New technology sectors can quickly change the economic landscape of a country and the world.

This occurred in the 18th Century, through the Industrial Revolution.

In the late 20th Century, the rapid uptake of consumer electronics in the 1970s was followed by the development of personal computers and ultimately the internet. Although these latter developments took place in the last 30 years, they have already changed the lives and working habits of a generation. Countries willing and capable of taking advantage of these new technologies prosper, where others fall behind. It used to take many years, often decades, for academic discoveries to be commercialised.

This has changed into a race between nations to bring new technologies to market more quickly, to gain first mover advantage and establish a dominant market position in the following years. This was achieved by the US through the rapid commercialization of technologies such as semiconductors, computers, and the internet.

There is no reason however to believe that smaller countries cannot compete as Finland has shown with Nokia, a company that enjoys a dominant position in mobile telephone handsets. This was built on an early lead in mobile telephony by the Scandinavian countries.

The UK at present enjoys a leading position in research in a number of technologies, which have the potential to become large new sectors in the future, and this report is written in the context of trying to ensure this research lead is translated into an economic success for UK plc.

Investment in innovation is essential for a successful economy. Research suggests that an increase of 1% in business R&D investment increases multi-factor productivity by 0.13%, and a 1% increase in public sector R&D achieves a multi-factor productivity increase of 0.17%4. Other evidence suggests that innovative companies increase their turnover and increase employment more rapidly than non-innovators5.

Technical and commercial uncertainty is one of the pervasive features of innovation processes, particularly in the pre-competitive development of new ideas with the seeds of commercial potential6. This is a phase where uncertainty of outcomes is associated with the highest financial risks in the funding of new projects or new ventures. This stage in the commercialisation process attracts very little investment from the venture capital market or business angels, and is usually undertaken by only the very largest industrial companies7.

Matching technologies to markets and demonstrating their ability to create value to customers and investors is a key process for successfully commercialising emerging technologies8. It is through this process that new industries are developed through the formation of clusters of companies, and value chains that generate revenue around early products. The development of these platform

technologies, or technologies which underpin a wide range of applications, often spanning many business sectors, enables the creation of new markets, or generates significant changes in existing markets. This feature creates the opportunity for large spillover benefits, but also poses the challenge of how to ensure that those opportunities can be capitalised within the national innovation system.

Businesses only rarely innovate in isolation, and often draw in information and knowledge from external parties. This happens via skilled people; collaboration with other firms (most often, customers and suppliers); and cooperation with universities and non-university institutes that engage in research and problem solving.

The conduct of innovation is not only becoming more distributed, but it is also displaying signs of increased complementarities: inputs to the innovation process complement one another so that the total is more than the sum of its parts. This means that any weakness in a part of the innovation system disproportionately affects the performance of the whole system.

In the case of platform technologies, with their considerable potential spillovers and increasing global competition, a successful innovation strategy has to rely on an approach that pursues excellence across all key innovation capabilities in support of the development of competitive advantage.

Amongst the wider set of innovation policy instruments, TICs are particularly valuable where there is a strong case for developing a research and pre-commercialisation capability as the means to addressing the ultimate innovation challenges. The rationale for public support for TICs stems from the barriers to strategic and co-ordinated capability development, which may apply to

infrastructure, equipment and skills which would not otherwise be in place.

They exist in large part to help firms innovate, and to solve innovation problems that are beyond the capabilities of individual firms.

Infrastructures such as these are also difficult for individual firms to procure for themselves or provide for others on a purely commercial basis, given the scale of coordination barriers and transaction costs. They are large, longlasting, for the most part indivisible, and are used collectively by most or all economic actors.

By bringing activity together into a single location, TICs can provide a focal point to the research and innovation activities of companies, particularly new ones, and provide access to the facilities and expertise needed to pursue their innovation objectives successfully in a competitive global marketplace. Shared access to research equipment and instruments and the exchange of tacit knowledge are significantly facilitated by co-location. This includes the learning from collaborators’ research failures, which helps avoid wasting resources pursuing fruitless lines of research. TICs provide a direct focus for effective collaborations which are unlikely to take place without the co-location and network opportunities they enable. Although this focus on co-location could be said to imply there is a risk that non co-located business and researchers would be disadvantaged by this, the use of new communications technologies enables this problem to be managed. Therefore, the benefits of investing in TICs can outweigh potential risk and costs.

TICs therefore have the potential to help the UK overcome the problem of translating its leading research into economic benefit, which has traditionally been an area where UK performance has been relatively weak. Body scanners and Application Specific Circuits are all well documented examples of the past, and it is becoming ever more important that the UK address this weakness.