Last week, the Western Mail reported on a fascinating interview with the former First Minister, Rhodri Morgan, in which he argued that Europe must discover how so many successful technology companies take root in the United States and learn from the conditions in the US that have allowed companies such as Amazon and Google to be created and thrive.He then went on to suggest that West Wales and the Valleys would qualify for a new round of European funding, bringing billions more into the economy to help close the prosperity gap with the rest of the UK.
Given the points raised by Mr Morgan, it is worth examining how Wales has actually spent the first round of European Structural funds, known as Objective 1, to encourage and develop innovation within our poorest regions between 2000 and 2006.
One of the key aims of the Objective 1 programme was to improve the competitiveness of the region through the acquisition and use of knowledge and new technologies. This was to be done in a variety of ways, including creating a culture of innovation, increasing investment in R&D, and diversifying the economic base by growing more technology and knowledge driven firms and improving their links to the knowledge base.
A total of £131 million of European grants were awarded to 34 different Welsh organisations during the period 2000-2006 to help develop a greater culture of innovation in Wales within 105 projects, which had a total value of a quarter of a billion pounds.
So what did we get for the small fortune spent on developing innovation? Did Wales manage to start putting into place the foundations for a new and innovative nation?
As research shows, if we first of all look at the programme targets for innovation, only 4,870 new jobs were created as opposed to 8,000, which equates to a 61 per cent success rate.
In terms of the number of employees helped through innovation training activities, only 6,950 individuals (or 46 per cent of the programme target) have been assisted, well below the forecasted total of 8,112. This failure in reaching human capital targets is extremely worrying as innovation cannot be developed effectively without the necessary quality of people.
With regard to the number of new companies in high-technology sectors, a target of 2,000 was established for the programme, although only 431 (or 22 per cent of the programme target) have been created at the end of 2008.
Given that the former First Minister has emphasised that Wales should prioritise knowledge-driven entrepreneurship, the efforts to date have been largely unsuccessful as a result of Objective 1 funding.
Therefore, there has been a failure in achieving the key targets and raising the innovation potential of West Wales and the Valleys. Even if we look at broader statistics, such as the level of private sector expenditure on research and development (R&D) in Wales, we find that there has been only a slight improvement over the course of the programme. Whilst the Welsh Assembly Government established a target of private sector R&D accounting for 1 per cent of GVA by 2010, this had only reached 0.53 per cent by 2008.
Whilst £284 million of innovation support projects have been supported under the Objective 1 funding, the key programme targets in terms of new jobs, upskilling and new business creation were not achieved. The question, of course, is whether this sort of funding could and should have created an environment that, as the former First Minister noted, could incubate the technological companies of the future? Indeed, how many successful companies can anyone name that have emerged and grown as a result of the millions spent on innovation?
Some will argue that the large capital projects, such as the Technium programmes, are long term investments that will help develop a stronger innovation infrastructure linking university and industry. That may well be the case, but given that a key focus of the structural funds programme is the creation of higher quality jobs within the poorest areas of Wales, the failure to achieve the jobs and training target, never mind the target for the number of new high technology firms, should concern policymakers.
So what are the lessons to be learnt from the relative failure of the Objective 1 programme to raise the innovation potential of this nation?
The evidence clearly shows that there remains a disconnect between the key actors, with all of them operating in silos rather than as an efficient system that effectively transfers knowledge from the laboratory to the market-place and then provides the necessary resources and support to fully exploit that knowledge. Indeed, there must be a greater effort in ensuring that programmes focus on building both research capacity in both the academic and private sectors whilst enabling better relationships between the two sectors, a role that government can contribute to and, more importantly, stimulate and enhance.
Therefore, if the next Googles, Yahoos and YouTubes of the future are to emerge in Wales over the next decade, then there must be a different approach to supporting innovation and not just repeating the same policy initiatives which have largely failed to attain the targets within the previous round of Objective 1 structural funding. In particular, government needs to bang some heads together and ensure that all the key actors work more closely together as part of an innovation system and not operate in isolation or, even worse, in competition.
If Wales is to improve its innovation performance over time, then we must ensure that the sum of the parts – government, industry and academia – are greater than the whole.
Comments
Don't get involved in pointless slanging matches with nationalists, it only gives them credibility.
When I say infrastructure projects, people might automatically think railways, roads and bridges which is true to an extent, but if people are to engage in high-tech industries then something along the lines of fibre-optic roll out would be handy.
Using one of Google's ideas, and assuming large capacity fibre-optic in place, someone in say West Wales could provide a low-cost data centre, using the ambient temperature for cooling reducing the overheads of traditional centre employing large air-conditioning facilities.
What people should remember is that a good business or technological idea will be born regardless of capital projects. A technium centre will not create the next Google; it will be a person with a good idea. Venture capitalists or other investors recognise a good idea and will invest in such a project. Certainly some existing infrastructure could make the fruition of such an idea that bit easier, allowing someone in Machynlleth o Crymych to make a video call to demonstrate an idea to someone in Zurich.
What I'm simply trying to say that throwing money at people doesn't create jobs; it will be an original and unique idea, and that all depends upon an individual's attitude. Give them the tools and allow them to build.