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Regional Innovation Monitor Plus 2016 30 May 2016 Regional Innovation Monitor Plus 2016 Regional Innovation Report Wales (Advanced materials and nanotechnology) To the European Commission Internal Market, Industry, Entrepreneurship and SMEs Directorate-General Directorate F – Innovation and Advanced Manufacturing www.technopolis-group.com Regional Innovation Monitor Plus 2016 Regional Innovation Report Wales (Advanced materials and nanotechnology) technopolis |group| in cooperation with Meirion Thomas, CM International Dr Dylan Henderson, CM International Table of Contents Executive Summary 2! 1. Advanced Manufacturing: Advanced Materials and Nanotechnology 5! 1.1 Overview of performance and trends 5! 1.2 Business sector perspective 6! 1.3 Scientific research potential 8! 1.4 Role of intermediary institutions 10! 1.5 Developing skills for the future 12! 1.6 Major investment projects 13! 1.7 International cooperation 15! 1.8 Policy support and delivery mechanisms 17! 1.9 Good practice case 19! 1.10 Leveraging the existing potential 23! 2. Regional Innovation Performance Trends, Governance and Instruments 26! 2.1 Recent trends in innovation performance and identified challenges 26! 2.2 Institutional framework and set-up 28! 2.3 Regional innovation policy mix 31! 2.4 Appraisal of regional innovation policies 36! 2.5 Policy good practice 37! 2.6 Possible future orientations and opportunities 38! Appendix A Bibliography 41! Appendix B Stakeholders 42! Table of Figures Figure 1 The Compound Semiconductor Centre: strategic vision .................................. 14! Figure 2 Innovation performance indicators for Wales relative to EU28 average (2011) ......................................................................................................................................... 26! Figure 3 Engagement in innovation activity relative to UK regions (2011) .................. 27! List of Tables Table 1 Existing regional innovation support measures ............................................... 34! Regional Innovation Monitor Plus 2016 i PREFACE In the context of the growth and investment package set out in the Investment Plan of the European Commission, the Regional Innovation Monitor Plus (RIM Plus) provides a unique platform for sharing knowledge and know-how on major innovation and industrial policy trends in some 200 regions across EU20 Member States. Launched in 2010, the Regional Innovation Monitor aimed at supporting sharing of intelligence on innovation policies across EU regions. Building upon the experience gained and results obtained during the period 2010-2012, the RIM Plus 2013-2014 provided practical guidance to regions on how to use the collected information, via a network of regional experts. Since 2014, the RIM Plus has introduced a thematic focus on advanced manufacturing. The RIM Plus 2015-2016 evolved from a general monitoring of innovation policies towards establishing a more thematic focus in selected areas in order to contribute to improving the competitiveness of European regions. Particularly, the RIM Plus aims through its activities and in close cooperation with the regional stakeholders and other relevant initiatives to: •! Contribute to the development of new and open spaces of collaboration and exchange on advanced manufacturing, each with a clearly defined thematic focus. •! Play an enabling role in providing evidence-based information on specific themes and bring in outside perspective from other regions. •! Map out regional practices in support of advanced manufacturing and relevant pilot/demo projects and work towards involving the relevant stakeholders. •! Provide an easy access and comparative overview of regional innovation policies and relevant actions in the field of advanced manufacturing. •! Share the lessons learned with the European Commission services to feed into the preparation of future programmes. The main aim of 30 regional reports is to provide a description and analysis of developments in the area of advanced manufacturing with a clearly defined thematic focus and regional innovation policy, taking into account the specific context of the region as well as general trends. All regional innovation reports are produced in a standardised way using a common methodological and conceptual framework, in order to allow for horizontal analysis, with a view to preparing the Final EU Regional Innovation Monitor Plus report. European Commission official responsible for the project is Alberto Licciardello ([email protected]). The present report was prepared by Meirion Thomas and Dr Dylan Henderson ([email protected] / [email protected]). The contents and views expressed in this report do not necessarily reflect the opinions or policies of the regions, Member States or the European Commission. Copyright of the document belongs to the European Commission. Neither the European Commission, nor any person acting on its behalf, may be held responsible for the use to which information contained in this document may be put, or for any errors which, despite careful preparation and checking, may appear. Further information: https://ec.europa.eu/growth/tools-databases/regional-innovation-monitor Regional Innovation Monitor Plus 2016 1 Executive Summary 1.Advanced Manufacturing: Advanced materials and nanotechnology •! Challenge 1: The global value chain makes the sector in Wales potentially vulnerable Most of the companies active in the Advanced Materials and Manufacturing (AM&M) sector in Wales operate within global supply chains. The larger companies are, most typically Tier 1 suppliers, while SMEs, which form the major part of the sector in Wales, are usually Tiers 2 and 3. The global value chain position of the sector reduces the innovation activity of a large number of firms. They have little incentive to innovate outside of the needs of those companies occupying the Tiers above them in the supply chain. As a region and country with open borders to a much larger national and EU economy, companies in the advanced materials sector in Wales risk the leakage of skills and technologies to other external parts of the value chain. This inevitably increases, further, their vulnerability and the risks associated with investments in their technology base, innovation and skills. •! Challenge 2: Weakness in capacity of SMEs to invest in leading edge technologies, advanced skills and access to the global marketplace The SME base in Wales, particularly in the AM&M sector, demonstrate a long standing weakness in its capacity and capability to make the scale and type of investments necessary to effectively acquire and apply leading edge technologies, and to invest in new or upgraded advanced skills. Welsh Government policies and investment programmes including the EU Structural Fund programmes have been targeted at this challenge area to a significant extent for many years with only limited impact. •! Challenge 3: Skills shortages in high level technical skills in the materials and nanotechnology sub sector With increasing employment in the advanced manufacturing sector generally, demand outstrips supply in Wales. This is particularly the case with regard to the development and application of high level technical skills in the materials and nanotechnology sub sector. The same appears to be the case in respect of relevant R&D skills. 2.Regional Innovation Performance Trends, Governance and Instruments •! Challenge 1: Solving the long-term macro-level structural deficiency in the economy For over 30 years the Welsh economy has underperformed and has continued to fall back against both UK and EU measures of regional prosperity such as Gross Domestic Product (GDP) per capita. Although manufacturing productivity improved because of foreign direct investment, a period of significant retrenchment by the foreign investors began around 2000. As a result Welsh SMEs lost the leadership of large multinationals in supply chain practices, investments in technology and innovation. This weak overall economic performance is indicative of serious structural deficiencies in the Welsh economy with too few innovative and R&D performing companies. However, a few sectors of potential strength do stand out, including Life Sciences and Health, Low Carbon Energy and Environment, advanced Engineering and Materials, ICT and the Digital Economy. These areas point the way to a potentially more ‘smart’ economic and innovation policy. 2 Regional Innovation Monitor Plus 2016 •! Challenge 1: Achieving greater balance in the R&D performance of the region Out of the three components of R&D expenditure commonly used as a measure of innovation performance, Wales matches the EU28 average in only one, expenditure on R&D by its higher education sector. This is particularly important because of the lack of one of the alternative drivers of R&D expenditure, namely government research institutions. Wales has no such institutions and therefore misses out on spin-offs and knowledge based cluster developments that typically arise as a result of government R&D activity. Welsh SMEs appear strong at interacting with other SMEs and universities and are incremental innovators rather than radical innovators. There is the potential opportunity for more ‘open innovation’ forms and patterns to emerge that will allow the R&D performance to be more balanced. •! Challenge 3: Successfully specialising in high value activities and knowledge based sectors Despite their innovation efforts and R&D investments the Welsh SME base has struggled to make a significant indent into
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