02Long-term funding of a global innovation brand

Case study 1: Cambridge University and Science Parks

City decision makers can support their established networks through providing long-term funding, and supporting comparative advantages.

The University of Cambridge and its Science Parks form a successful example of university-business collaboration leading to a regional innovation ecosystem. While the strong local economy of Cambridge and the University’s global reputation are a unique attraction for businesses, this example provides valuable insights for decision makers in terms of fostering and maintaining strong university-business relationships over time.

Cambridge has world leading strengths in knowledge intensive services (2nd performing city in UK)20 and in particular Biotechnologies (Cambridge hosts 20 per cent of the world’s Nobel Prize winners in medicine and chemistry). The city now boasts over 1,000 technology and biotechnology companies, (1,400 when providers of services and support organisations are included) and is testament to its success in building a regional innovation ecosystem.

Much of Cambridge’s success has been attributed to the Science Park, which provides a link between the University (including housing two departments) and private research companies as well as an emphasis on open knowledge sharing. The park is noted as the catalyst of what has been described as ‘the Cambridge phenomenon.’21

City decision makers can maintain successful networks by encouraging and publicising the opportunities and encouraging organisations to ‘get out into the community’.

The City complements the Science Park’s co-locational benefits to businesses and universities by supporting informal networking opportunities. Rather than a business directly approaching Cambridge University or vice-versa, relationships often begin at one of the city’s many networking events, some of which are supported or attended by the City. The City Council maximises the potential for these relationships to develop through hosting city events such as science festivals and encouraging partners to sit on school boards. This also enables city decision makers to establish relationships with business and university representatives learning about barriers to decision making directly.

Cities can ease firms’ access to benefits by organising its networks effectively.

While Cambridge has found its networks to be a strength, there is also recognition that networks may be becoming too numerous and specialised (our conversations estimated more than the 47 listed in 2011).22 Numerous networks can be difficult for smaller businesses to keep track of and co-ordinate. Given that some of the most innovative collaborations come from cross-industry collaborations, having networks that are too descriptive can weaken their potential. Cities should offer businesses and universities the opportunity to network but not be too prescriptive about the target audience.

Cities can use graduates to strengthen links between businesses and universities.

University alumni provide a direct link to businesses and as such can help identify areas of collaboration that will bring mutual benefits and strengthen relationships. Many graduates of the University are employed within Cambridge’s firms and opportunities for mutually beneficial collaboration are often identified through maintaining strong links with graduates. The success of this measure for other cities might be dependent on universities’ retention rates.

The Cambridge phenomenon has been hugely successful over the long-term. This is in part due to, and in part reinforces, the strong historic brand image of the university and its science parks. This has not happened in isolation or overnight and the parks benefit from long-term investment as well as a globally strong economy and university.

The history, local economic conditions and close links between the university and city decision makers means that the setting is unique. But cities can learn from how it built university-business relationships over time as well as the challenges in maintaining effective networks.

Case study 2: Fraunhofer Gesellschaft

Fraunhofer Gesellschaft (Fraunhofer) is a network of research institutions partnered with universities that is internationally regarded as a strong innovation ecosystem. As the primary independent applied research body in Germany and the largest organisation for applied research in Europe, it conducts research into a range of areas tailored to focus on national economic strengths and growth areas, including health, security, communication, transportation, energy and the environment.

National policy should consider long-term funding of initiatives to develop lasting collaborative relationships between universities and businesses.

Fraunhofer benefited from committed long-term federal funding which provided the resources and certainty it needed to reach its current level of standing and success. The institute itself acknowledges that progress from 1949 until the 1970s was limited in part due to a lack of funding. This continued investment allowed the institution to build up the strong brand image and international reputation it holds today and which enables it to secure research contracts.

The Fraunhofer funding model provides long-term targeted funding as part of a national ‘brand’. Funding comes from a range of sources including public funding through a central grant, local government support for individual institutions, government commissioned work and private commissioned work. The central grant funding is guaranteed over a period and is attributed with the ability of the institutes to take a long-term approach to their work. This allows Fraunhofer’s partners to anticipate technology trends rather than just react to them. The Government funding is provided under what is known as the ‘Fraunhofer model’, whereby for every euro Fraunhofer earns from contract research, the federal government will match with a euro of funding. The centre itself also acts as a non-profit organisation. In this way the Government ensures any funding it provides ends up in commercially relevant projects.

Fraunhofer operates in recognition that the early stage of Research and Development is typically done in universities/research centres, while industry concentrates on implementation and the application of innovation. This typically leaves a knowledge and funding gap in terms of taking that research and developing it into a fully working prototype. This gap is acknowledged to exist in the UK and the steps Fraunhofer takes to establish strong relationships with and between universities and industry provides direct lessons for UK cities.23

Cities can ease firms’ access to benefits by organising its networks effectively.

Germany has a strong tradition of senior academics previously/currently holding senior industry positions, which helps academic research to have a clear commercial focus. All of Fraunhofer’s Research Centres and Institutes are partnered with a university to support universities in commercialising their work. Fraunhofer assists with undertaking further applied research, development, prototyping and, if necessary, small scale production. This helps attract business investors as it removes the risk that the technology will not go to market. It can also ensure innovative ideas are quickly and cost-effectively moved from the research stage to commercial products.

Stratchclyde Photonics and the Catapult Centres – A Fraunhofer model for the UK

Fraunhofer Centre for Applied Photonics, Strathclyde

In 2012 Fraunhofer established its first UK headquarters in Glasgow and the Fraunhofer Centre for Applied Photonics (CAP) based at the University of Strathclyde. Although it is too early to fully assess how successful this move has been and if further Fraunhofer centres would benefit the UK, the centre has performed strongly so far, gaining over £1.5 million in contract research projects.24

In establishing this centre Glasgow applied the core lessons from the Fraunhofer success story. The centre focuses on a national strength -the British photonics industry is the second-largest in Europe (after Germany), over 80 manufacturers of laser-based products are headquartered in Scotland alone and the University is internationally recognised as an expert in photonics. The Centre ensures close links with the University through sharing staff with the University. For example, the Director of Research at the University’s Institute of Photonics is seconded 50 per cent as the Head of CAP. The Centre and the University also benefit from the integrated links with other Fraunhofer Centres that work in relevant fields. For example Researchers from the Fraunhofer Institute for Applied Solid State Physics IAF in Freiburg are cooperating with scientists from Strathclyde.

Glasgow and Fraunhofer took time to establish this relationship, ensuring both were clear on how the relationship would benefit them and establishing common expectations. The first contact was made in 2010 and the relationship is based around a 5-year business plan and funding package. The community/city supported this relationship, with funding provided by the University itself, Scottish Enterprise, the Scottish Funding Council and the Scottish Government as well as the Fraunhofer Society. Further stability beyond the initial funding round would enable the centre to concentrate on building a larger scale of networks over a longer time period and enable management innovation with less immediate risk.

Catapult Centres: a UK Fraunhofer?

In 2012, the Department of Business and Skills established Seven Catapult Centres (see Page 10) loosely based on a Fraunhofer style model (as recommended by Hermann Hauser).25 Whilst each centre is based in a single location they are designed to be a focal point for the whole of the UK’s activity in each of their seven fields.26 This is slightly different from the more locality-based approach of Fraunhofer. The Catapult Centres are also expected to have a degree of local flexibility in their management, this could lead to experimentation and a greater chance of successes as an appropriate model for the UK’s innovation strengths is established.

The Catapult Centres could benefit from learning from Fraunhofer and Cambridge’s long-term commitment to funding and attempts to build a scale of networks between research centres and with businesses over time. As the time it took to build scale and success in both these models shows, it is too early to assess the results of the Catapult Centres.


  • 20 Centre for Cities, (2014), Cities Outlook 2014 London: Centre for Cities
  • 21 Wickstead, S (2000) The Cambridge Phenomenon Revisited. Cambridge, UK.
  • 22 Networking in Cambridge: The Definitive(ish) Guide, 2010, The Cluster. Available at http://www.cabume.co.uk/the-cluster/networking-in-cambridge-the-definitiveish-guide.html
  • 23 Centre for Cities interviews and and Collaborate to innovate: How business can work with universities to generate knowledge and drive innovation, Big Innovation Centre, November 2013.
  • 24 The Establishment of Fraunhofer in the UK, Tim Holt Executive Director of Fraunhofer UK Research Ltd. Available here http://www.auril.org.uk/NewsandEvents/tabid/1251/articleType/ArticleView/articleId/1655/The-establishment-of-Fraunhofer-in-the-UK.aspx Accessed 14/03/14.
  • 25 Hausser, (2010) The Current and Future Role of Technology and Innovation Centres in the UK. London: BIS
  • 26 High-Value Manufacturing, Cell therapy, Off-shore renewables, Connected digital economy, Satellite applications, Future Cities, Transport systems.