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Business Enterprise Research and Development in Scotland 2002

6 Size, Age and Ownership of Firms Performing R&D in Scotland

6.1 For the 2002 survey, 901 enterprises were identified as undertaking R&D in Scotland. This included 55 companies that employed 400 or more people in the UK. The total number of R&D performers identified has grown substantially, by 242 firms or 37%, compared to the previous year. In the UK 24% more firms were found to undertake R&D. As previously, around half of these firms supported manufactured products and the remainder provided a variety of services.

Size

6.2 The number of small (0-99 employees) firms that have been identified as undertaking R&D in Scotland has increased by 42% over the year. Table 18 provides the details of the 2002 size breakdown.

Table 18: Number and Size of Businesses Performing R&D: Scotland 2002

Source: ONS/SE AnalysisTable 15

6.3 As one enterprise may undertake R&D in several of the Regions of the UK a comparison between Scotland and the UK on the basis of number of enterprises would be misleading. Not too much should be read into the figures. The list of R&D firms is compiled from a variety of sources and while it reliably records larger R&D providers, very small R&D providers who have little impact on the final expenditure figure are not reliably included or excluded. The main focus of the survey is expenditure, not number of firms.

6.4 Larger companies of course account for most R&D spending: in 2002 firms with over 400 employees undertook 56% of all Scottish R&D. However this is significantly less than in the UK as a whole (71%). In particular a higher proportion of R&D in Scotland is done by medium sized firms. As Table 19 shows, the difference is much larger for services products: more than two thirds of R&D was undertaken by small firms (a quarter in the UK).

Table 19: Expenditure by Size ¹ of Business: Scotland and UK 2002

Source: ONS/SE Analysis Table 12 and MA14 Table 19
1 Sizebands are for total UK employees

6.5 This could indicate that whereas a number of large UK and international R&D performers in the manufacturing sector maintain significant R&D branches in Scotland, equivalent sized firms in the services field do not.

6.6 This finding correlates with the low level of R&D spending for service products in Scotland, as already noted.

6.7 Table 20 contains the analysis of employment by firm size. The findings correlate with the results on expenditure.

Table 20: R&D Employment by Size ¹ of Business: Scotland and UK, 2002

Source: ONS Special analysis Table 12A
1 Sizebands are for total UK employees

6.8 Table 21 gives an indication of the level of concentration of R&D activity. It shows that in 2002 the 15 largest R&D firms of the UK were virtually absent from Scotland. The first 100 R&D performing firms undertook 60% of Scottish R&D but 70% of UK R&D. Since 2001 the share of the top 20 firms has stayed the same in Scotland but has declined in the UK. The share of the top 100 firms has declined in Scotland and the UK.

6.9 Table 21 also shows how government procurement benefits, in Scotland and the UK, predominantly the largest firms. The top 10 firms receive more than half of government R&D contracts by value.

Table 21: Level of Concentration of R&D 2002

Source: ONS/SE analysis Table 11
Note: top enterprise groups when sorted in order of R&D expenditure in the UK

Age

6.10 Only a small proportion of Scottish R&D is undertaken in firms that are less than 10 years old. This is particularly true for manufacturing (Table 22). While 18% of R&D performing firms in manufacturing are under 10 years old, they only produce 7% of R&D output. In services around half of the firms are young, producing around half of R&D output.

Table 22: Age of firm performing R&D in Scotland 2002

Source: ONS/sSE analysis Tables 18 and 19
*less than 10 years old

Country of Ownership

6.11 Table 23 shows that over half of R&D in Scotland is undertaken by firms headquartered in the USA: in 2001 these firms spent 348 million - 54% of the total - and employed nearly 6,000 staff on R&D activities in Scotland. Firms from the US have expanded the amount of Scottish R&D considerably since the previous year and have increased their share from by 10 percentage points. In the UK as a whole US based firms accounted for 23% of R&D.

Table 23: R&D expenditure by country of ownership 2002

Source:ONS/SE analysis table 13 and Table 22 MA14

6.12 The proportion of R&D undertaken in Scotland by Scottish firms was in 2002

Location of managerial control in UK

6.13 Here, the location of the head office of the enterprise undertaking R&D in Scotland is examined. For foreign owned enterprises this is the location of the UK chief office. This analysis is different from the work in last year's report, which was based on the location of intermediate administrative centres, not necessarily the UK head office.

6.14 Table 24 below and Table 17 in Appendix 3 show that 44% of the R&D undertaken in Scotland is controlled from a Scottish location. One third is controlled by a head office in the South East and the remainder from somewhere else in the UK.

6.15 All other UK regions, with the exception of East Midlands, control a larger percentage of their R&D locally. However the list of regions that control most of their R&D locally contains a mixture of high and low performers: West Midlands, South East,
Yorkshire and Humber, Northern Ireland, London and Wales all control over 70% of R&D locally. Only the South East has a more research intensive economy than the UK average and West Midlands is close to the UK average. Local control is not directly correlated with R&D intensity. Of course it is the large R&D firms that have a head office outside Scotland: the 56% of Scottish R&D controlled from a head office located in the rest of the UK is undertaken by only 58 firms. 843 R&D firms do have a Scottish head office ( Table 21, Appendix 3).

Table 24: Location of Head Office / Location of Performing Unit 2002

Source: ONS/SE analysis Table 17

6.16 The same analysis for other regions shows interesting linkages. For the purpose of this analysis a region is called self contained if 70% or more of its R&D is controlled from a local head office. Linkages are shown as major (20% or more, shown in bold) or minor (10% or more).

Location in Scotland

6.17 Table 23 in Appendix 3 shows R&D expenditure analysed by local authority area. The top areas chosen by businesses as locations for their R&D are shown in Table 25.

Table 25: Five main areas for undertaking R&D in Scotland 2002

Source: ONS/SE analysis table 23

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