Scotland’s universities enjoy an international reputation for their intellectual traditions, the quality of their teaching and the depth of their research.

Scotland has less than 9 per cent of the UK population but its institutions file 15 per cent of higher education patent applications and gain 11 per cent of the patents granted.

For a country with only 5m people, Scotland produces more research per 10,000 of the population than any other country in the Organisation for Economic Co-operation and Development. With just 0.1 per cent of the world’s population, Scotland provides 1 per cent of the world’s published research.

However, Scotland’s educational institutions face challenges over the transfer of their knowledge to the private sector – particularly to small and medium sized- enterprises (SMEs).

They also face longer-term threats to their funding, as the rest of the UK appears set to rely increasingly on tuition fees – a route the devolved Scottish executive has declined to follow.

Universities Scotland, which represents the sector, acknowledges that Scotland’s business enterprise expenditure on research and development accounts for only 0.58 per cent of gross domestic product, compared with the European average of 1.14 per cent and the UK’s investment of 1.16 per cent of GDP.

In general, Scotland also performs slightly below the UK average when it comes to the amount of “product innovation” – businesses developing goods or services which are new to that business. However, the same analysis shows Scotland has a significantly higher proportion of companies that are “novel innovators” – businesses which have introduced products or processes that are not just new to that particular business but entirely new to the market.

Universities Scotland found companies that are novel innovators generally share common characteristics, spending more on research and development and employing much higher proportions of technologists, scientists and higher professionals.

But if Scottish companies do not make the investment in research and development activity, how do they maintain an advantage over the rest of the UK in terms of novel innovations?

One study, commissioned by the Scottish executive to look into the Scottish innovation system, concluded that:
• Scottish firms have a higher proportion of science and engineering graduates among their employees compared with the UK average and therefore make better use of highly educated workers
• Scottish innovators make greater use of the science base as a source of knowledge and information for innovation activities
• Scottish innovators have a higher propensity to enter into co-operative arrangements with the science base (higher education institutions and research organisations) for innovation than UK counterparts

Universities complain that existing economic analysis tends to focus on research, development and innovation in terms of technology. This fails to capture the enormous contribution to the Scottish economy that the creative industries make – worth £5bn, employing about 100,000 workers or around 5 per cent of the total workforce.

Universities Scotland states: “These industries are highly innovation-driven and tend to have strong links with the higher education base. The creative aspects of other industries (for example product design) add even more value. Unfortunately, existing analyses do not enable us to measure the economic impact of higher education on these industries, even though it is likely to be high.”

In fact, the universities argue that Scottish higher education is relatively more sophisticated than the Scottish economy as a whole.

They cite a recent report that concluded: “A very consistent picture was drawn of the relative thinness of the SME sector in Scotland in terms of its scientific and managerial competence, and the lack of absorptive capacity in the sector to make use of the (often world-class) research being carried out in Scottish universities …

“The available data suggest that the perception that there is a ‘problem’ of a lack of knowledge transfer and commercialisation among Scottish higher education institutions is unfounded. There is, however, a disconnect between the high-quality research being carried out in Scotland and the indigenous SME sector.”

To address these challenges, all 29 of Scotland’s higher education institutions and research institutes are collaborating to help forge links between academics and existing companies, many of which would have little idea how to use research.

The Scottish Further and Higher Education Funding Council, which annually distributes £1.6bn of public funds to colleges and universities, is backing Interface, a “knowledge connection for business” that was established in 2005 as a central point of reference to help companies access research within Scotland.

David Gani, the council’s director of research and strategy, says: “We would like to optimise interaction between Scotland’s superb research base and its large number of small and medium-sized enterprises.”

Arguably the greatest challenge facing Scotland’s universities concerns their funding. One of the first actions of the new minority Scottish National party administration was to announce it would press ahead with plans to abolish the £2,289 endowment fee paid by students. This was introduced in 2001 when a previous Labour and Liberal Democrat coalition scrapped tuition fees for Scottish students.

Universities Scotland has concentrated on lobbying the Scottish executive for another generous budget settlement this autumn. However, there is real concern in both university and political circles that Scottish universities will be left behind if the current £3,000 cap on tuition fees in the rest of the UK is lifted after 2009, when it will be reviewed.

Brian Lang, principal of St Andrews University, has warned that Scottish universities could be left unable to compete for resources and staff, and urged the Scottish government to introduce a graduate tax.

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