The Case for Place in R & D

UPDATED 14th September. See Postscript.

A debate is now underway regarding the extent to which public investments in Research, Development and Innovation (R.D & I) should continue to based primarily on the concept of ‘excellence’ or to what extent should the concept of place now increasingly drive decision making.?The Government has some has some difficult new policy choices to make but it should do so solely on the basis of evidence.

It is argued often that a priority focus on excellent research does most to lever in investment from the private sector.?There is scant evidence to support this assertion. Total levels of investment by firms and other organisations in R. D. & I (known as BERD) are much lower, and have been so for many years, compared to our main international counterparts. Only a very limited number of sectors currently demonstrate higher levels of private investment (life sciences, aerospace, automotive, energy, digital.)?But the current spatially blind approach over recent years has simply not proven effective elsewhere in other important sectors of the economy. A place based approach to helping to meet the more specific R. D. & I needs and opportunities of individual firms and their clusters in their own local and regional markets is also very much needed.

It is often argued also that prioritising the push of new scientific knowledges and technologies into the economy does most to improve overall levels of productivity. Few sensible commentators would argue that the UK public purse needs to spend less on science and technology but a causal relationship between public investments in scientific R. D. & I and a resultant significant improvement in overall productivity has just not been established. Our overall levels of productivity remain generally much lower than the same international counterparts. Even before the pandemic and the earlier financial crash, there were few signs of significant improvements in overall levels of productivity.?There are a number of reasons why our levels of productivity are lower, not least of which is the structure of our economy, especially its focus on the service sector. There are places in the UK where levels of productivity and wealth are high in both absolute and relative terms, but many more places demonstrate much lower levels and have increasingly done so over recent decades. Continuing investments in science & technology though, need to accompanied also with more public investment in other sectors and in other forms of R, D and I. These can include social innovation, innovation in the foundational economy and public services (which employ many more people), and, of course, in the current crises, with investments in innovation in public health, and other related measures need to deal with its seemingly inevitable social and economic aftermath. It is these forms of widening R. D. & I that are best designed and delivered to meet the needs and opportunities of local firms, local people, communities and places.

It has been argued similarly by some that it is largely irrelevant where R.D & I physically takes place.? They contend the world is now flat. Globalisation, standardisation and codification of new knowledges, products and process means improvements can be transferred quickly to all other places using the global information super highway, open borders and free trade deals. Such a view is easily contested.

Others have demonstrated that place does matter and it matters now more than ever.?New Economic Geography emphasises the complex relationships between people, public and private institutions, bureaucracies, firms and their many social and cultural interactions. It argued that these complex dynamics are most evident in large, dense metropolitan areas (cities) and it is these places were new knowledges now most readily emerge and are transmitted. This world is therefore spiky. This approach can be applied descriptively. Others developed this conceptual framework to prescribe a priority.?And, in many parts of the United Kingdom, cities most often host the largest, most knowledge intensive businesses and research institutions.

Professor Phil McCann, at the University of Sheffield, has identified clearly though that the regions and places across many parts of the country have effectively ‘dislocated’ and ‘decoupled’ from the Greater South East. Extensive data is used to show that the structural disparities between the ‘North’ and ‘South’ are wider than ever.. McCann evidences growing inequalities in many parts of the Midlands, Northern England, the South West, Northern Ireland and Wales. He argues forcefully that this inequality is limiting overall national productivity and wealth, which in places is now often lower than many of international comparators, including some parts of Eastern Europe.

The political implications of these evident trends have also been highlighted. Prof. Andres Rodriguez Pose and colleagues at the London School of Economics have written about the ‘electoral revenge’ of people ‘left behind’ in these struggling places. His important work has examined observable political trends in several post industrial nations, including especially the United Kingdom. The work of Pose can now be evidenced dramatically in the former ‘red wall’ sets won by the newly elected Government in 2019 and the strong political emphasis it is now placing on the broad, albeit yet to defined in detail, concept of Levelling Up.?There is therefore both an economic and a political case for the concept of Place to be important component of public investment in R.D.& I.

This short blog has simply sought to summarise in accessible terms the main arguments. It concludes a meaningful approach to Place is very much evidenced. This does not mean that the existing spatially blind approach should be abandoned completely. Far from it. The promised and significant uplift in the amount of public funding for R.D. & I should allow both approaches to be adopted.?The Government will undoubtedly receive lots of lobbying. Some of it will be evidence based. Other efforts will claim to be so based but may well represent vested interests on different sides of the debate.

POSTSCRIPT 14th September

That the government chose to spend huge amounts of political capital by breaking an election manifesto to increase National Insurance to take its overall tax burden to the highest levels for many decades implies huge pressure on government (revenue) spending. That the government decided on the very same day to confirm that the Spending Review will be published (very early) on 27th October also implies a broad 'deal' has already been done between the main protagonists on the overall spending envelope. That the letter launching the Review focuses, as expected, very highly on capital expenditure (with little or mention of revenue spending) also implies the main outcome is a) already broadly agreed and b) likely to very tough, especially on those spending lines without similar levels of political support.

Ends