How well has British industry exploited the many inventions made by UK universities and research institutes? Not well enough, Graham Spinardi finds

The United Kingdom's record is pretty poor when it comes to turning basic research into commercial products. Myriad explanations have been advanced for this failure - ranging from a short-term outlook by the financial sector to the effect of a relatively large defence sector in skewing the activities of British industry away from civil innovation.

We hope to come up with some new answers through our Economic and Social Research Council-funded research project at Edinburgh University, which is documenting Britain's exploitation of inventions between 1949 and the 1980s by the National Research Development Corporation. Set up to rectify the failure to patent UK inventions, a failure that led to revenue draining away to other nations (penicillin being perhaps the most infamous example), the corporation sought to ensure UK inventions were patented, so that successful commercialisation would profit the nation. It also sought to exploit inventions by offering them to UK firms first.

How did overseas firms differ from ours in their exploitation of NRDC inventions? How does the exploitation of inventions vary between industrial sectors and types of technology? How has the exploitation of inventions changed over the years?

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Some of the inventions handled by the NRDC came from private inventors, but the bulk came from universities and other government research institutes. In 1981 the NRDC merged with the National Enterprise Board and was renamed the British Technology Group. BTG's first right of refusal on public sector inventions was rescinded in 1985, allowing universities, for example, to set up their own technology transfer organisations. At the same time, however, BTG increasingly dealt with inventions from the private sector. In 1992 the group was privatised, with stock market flotation following in 1995.

Even before privatisation BTG had begun to adopt a more "hard-headed" approach. Greater selectivity over which inventions to patent and which companies to choose as licensees stemmed from the realisation that earlier approaches were sometimes too optimistic. Patents are expensive - judgement of the likely commercial value of an invention needs to be made. In the early years of the NRDC too many firms were granted licences when in retrospect it was clear they were unlikely to be able to exploit the invention successfully.

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Lord Halsbury, the first NRDC managing director, spent much of the 1950s trying - unsuccessfully - to establish a UK computer industry capable of competing with growing American dominance. Although the UK was at the forefront of early work on computers, this research was not turned into competitive products. British computers were let down by lack of integration with existing office equipment. Not only did IBM encompass both the computer and the office equipment sides of the business in America, but the US defence establishment also provided a huge market, kickstarting the US computer industry.

The NRDC also handled the hovercraft. Although British companies successfully developed this technology, commercial success was limited by lack of demand. Despite efforts to develop different applications, the hovercraft remained a niche product. This was not a specifically British failure - no other overseas hovercraft manufacturers fared better.

Two of the NRDC's greatest successes, in terms of licensing revenue generated, were the antibiotic Cephalosporin and the pesticide Pyrethrin, both licensed by British companies. This is consistent with the relatively high levels of spending on research and development in sectors such as pharmaceuticals. It is also clear from this, however, that the short-termism of the UK financial system is not a blanket influence. If the British pharmaceutical industry can make long-term investments in innovation, why cannot other sectors?

Two characteristics may be relevant to the relative success of UK pharmaceuticals and other science-based industries such as biotechnology. The linkage between research and product is very apparent, coming closest to fitting the generally discredited "linear model" of innovation. Pharmaceutical inventions may need little changing to become the final product, but require much development in production processes and testing. Engineering or electronics inventions, on the other hand, may require substantial further development in the way they are incorporated into products and marketed. Moreover, the market for pharmaceutical products is dominated by the need to satisfy organisational customers such as health services rather than individual customers.

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By contrast, British inventions in semiconductors and electronics seem to have been under-exploited by UK industry. The NRDC handled many such inventions, originating often in work done at the defence research establishments. Ironically, the strength of British firms in weapons manufacturing may have undermined the exploitation of these inventions in civil applications. For example, British defence-funded research and development was at the forefront of semiconductor growth techniques and the use of gallium arsenide in light-emitting diodes. Typically, only small companies licensed such inventions from the NRDC for civil applications, and any success they had was modest.

Our report is due at the turnof the millennium. Although it will look back to the experiences of the previous 50 years, its conclusions should help to exploit British inventions in the next century.

Graham Spinardi is senior research fellow, Research Centre for Social Sciences, Edinburgh University.