Introducing the Centre for Innovation Management Research

The Centre for Innovation Management Research (CIMR) is one of Birkbeck’s inter-disciplinary research centres. Professor Helen Lawton-Smith, Director of CIMR, explains what it’s all about.

CIMR is an inclusive and impactful centre of research excellence in the field of innovation and entrepreneurship. Inclusivity comes from the engagement in all our activities of CIMR members, our academic colleagues in Birkbeck and in other universities, our diverse set of visiting fellows and alumni (professionals in a wide range of organisations) and our PhD students.

Impact comes from our research, publication and dissemination in societally important topics. Recent studies include analysis of strategies for knowledge exchange, of knowledge co-creation, of diversities of innovation (BAME and disabled groups), public policy on entrepreneurship and innovation in differing regional, national and international contexts and on. We’ve been awarded research grants by the ESRC, British Academy, European Commission and Innovate UK.

Our recent workshops have included: Accelerating SME Internationalization: Academic, Policy and Practitioner Perspective (March 2019); International perspectives on measuring and evaluating knowledge exchange (July 2019), Strategies for knowledge exchange in a changing higher education landscape, (September 2019).

We engage in national and international collaborations. In 2019, led by CIMR, the School of Business Economics and Informatics signed a Memorandum of Understanding with the Kogod School of Business, American University, Washington DC. CIMR colleagues work closely with scholars in the US and in mainland European countries including Sweden and Italy.

We publish in top international journals including Research Policy, Industry and Innovation, Technological Forecasting and Social Change, European Urban and Regional Studies, Entrepreneurship & Regional Development, Small Business Economics, and Regional Studies.

Our research insights feed directly into UK and international policy-making. We have informed practice in the Department for Business, Energy & Industrial Strategy, Innovate UK, European Commission and the OECD.

Our research and international collaborations feed directly into teaching on technology transfer, innovation and entrepreneurship and blockchain. Masters students are welcomed to CIMR events and to join our alumni – we look forward to meeting you.

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How to find ideas that markets will love

Birkbeck alum and Innovation Strategy Consultant Melina Padayachy identifies the essential missing link for successful entrepreneurs.

Creativity, Idea, Inspiration, Innovation, Pencil

Finding ideas that markets would love can often seem like a feat that only few people are lucky enough to achieve. Study the stories of Amazon, Google and Starbucks for instance, and you would find that in each case, the innovators almost stumbled upon their ideas by chance.

Indeed, prior to the genesis of Google, Larry Page was a student at Stanford University where he was aspiring to download the internet on his computer and rank web pages based on their popularity. As a result, Google’s proprietary Page Ranking technology was born, making Google the leading search engine in the world.

For Amazon, Jeff Bezos came across an important piece of information about the exponential rise of the internet while researching opportunities for his boss and as a consequence, he created what is now the leading online retailer in the world.

Next, the idea to sell espresso in a coffee bar popped into Howard Shultz’s mind while he was attending a conference in Milan and he saw espresso bars at nearly every road corner. He wanted to import the concept to the United States and today, Starbucks is one of the leading coffee places in the world.

In all three cases, it would seem that the innovators were either in the right place at the right time or they were trying to solve the right problem. As a result, one may be tempted to conclude that innovation is essentially serendipitous and that any attempt to decode it would be futile.

Yet, if you examine how past innovations impacted their markets, you would find certain distinctive patterns that could be emulated. For instance, some innovations capitalised on existing trends while others were caused by growing and changing trends, and still others, created new trends.

Of even more significance, are the facts that based on their respective market impacts, different ideas would need different development, go-to-market and scaling strategies.

The implications are quite significant because often, new ideas are subsumed under the generic banner of innovation and no distinction is made among their respective market impacts. As a result, some fail to take off. Indeed, scroll through the post-mortems of failed ideas and you would see that often, ideas failed because their market impact was either wrongly framed or overlooked, and as a result, the wrong development and go-to-market strategies were applied.

The Link between the market impact of an idea and its development strategies

Amazon.com

Take a look at Amazon.com for instance. In 1994, Jeff Bezos spotted a growing trend in the use of the internet and he noticed it was starting to change the way that books were bought. Internet technology was new at the time and people had just started buying books online. Already cognizant of the facts that internet usage was growing at the rate of 2300% per year and that books were the most sold items on the internet, Bezos decided to launch an online bookstore. However, the uncertainties facing the company were quite high.

To start with, it wasn’t clear whether book buyers would continue adopting the internet and if so, whether they would change their book purchasing habits. In that respect, Amazon relied on market intelligence to gauge the rate at which internet usage was growing.

Also, by observing markets, Jeff Bezos could find that there were already two online booksellers and that the market was growing.

Then, Amazon’s beta test prior to its launch helped identify the barriers to adoption, namely customers’ concerns about storing their credit card information online. Amazon thus came up with a secure credit card system. Incidentally, the company “finished 1996, its first full year in business with net sales of $ 15.7 million- an attention getting 3000 per cent jump over 1995’s $ 511000.” Clearly, the trend had caught on.

Boo.com

Similarly, Boo.com was an online fashion company that was founded in 1998 by Ernst Malstom, Swedish poetry critic, and Kajsa Leander, former Vogue model. Aspiring to be the “premier online location where the cool and the chic would be able to buy their clothes,” Boo.com launched with 400 employees in eight offices.

However, in as much as only 20% of UK households had access to the internet, the company had few visitors to its sites and not enough sales to sustain itself. Furthermore, the website’s features could not be fully accessed with the dial up connection in UK households. As a result, the company had to close down two years later.

Question is: Could Boo.com have done anything differently?

To start with, Boo.com impacted its market in very much the same way that Amazon.com impacted theirs. Indeed, the company capitalised on a growing trend in the use of the internet, to change the way that an existing job was being done, i.e purchase of fashion.

The uncertainties that Boo.com faced were quite similar to those faced by Amazon.com.  Yet, unlike Amazon.com, the company did not understand its market impact and as a result, it did not try to overcome the uncertainties associated with the idea.

For instance, it should first have had market intelligence pertaining to the rate of growth in internet usage in its different markets. Market intelligence would have revealed that only 20% of UK households had access to the internet, and that information would have enabled the founders to adequately gauge the scale of their initial business and potential rate of adoption.

Then, with a Minimum Viable Product (MVP), Boo.com would have identified the barriers to adoption. For instance, it would have discovered sooner that the features on its website were not supported by dial-up connection and it could have perhaps simplified its website or found ways to get around the problem. The MVP would have also allowed the company to test the fit between the service and markets and the fit between the business model and markets.

Instead, the company was focused on scaling and as a result it did not survive.

Thus, by understanding the market impacts of innovations and by understanding their implications for the development, commercialisation and scaling of new ideas, innovators can avoid diving into new ventures armed with only their gut feeling, and can successfully bring their ideas to markets.

Melina Padayachy is an affiliate alumnus of the Birkbeck Centre for Innovation Management Research. This blog is adapted from an excerpt of her new book, The Innovator’s Method: Bringing New Ideas to Markets.

Based on an analysis of past innovations and of start-ups that have failed, The Innovator’s Method identifies a unique link between how an idea would impact the “job to be done” of its market and its ensuing development, go-to-market and scaling strategies.

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What does the retreat of public research mean for welfare and innovation?

This article was written by Professor Daniele Archibugi and Dr  Andrea Filippetti, from Birkbeck’s Centre for Innovation Management Research

research-and-developmentAn increasing proportion of knowledge is generated in the private sector, rather than in public research institutions like universities.  For many, this is cause for concern; public research and private research differ economically in terms of public access, potential for future technological innovations and in the criteria of resource allocation. Does it matter whether research is conducted by  private business rather than in universities or government research centres? And will the retreat of public research have negative effects on welfare and innovation?

These are just two of the questions we considered in our recent research . While science and innovation policy in the last decades has focused on exploring the relevance of the interconnections between public and business players in enhancing knowledge-based societies, we argue that a major trend has been ignored: both the quota of public Research and Development (R&D) and its share over the total R&D investment has shrunk in most OECD countries.

The shift from public R&D to business R&D

The evidence for a shift in R&D is reflected in the most visible and measurable component of knowledge creation –  the resources allocated to R&D. In most OECD countries a significant shift in the effort to finance public R&D has occurred: as shown in the tables below, from 1981 to 2013 the share of public-financed R&D to GDP has been reduced from 0.82 per cent to 0.67 per cent. By contrast, the industry-financed R&D has increased from 0.96 per cent of GDP in 1981 to 1.44 per cent in 2013.

Gross R&D (GERD) expenditure as a percentage of GDP by source of funds (G-7 countries plus South Korea and OECD average), rate of change 1981-2013

Industry-financed GERD as a percentage of GDP Government-financed GERD as a percentage of GDP
rate of change 1981-2013 rate of change 1981-2013
Canada 53.06% -6.56%
France 63.16% -21.21%
Germany 38.81% -13.27%
Italy 33.33% 38.46%
Japan 85.82% 15.38%
South Korea* 86.90% 126.19%
United Kingdom -19.15% -59.26%
United States 48.21% -29.63%
OECD – Total 50.00% -18.29%

Source: OECD Main Science and Technology Indicators (MSTI).

*  Data for South Korea refer to 1995 instead of 1981.

 

Table 2 – Percentage of Gross R&D (GERD) expenditure by source of funds (G-7 countries plus South Korea countries and OECD average)

 

Percentage of GERD financed by industry Percentage of GERD financed by government
year 1981 2013 rate of change 1981 2013 rate of change
Canada 40.77 46.45 13.93% 50.61 34.86 -31.12%
France 40.92 55.38 35.34% 53.4 34.97 -34.51%
Germany 56.85 65.21 14.71% 41.79 29.78 -28.74%
Italy 50.08 44.29 -11.56% 47.21 42.55 -9.87%
Japan 67.71 75.48 11.48% 24.91 17.30 -30.55%
South Korea* 76.26 75.68 -0.76% 19.04 22.83 19.91%
United Kingdom 42.05 46.55 (70)** 10.70% 48.1 26.99 -43.89%
United States 49.41 60.85 23.15% 47.8 27.75 -41.95%
OECD – Total 51.64 60.76 17.66% 44.19 28.28 -36.00%

Source: OECD Main Science and Technology Indicators (MSTI). Data for South Korea refer to 1995 instead of 1981; the sum of the shares does not add up to 100% since there are other minor sources that are not considered, namely “other national sources” and “abroad”.

* Data for South Korea refer to 1995 instead of 1981.

** In the UK a significant higher proportion of R&D funding comes from overseas. When this is taken into account the share of private-funded R&D stands at 70% (Economic Insight, 2015, p. 7)

 

This data also indicates significant differences across countries. Japan and South Korea exhibit a virtuous trend where both  business and  government have increased their R&D expenditure; in South Korea, particularly, government expenditure increase has been spectacular. In the US, the UK, Canada, France and Germany, by contrast, we see simultaneously the growth of industry-financed R&D and  the decline of government-financed R&D.

Beyond the knowledge-as-a-public-good view

The current privatisation of research activity and knowledge (which is often praised) can have major consequences on innovation and, ultimately, on long-term economic growth and social welfare. But why is the threat to knowledge largely ignored or under-estimated?  We believe that it is due to an unclear understanding of the economic characteristics of knowledge. Historically, knowledge has been considered to be a public good; Nobel Prize winner in Economics, Kenneth Arrow, is cited arguing that knowledge is costly to produce but could be disseminated as information at zero or very low costs. While this view recurs frequently in literature, and is repeated by another authoritative Nobel Prize winner, Joseph Stiglitz, a great body of research has demonstrated that knowledge has both public and private components.

Public-generated knowledge and private-generated knowledge have different economic characteristics, which will shape future knowledge-creation and innovation. The way in which knowledge production is funded – public or business – matters for subsequent application for innovation, particularly in:

  1. Resources allocation
  2. Excludability in consumption
  3. Excludability in production
  Private-generated knowledge Public-generated knowledge
A.

 

Resources allocated through market mechanism.

The main purpose is to contribute to profits though knowledge-based products, services and processes.

Resources allocated through political process.

The main purpose is to contribute to the advancement of knowledge and social welfare.

B. Excludability in consumption pursued through active strategies such as industrial secrecy and proprietary forms of intellectual property. Non-excludability in consumption implemented through technology transfer policies and full disclosure (e.g. open science and non-proprietary forms of intellectual property).
C. Excludability in production associated to firm-specific technical knowledge and tacit knowledge. Non-excludability in production actively sought reducing tacit knowledge.

Our research suggests that, up until now, little attention has been given to the major shift from public to private consequences. We are calling for a change: while the long-term consequences of this shift have not yet been discussed at length, they have the potential to be extremely relevant to long-term technological opportunities, the role of major scientific breakthroughs, and vital knowledge exchange from basic research in the public sector.

Further reading:

  • Archibugi, D. and Filippetti, A. (2016) ‘The Retreat of Public Research and Its Adverse Consequences on Innovation’. CIMR Research Working Paper Series Working Paper No. 31.
  • Archibugi, D. and Filippetti, A. (2015) The Handbook of Global Science, Technology, and Innovation, John Wiley & Sons.
  • Mazzucato, M., 2013. The Entrepreneurial State: Debunking Public vs. Private Sector Myths. Anthem Press, London.
  • I.T., 2015. The Future Postponed. Why Declining Investment in Basic Research Threatens a U.S. Innovation Deficit. M.I.T. Washington Office, Washington D.C.

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Entrepreneurship in London’s Universities

This Thursday 28 June, as part of the School of Business, Economics and Informatics‘ annual Business Week, Professor Helen Lawton Smith will be holding an event on entrepreneurship.  Prior to the event, Professor Lawton Smith explained to us how university spin-offs in London are faring.

The Coalition government has recognised, in policy announcements and ministerial speeches, that the creation of new jobs and economic growth is key to the recovery of the UK economy. In both the UK and the USA, studies have shown that it is new companies, rather than established firms, which are leading the creation of new employment opportunities.

Universities, with their wealth of knowledge and highly skilled staff, have a lot of potential for commercialising their research through spin-offs. What’s more, London, a global city and home to 42 universities, offers an attractive environment in which to launch new spin-offs. Metropolitan regions, such as London, offer many advantages to the new spin-off: they attract a highly skilled workforce, the high concentration of large and international companies means there is a market for products commercialised by universities, and they provide resources in the form of services companies (offering technical, commercial and marketing know-how), physical infrastructure and strong telecommunications networks. Given that any fresh young company needs a market, a talent pool, and access to financial resources, London appears to be a highly attractive location.

However, Lawton Smith explains, one important factor for new companies is the support of regional knowledge networks. In large cities, including London, although resources may be available they tend to be accessed less by spin-offs than in other regions of the UK. Lawton Smith explains that, despite its obvious advantages, London’s ‘entrepreneurial system’ (networks, research universities, professional services and skilled labour) was not well developed, even by the mid-2000s. It seems that during this period, most London universities were not embedded in any networks, possibly, suggests Lawton Smith, due to the sheer quantity of organisations involved in London’s financial community. In smaller regions these sorts of networks may be more transparent, and easier to tap into.

This situation is beginning to change. Imperial College has launched a £300 million venture fund – Imperial Innovations – which was listed on the AIM stock exchange in 2006. Imperial Innovations, which already has equity holdings in 80 companies, is now looking to invest in other universities’ spin-offs.

Other promising advances include the London Development Agency’s (LDA) commitment in 2005 to improve the infrastructure to support university spin-offs in the capital; London’s Science and Industry Council now brings together players from industry, academia, finance and the public sector to promote London’s strengths in science, technology and design to a national and international audience; the London Economic Partnership (LEP), established in 2011 will be taking a broader approach to supporting innovation and enterprise; and the Regional Growth Fund (2011 – 2014) is also being directed towards support for entrepreneurs.

It is too early to tell whether these changes will have an effect on the number of university spin-offs which chose to launch and remain in London.  Currently more than a third of London university spin-offs leave London at start-up or a later date. Lawton Smith explains: “Applications of technological advances may take place outside London because of problems of supporting spin-off growth within the city. The regional impact of university spin-offs extends well beyond the metropolitan region.” Indeed, a map showing the location of registered offices of London university spin-offs shows that they are spread well beyond the capital.

In London, as across most of the UK, the number of university spin-offs has been increasing since 1997, and survival rates are increasing. However, the majority remain small. Indeed, 90% are micro enterprises or small enterprises (defined as having less than ten, or between 11 and 50 employees, respectively). In London spin-offs the average number of people per company is 12.7.  Lawton Smith argues that we cannot judge the success of these spin-offs solely on their size. She explains: “There may well be an optimal size of firm for certain types of activity, such as in the creative industries sector. To assess the value of these companies by measuring employment misses their value based on other criteria, such as technological advances.”

However, other success measures aside, if university spin-offs are to play a part in the UK’s economic recovery, the Government’s primary interest lies in their ability to create employment, and it seems that here university spin-offs do not compare favourably with corporate spin-offs, which expand at ten times the rate of their university counterparts.

Looking at the chemical sector (which has the third highest concentration of university spin-offs in the UK after pharmaceuticals and biotechnology, and software and computer services) Lawton Smith suggests that, “many spin-offs are launched as a vehicle on which to focus further research, rather than genuine attempts to set up spin-out companies which take invention to full commercialisation.”  Many of the companies which the Royal Society of Chemists looked at in a 2006 study were based on a single idea or patent, which meant that they had little hope of long-term viability.

Although few of the older spin-offs have reached a substantial size, the Lawton Smith et al study showed that those spin-offs which have shown the highest growth have been those with the most recent origin. 60% of those which achieve high growth do so within five years of incorporation. These companies are known as ‘Gazelles’. Despite this, only a small proportion of the 244 firms identified from 12 London universities in Lawton Smith’s et al’s study achieved high growth.

Although it is clear that there are areas where London’s universities could do more to support spin-offs, and that the capital offers challenges, as well as opportunities, to new companies, Lawton Smith says that there is positive news. High growth university spin-offs outperform other high growth firms by 0.8%. And survival rates are high, particularly for staff start-ups (using IP from the university but without university funding or support).

Lawton Smith concludes: “If the Government, LDA and LEP are truly dedicated to supporting innovation and entrepreneurship in London, then all the evidence shows that they need to provide sustained capacity building for dedicated entrepreneurial support systems. The advantages of co-location with the originating university will be outweighed by the disadvantages of a lack of accessible premises, networks and professional service firms unless the Government can meet the challenges it faces in this area.

“On a positive note, although small in size, London’s recent university spin-offs are showing strong growth and high survival rates. There are some grounds for believing that the future holds prospects for a greater impact of spin-offs on employment.”

——————————————————————————————————————————-

This article was based on the research findings in the following papers:

London Higher Study Investigating Spin-offs in Science, Engineering and the Creative Arts among 12 higher education institutions in London by Helen Lawton Smith (Birkbeck), Dave Chapman (UCL) Peter Reid (LTN) Tim Barnes (Lodestone), Peter Wood (UCL), Saverio Romeo (Birkbeck) (March 2007)

Funded by London Higher.

and

Chapman, D, Lawton Smith, H, Wood, P Barnes, T and Romeo, S (2011) Entrepreneurial Academics and Regional Economic Development: the case of spinoffs from London’s Universities, Industry and Higher Education 25, 6 483-492

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