Written evidence submitted by Careful Industries (IGR0086)

Science, Innovation and Technology Committee - Innovation Growth and the Regions

Prepared by: Rachel Coldicutt OBE, Executive Director, Careful Industries and independent sociotechnical researcher, specialising in inclusive innovation and technology ethics.

1. Summary

1.1 In 2025, the UK finds itself stuck on the edge of an innovation gap: we are “the third biggest AI market in the world”[1] yet we also boast the ninth highest levels of income inequality, our centres of research excellence are side-by-side with neighbourhoods rife with child poverty, and almost half of small businesses have no plans to use AI.[2] Previous UK research, development and innovation (RD&I) strategies have assumed that both direct and indirect benefits will trickle down from a culture of international research excellence,[3] but neither the investments nor the benefits governing this approach have been equitably distributed. A more interventionist approach is now needed for innovation diffusion – one that actively delivers benefits to people in places. Our hypothesis is that this requires investments not only in science parks and high-potential innovation clusters but in social capital, building relationships and opportunities so that a culture of innovation spreads freely across the UK - supported by hyperlocal investment and infrastructure, and the focus of our research so far has been at the neighbourhood scale.

1.2 This evidence submission draws on findings from three research and social change programmes undertaken in the period since 2021: the Community Tech programme, supporting community innovators across England, funded by Power to Change and delivered in collaboration with the Centre for Sociodigital Futures at Bristol University; the AHRC-funded Bridging Responsible AI Divides programme AI in the Street, delivered in partnership with Warwick University; and most recently in researching the concept of “Networked Neighbourhoods”, working with UK VC firm Phoenix Court.

2. How does research and innovation in our regions drive growth and prosperity in those regions?

2.1 How effective are regional innovation hubs and clusters in supporting regional growth and prosperity for local communities?

2.2 At the hyperlocal level, more intentional mechanisms for both economic and technological transfer are required. Neighbourhood-scale evidence shows that the macroeconomic gains from RD&I do not automatically translate into meaningful improvements for people in places – and even very close proximity to high-performance innovation does inevitably not lead to high-quality, direct outputs for local residents. At a very local level, for instance, income inequality in the London Borough of Camden means that the life expectancy of Somers Town residents, who overlook Google’s UK headquarters and the Crick Institute, is 20 years’ shorter than those of people in nearby Highgate, while in Cambridge there is now a 10-year gap in life expectancy between those who live in the city’s richest and poorest areas, while the nearby city of Peterborough experiences little by way of proximity benefit to Cambridge’s innovation-based prosperity.[4] That the agglomeration of the benefits of innovation simultaneously plays out at national, regional, and local levels shows that the assumptions of the Medici Model of innovation have limitations and would benefit from more deliberative stewarding and translation at all geographical levels. [5]

2.3 Our research has also shown that “Innovation Places”, such as autonomous vehicle testbeds and 5G incubators, can mean the needs of future innovation are prioritised over the benefits accrued to either people or place and the deployment of technology infrastructure without regard for livability or context can have an alienating effect – one that may in turn decrease public trust in technology. The appearance of inexplicable hardware and cameras with flashing lights can make places feel less pleasant and familiar; when such infrastructure comes with no tangible benefits, it can be difficult for residents to feel comfortable and develop high levels of trust.  Drawing on findings from five AI Observatories in the UK and Australia, the AI in the Street research project found that technological change that was imposed on places without public participation or collaboration created  ‘a sense of uncomfortableness and awkwardness, filling public spaces with new kinds of clutter and uncertainty. As one participant who joined a sensing walk in a testbed space Coventry said, “I can’t take this in as a human, it’s not designed for me.”’[6] Such activities can actively slow down technological diffusion and create artificial barriers between people who do and do not perceive innovation to be “for them”.

2.4 The 2022 paper “Research and Innovation in Place”, written for UKRI by the consultancy SQW, puts forward an economic theory of change for innovation and place and identifies places where R&I has led to a high Gross Value Added (GVA). This analysis finds that the impact of R&I is higher in places that are already innovation ready, and identifies innovation “stickiness” as being built through a range of pre-existing factors, including strong relationships and existing innovation infrastructure. In considering the Sheffield City-Region, the authors find that the opposite is also true, with socioeconomic factors also have a role in reducing the innovation destiny of a place: “Despite a strong university presence and talent pipeline, wider skills/education, health and deprivation issues [in Sheffield City-Region] are affecting the quality of life. These factors are contributing to … a disconnect between R&I excellence and socio-economic outcomes on the ground. This case study also brings to the fore issues of path dependency and the time it takes to shift place-based economic narratives.”[7]

2.4 As such, it cannot be taken for granted that classical models of RD&I will lead to an improvement in prosperity in place or necessarily to technological diffusion.  Our research suggests that this is in part due to the nature of UKRI’s Theory of Change. This model of linear impact development, which is also referenced as the basis of Invest 2035, prioritises research excellence over direct impacts and does not encourage innovators to adapt in relationship to real-world events and situations, or to deliver impact at levels that are not thought to be “world leading”.[8] Innovation transfer is a social process rather than a technological one, and the incentives for engaging in this social process do not currently exist.

2.5 How regional Cluster growth can best be measured, mapped, and monitored to help inform local leadership and evidence-based policymaking in Whitehall?

2.6 To address the question of measurement it is also important to address what works. Our Network Neighbourhoods research paper (forthcoming, January 2025) finds that, while innovation can lead to economic growth, it is not an immediate or linear process. In fact, there are interim steps – and while advanced skills and infrastructures certainly have an important role to play in building capabilities, innovation also relies on people and relationships. Ideas are sparked, plans are formed, and daring ideas are tried out when people have the space and opportunity to collaborate – and this innovation mindset has existed in Britain before. As historian Anton Howes has noted, innovation is catching – and in the 17th Century the innovation mindset “spread from person to person, much like a disease”, enabling the culture of the Industrial Revolution.[9] While recent RD&I policy may have supposed that the conditions for innovation are most likely to be created by close proximity, it seems highly probable that high levels of social capital are also required.

2.7 Looking at the last 75 years of technological change, relationships have been a consistent factor in driving innovation: Margaret O’Mara’s history of Silicon Valley, The Code, describes how the potential of Silicon Valley was built on relationships forged in the 1940s and 50s in both the US military and at Berkeley and Stanford, while Stewart Brand’s Whole Earth Catalog was, effectively, an analogue social network for the cyberculture of the 1960s and 70s  that went on to shape the culture of the early Internet.[10] This fellow-feeling persists through start-up incubators such as Entrepreneur First and Y Combinator which create small group environments to support founders and maintain active alumni networks, with Y Combinator boasting of a “culture of helpfulness” among the “6,000+ domain experts” at members’ disposal.[11] The current digital economy is dominated by products forged by small groups of friends, including Google, Facebook, and PayPal, and many VCs continue to “invest in the team not the people” when making high-risk bets with early stage companies. Across the UK tech scene, relationships and reputation are a vital currency, brokered by a small number of individuals and organisations who weave networks and broker introductions.

2.8 Our qualitative interviews with innovation practitioners from Manchester, Bristol and the London Borough of Camden show that relationships are not just important for start-up incubators and in high-growth technology and research contexts – they are also at the heart of more inclusive and socially responsible innovation, and could be rolled out more effectively to enable more people to deliver direct impact the places they live and work. Indeed, it seems likely that the keys to unlocking more inclusive innovation in places are very similar to those needed to unlock high-risk, high-reward R&D: access to opportunity enabled by strong relationships, adequate funding, trust, and the time and space to explore. As Margarida Madaleno et al. found in their 2021 survey of the impacts of incubators and accelerators, not only is there “no inherent penalty in non-profit programmes”, but “human capital and founders’ social networks are more important” than affiliation to a particular industry and ‘curated and structured co-location … may be particularly fruitful for members of groups excluded from mainstream economic activity” as it “foments knowledge exchange in a manner that is efficient rather than limited to pre-existing social structures.’[12]

2.9 As such, we suggest that measuring only realised economic impacts is too limiting; it is also possible to use relational mapping techniques to measure the strength of social connection in a place and to build intentional mechanisms and infrastructures for cultivating this.[13]

3. How is research and innovation diffused or supported to drive productivity and growth in the regions, wherever it may come from? What more can be done to ensure that innovation investments deliver tangible outcomes for both local and national economies, in terms of productivity and growth, and how should this be assessed?

3.1  The focus in Invest 2035 on “supercharging high performance clusters” risks widening inequality gaps rather than closing them. If innovation and its benefits do not organically spread, such a strategy risks increasing the number of people and places that are left behind. Intentional steps need to be taken to narrow those gaps, and our contention is that this requires building resilient social infrastructure that enables more people to develop a confident relationships with innovation, raise levels of trust, and create an ecosystem in which benefits are shared and exchanged rather than only accruing in traditional centres of excellence.

3.2 Technological diffusion as a social process can be supported by organisations that act as community incubators. These may not be familiar to proponents of classical RD&I as they are rarely traditional labs or research environments. Instead these are locally focussed “connected organisations” that act as “beneficial attractors”[14] and super connectors. These organisations deliver benefits such as fostering relationships, teaching new skills, creating pathways to new opportunities, and distributing funds. They provide a single access point to a range of neighbourhood assets and also offer a place to grow relationships and develop social capital.

3.3 Connected Organisations such as the Pervasive Media Studio and Knowle West Media Centre in Bristol, Tech for Good SW, the Federation in Manchester, and Telos House in Camden are vital for building social capital and creating opportunities, and similar communities and organisations already exist across the UK, taking different forms as needed. Some Connected Organisations are intentionally focussed on technology-based innovation, others on locally focussed social innovation. For instance, Hastings Commons in Watchet, Civic Square in Birmingham, DoES Liverpool, Phoenix Court in Camden, north London, and Limehouse Labs in east London variously steward and create space for different kinds of innovation activities; others, such as the Turing Innovation Catalyst in Manchester and the national Platform Places programme, take a more active approach to shaping and creating opportunities. Elsewhere, local organisations including local libraries and British Chambers of Commerce also take a facilitative and enabling role in improving skills and distributing opportunities. What Connected Organisations have in common is that they are places and communities where people are invited to participate and create change. The non-standard nature of these organisations mean they do not share a singular economic approach and investment model – responding to the presenting needs and adapting their available resources.

3.4 Connected Organisations tend to be more informally constituted than programmatic incubators and accelerators,[15] and may attract people with a shared interest, set of values, demographic, or social identity – people who may not conform to the stereotypes of the classic start-up entrepreneurs – to build relationships and use innovation to create social and economic benefit, solve problems, grow businesses, and acquire new skills, ones that often deliver direct benefit to neighbourhoods. As Carolyn Hassan, former CEO of Knowle West Media Centre has said, this kind of locally generated innovation helps ensure that “value that sticks to a place", solving real-world problems and increasing people’s quality of life. [16] The flexible nature of these communities and organisations also reflects the fact that place-based innovation does not work on a “rinse and repeat” formula, and different organisations play different roles in different contexts. As Liz Scott of the Turing Innovation Catalyst says in our Networked Neighbourhoods report, “When it's done well, place-based innovation takes into account the character, the maturity, the strengths, the challenges, the demographics, geography sometimes, of a place. When it's not done well, it's like a cookie cutter: we did this in this place and it worked well, so let's do it over here in this place. There'll be some commonality, but I think what sets apart any old innovation to place-based innovation is a really deep consideration of what are we working with here? Where are we now? And also a really deep consideration of where do we want to get to?”[17]

3.5 As such, our recommendations for improving innovation diffusion and sharing the profitability of RD&I across the UK begin at the neighbourhood level rather than the regional. The first stage of our research will be published at the end of January 2025. In this paper we propose that the UK government could take an intentionally plural approach to innovation, complementing existing programmes and proposals by committing to a 10-year inclusive innovation programme that actively seeds renewal and opportunity across the four nations. To deliver this we propose an “act-analyse-invest-repeat” approach that defines a new set of success measures for inclusive growth and builds the resilience and capabilities of new and existing innovation networks, comprised of four steps.

3.6 Step one is to offer core funding for 25 Connected Organisations outside of the Greater Southeast and set up hyperlocal Neighbourhood Investment Funds. Connected Organisations are the catalyst for local innovation. This additional funding would enable Connected Organisations to operate at peak capacity and invest in what works in their locality, while also offering the opportunity to understand what works by analysing ongoing expenditure and impact rather than through prescribed, short-term grant funding.

3.7 Step two is to identify and offer scale-up funding to regional and national cohorts of “fast follower” organisations. Inspired by the “ambitious and transformative” NHS Global Digital Exemplar programme that “catalysed digital transformation” and rapidly “built a learning ecosystem” across England,[18] this would create a fast route to growth and knowledge transfer and enable creation of an evidence-based playbook and development programme.

3.8 Step three is to create regionally managed inclusive investment funds. Many Connected Organisations’ impact is limited by constant fundraising and project-based funding, and grant-based schemes are vulnerable to short-term shifts in focus and energy. A proportion of the “future regional funding programme” proposed in the English Devolution White Paper[19] could be redirected into regionally managed funds that can receive, invest and distribute different kinds of capital and grant funding from a range of sources, including central, national and local governments; public and philanthropic funders including the National Lottery Community Fund; and venture capital.

3.9 Finally, we recommend that the Government defines success measures for inclusive growth, that vary regionally and take into consideration social as well as economic capital.

24 January 2025