But, like government, MSBs also have ‘unmet’ needs that could be addressed by R&D contracts. Our advisors could have a valuable role in acting as ‘trusted agents’ facilitating relationships between MSBs and technologists, articulating their needs and briefing and managing the relationship with the technologists.

All too often we see Cambridge technology business reach a certain size and then they are acquired by overseas interests. If stronger links were brokered with MSBs these technology companies could provide a powerhouse of innovation and strengthen the competitiveness of UK plc.

David Gill is a director of the St John’s Innovation Centre [www.stjohns.co.uk]. It was established by St John’s College, part of the University of Cambridge, and opened in 1988

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