Scotland: Towards the Knowledge Economy

CHAPTER 3: INDUSTRIAL CLUSTERS

The taskforce was asked to consider a framework within which universities can assist with the development and implementation of Scottish Enterprise's cluster plans for key industries in which companies and public bodies will collaborate

3.1 This chapter:

sets out the background to the Scottish Enterprise clusters strategy and the potential role of the higher education sector;

explains the activity that is currently going on to engage the sector; and

sets out 5 further actions that could be taken to strengthen partnership with HEIs and research institutes.

BACKGROUND

3.2 The taskforce was asked to consider a framework within which HEIs can assist the development and implementation of Scottish Enterprise's cluster plans for key industries in which companies and public bodies will collaborate. Essentially, this builds on, and broadens, the work considered in the two preceding Chapters. The taskforce were already familiar with SE's clusters strategy and the evidence that clusters can drive economic development. However, over the last two years SE has given greater priority to the potential for supporting clusters in the Scottish economy and there are now four pilots in Oil and Gas, Food, Semi-conductors and Biotechnology nearing completion. These are designed to test how the 'community' in each of these clusters could undertake a series of related actions to substantially grow the clusters over the years ahead.

3.3 The taskforce was aware that Scotland has been in the vanguard of promoting clustering as a very practical tool to strengthen and deepen our major industries. The basic theory is that clustering offers a method whereby companies can form highly beneficial relationships with other businesses, their suppliers, and the wider community, particularly research and education. These relationships properly organised and focused, can substantially improve innovation capability and lead to dramatic improvements in the rate of new company start-up, the growth of existing businesses and the ability to win knowledge-based inward invest-ment. Strong clusters promote innovation and enhance the performance of individual companies. Indeed, success may arise from how the cluster as a whole performs rather than how individual companies perform. It is perhaps not surprising that 70% of America's new semiconductor companies have been set up in Silicon Valley and that companies which become global players are more likely to emerge from strong clusters. Such companies, of course, further strengthen the cluster.

3.4 The taskforce also accepted that growing clusters exert a strong locational 'pull'. For example, over the past decade, a significant percentage of manufacturing inward invest-ment in Scotland has been in IT related industries. Even many of the recent call centres have been set up by IT companies such as IBM. The existence of the IT cluster in Scotland is one of the major reasons why such com-panies now locate in Scotland. Conversely, in industries such as automobile manufacture or consumer electronics where Scotland has little presence, the country is much less competitive and attracts relatively little inward investment. However, more importantly, strong clusters of innovation help attract 'higher' quality investment (i.e. product development and R&D). While requirements vary between industries, generally high quality inward investment projects seek: a pool of highly skilled and experienced labour relevant to the industry; relevant high quality university research and technology development centres; proximity to major customers; indigenous companies; cluster-related new companies; and an industry specific 'high tech' image. All these characteristics are, of course, available within a strong cluster. And strong clusters promote both inward investment and growth in indigenous business.

3.5 One constraint is that, as a small economy, Scotland cannot develop the necessary critical mass and support the infrastructure necessary for a wide range of unrelated industries. It is not therefore possible for Scotland to be competitive in all clusters. This makes it vital that we have research strengths in Scottish HEIs and research institutes that are linked as closely as possible to those areas of business in which Scotland can compete most effectively.

3.6 This raises concerns about over-specialisa-tion both from an economic and an academic perspective. In answer to the first, the aim is to diversify the economy in two important ways. Clusters can help generate new or future industries. (Within the IT cluster, for example, the approach is not about simply PC production but rather about the next generation of products such as laptops or flat panel displays, and building on existing assets such as multi-media industries.) Cluster strategies also encourage higher value functions such as research and development thereby diversifying the economy away from its over specialisation on the manufacturing function.

3.7 The approach is not intended to constrain academic freedom to pursue curiosity-driven research. The Government supports such research through its funding because it underpins basic wealth creation. However, clustering does mean looking for areas of complimentarity between our basic research strength and our business potential.

3.8 This was the background to the taskforce's approach.

CLUSTERS AND THE SCIENCE BASE - THE PRESENT POSITION

3.9 As set out above, research by Scottish Enterprise and others, has clearly shown the central role the science base plays in making clusters successful. The sector provides local advantage as an advanced factor condition and forms critical linkages in the networks that characterise successful clusters. The taskforce took the view that the compre-hensive involvement of the higher education sector in the development of the cluster approach is therefore fundamental to the success of the Scottish cluster's initiative. They also took note of the fact that SE has undertaken wide-ranging discussions with individuals and organisations in the sector during the research phase of the cluster work and that this process will continue with the development of a more formal and structured involvement programme during the implementation of the 4 pilot cluster plans and the scoping of new clusters.

3.10 Co-ordination of activities across all the cluster work is managed through Scottish Enterprise's Cluster Development Direc-torate's Transition Team, both the Transition Team and individual Cluster Teams are formally committed to engaging universities, other HEIs and research institutes at three levels: At the individual academic level where relevant academics in various institutions are actively working with specific Cluster Teams in the preparation of Action Plans. At the level of the individual institution where the Cluster Directorate are providing regular updates on progress and have an open door policy for questions from institutions or individuals - with named contact points and access to dedicated web sites. At the sector level though working with SHEFC, SFEFC, COSHEP, The Scottish Office, and SQA and others, to develop longer term and wider spread understanding and involvement of the sector in the clusters process.

In our recently published Network Strategy we emphasised that economic value lies in knowledge and for some time now we have been working with industry and academia to foster the links that will spawn the innovative ideas, products and businesses from which economic success in the information age will flow. The taskforce has provided an excellent forum for considering these important issues. Real progress has been made in generating new collaborative project ideas which have the potential to make a considerable impact upon the Scottish Economy.

Crawford Beveridge Chief Executive Scottish Enterprise

3.11 The taskforce also noted a range of ongoing activity. First, as part of the ongoing process of involving the sector in the clusters work The Scottish Office hosted a meeting last year with SHEFC and SE. The Scottish Universities' Policy Research and Advice network (SUPRA), a SHEFC funded body, is currently in discussion with the SE Cluster Directorate to establish how best to organise communications at the generic level with institutions. Second, abbreviated versions of the progress reports for the 4 pilot clusters have been distributed to all higher education institutions, the Scottish Agricultural Biological Research Institutes, and a range of further education colleges. Regular up dates will continue to be distributed. Third, SE Skills Directorate will in the near future lead a half day seminar (using the semi-conductors example) with The Scottish Office bringing together all key education staff from SHEFC, SFEFC, SQA and the NTOs. Finally, there are specific academic departments engaged with each cluster team projects - which include, for example, Alba, the Semi-conductor Incubator Centre within the University of Edinburgh, and the Advanced Materials Centre within Dundee University.

STRENGTHENING FURTHER THE PARTNERSHIP WITH THE SCIENCE BASE

3.12 Following discussions on how to further embed the higher education sector into the development of the cluster process and the evolution of individual action plans, the taskforce recommended the following additional actions: The establishment of a National Cluster Liaison Group comprising SE, SHEFC, COSHEP and representatives of the research institutes that would meet twice a year. The agenda would cover, for example, implementation of the pilot Action Plans, progress on future clusters, discussion on how institutions need to evolve to support clusters, with SHEFC funding being used to support this process further; The possibility of seconding individuals from key academic departments to relevant SE Cluster Teams or the Transition Team. The principle of encouraging institutions to be more active in the cluster research is a positive move. It would seek to directly involve academic staff in both the specific and the general cluster research, allowing them to play a more influential role in aligning their research with a cluster approach to economic development; Examination of the feasibility of allowing the Cluster web sites to be linked into the higher education sector's JANET and SUPER JANET internet links - allowing easier access for academics to the on-going work and opening up the possibility of web discussion groups on individual subjects. Electronic networks and connections will be a key element of cluster knowledge building. Specific details of how this might work will have to be considered as part of the cluster action plans; The evaluation of the potential for joint learning experiences for academics, SE personnel and companies' staff. The cluster action plans will consider the sharing of learning from elsewhere in the world and it is important for the higher education sector to participate fully in this.

3.13 The taskforce also concluded that the commitment of University Principals and their equivalents in other HEIs and research institutes is essential if these bodies are to contribute fully to cluster development.