The Technium programme of high technology incubators was arguably the highest-profile innovation policy in Wales since devolution, featuring in every one of the Welsh government’s economic strategies from 2000 until its eventual demise in 2010.
It also represented a significant infrastructural investment of over £100 million on ten buildings with 89 per cent of this coming from European Union Structural Funds and public sector matched funds.
To say it was an expensive failure is an understatement. Only 86 new high-technology firms were started out of target of 250 businesses with just over 800 high technology jobs created (at a cost of around £190,000 per job). In addition, the occupancy rates in some of Techniums was as low as four per cent and only £26 million of additional turnover was achieved in the tenant companies instead of the target of £112 million.
So what went wrong and what lessons can be learnt given that some policymakers may be developing similar projects again? These are questions I have explored with two academic colleagues – Dr Rhiannon Pugh and Dr Niall Mackenzie – in a paper recently published in the international journal “Regional Studies”.
Our analysis concluded that there were no explicit objectives for the Technium programme and it would seem that the only rationale was to build as many as possible before the European funding ran out. Certainly, there was little consideration of actual demand for such incubators from the local business community or universities.
Another key issue was that the monitoring and evaluation by Technium managers (who were often inexperienced) was practically non- existent and this failure on the ground was not noticed by those higher up within the system. As noted, occupancy rates in Techniums were low and the provision of business support and its take up was minimal.
Finally, whilst space within each property was targeted towards innovative businesses, there was no real support provided on site to the firms located there. This is contrary to what is practised within successful incubator programmes around the world where financial and management advice, and the building of a strong community, is as important as the physical space in which firms are based.
Ironically, following the closure of the Technium programme, a number of the buildings are currently being managed as part of the property portfolios of local authorities and have subsequently attracted a growing number of companies as tenants. However, this owes more to the traditional economic development role of councils rather than the so-called Triple Helix interweaving of government, business and higher education which underpinned the Technium programme from the beginning.
More relevantly, the failure of the Techniums programme is a salutary lesson for future innovation projects being developed within Wales i.e. where there is no business demand for a particular form of policy support, then the chances of it succeeding are severely limited. In particular, the construction of new buildings in itself cannot create an innovative economy and they have to be appropriately matched with the private sector’s ability and desire to use them.
Indeed, any policies around smart, sustainable and inclusive growth developed by the Welsh Government or the city regions need to engage with the stimulation of the private sector beyond the creation of physical infrastructure. It must also consider the availability of finance, commercialisation training and, most importantly of all, the development of human capital.
With Wales still suffering from considerable deficiencies in these areas, there is a need to be aware of the dangers of repeating the mistakes of the past through the creation of ‘big shiny buildings’, tempting as they are to policymakers looking for a quick fix to regenerate the economy.
Unfortunately, the same mistakes were repeated in a number of projects developed in the wake of Techniums. For example, High Performance Computing (HPC) Wales was established in 2011 to provide a world-class supercomputer facility but failed to address demand in the marketplace from the private sector. Whilst it had a target of creating over 400 jobs and supporting 550 firms, it created only 170 jobs, assisted 247 businesses and generated £3.7 million into the Welsh economy at an overall cost of £33 million.
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Certainly, public funding should not be used to fit the agendas of certain regional players particularly when the needs of the private sector are largely ignored. This could be especially the case in a small tightly networked economy such as Wales where everyone knows each other and individuals and organisations can influence policy decisions regardless of demand.
To counter this, a better understanding of business need for innovation support is required, either from research or by working more closely with individual firms or business groups - such as the Federation for Small Businesses - to understand properly where policy could make a better contribution to innovation and identifying areas where there are strengths and weaknesses in the economy.
Therefore, there are vital lessons to be learnt from the failure of the Techniums to ensure so that it does not happen again. Most important of all, there cannot be a situation in the future where large amounts of public money are spent on grandiose projects without properly understanding the issue of demand amongst the local business community.