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Welsh Healthcare Innovation Pipeline™

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  • Labcorp Drug Development

Abstract and Figures

This investigation explored the Welsh Life Sciences (LS) sector through a Grounded Theory approach. Semi-structured interviews with senior stakeholders from academia, government, industry, NHS Wales, third sector and professional institutions were conducted. A conceptual framework was developed to help understand the complex interactions within the Welsh LS sector. Gap analysis was systematically applied to the data in order to design a model for potential interventions to positively influence the Welsh LS sector. The model was then compared with current and forthcoming policy and policy recommendations to produce an integrated intervention termed the “Welsh Healthcare Innovation Pipeline” (WHIP), to result in the adoption of new innovation within NHS Wales through sourcing, trialling, assessing, procuring, and adopting healthcare innovations through an integrated framework.
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Exploring the Needs of the Welsh Life Science Sector for
Innovation and Growth
Brian Lee Perkins
Director of Studies:
Professor Marc Clement, Swansea University
Supervisors:
Dr Andrew Walters, Cardiff Metropolitan University
Dr Peter Dorrington, Cardiff Metropolitan University
Advisors:
Dr Daniele Doneddu, Swansea University
Dr Gareth Davies, Swansea University
A thesis submitted in fulfilment of the requirements of Cardiff Metropolitan University for the
degree of Doctor of Philosophy from the University of Wales
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Abstract
This investigation explored the Welsh Life Sciences (LS) sector through a Grounded
Theory approach. Semi-structured interviews with senior stakeholders from academia,
government, industry, NHS Wales, third sector and professional institutions were
conducted. A conceptual framework was developed to help understand the complex
interactions within the Welsh LS sector. Gap analysis was systematically applied to
the data in order to design a model for potential interventions to positively influence
the Welsh LS sector. The model was then compared with current and forthcoming
policy and policy recommendations to produce an integrated intervention termed the
“Welsh Healthcare Innovation Pipeline” (WHIP), to result in the adoption of new
innovation within NHS Wales through sourcing, trialling, assessing, procuring, and
adopting healthcare innovations through an integrated framework. The proposal is
that the WHIP would be adopted across Wales after being piloted sub-regionally
within the West Wales region.
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Acknowledgements
Personal
I would like to thank my partner Ina for being my guiding light and role model. Not only did
she support me with encouragement and endless cups of coffee, she is actually responsible for
bringing the Prince of Wales Innovation Scholarship to my attention and recruiting me to this
lovely country. I never imagined we would evolve from simple lab geeks chatting endlessly
about bioassays in San Diego to performing our PhDs together in Wales.
I would also like to thank my father, mother and brother for keeping me grounded and giving
me the motivation and inspiration necessary to press on with the PhD.
Lastly, I would like to thank all of my friends who made sure that this journey was just as
enjoyable as the destination.
Professional
First and foremost, I would like to thank my Director of Studies, Professor Marc Clement,
who provided the much needed guidance and mentorship to perform this investigation. He
served in roles within academia, government, industry and the third sector, which helped to
inform me as a researcher. He also founded the Prince of Wales Innovation Scholarship that
brought me to Wales. It was definitely a privilege to work with such a fellow. I would also
like to thank Dr Daniele Doneddu and Dr Gareth Davies, who managed to join our 7 a.m.
tutorials on a weekly basis from the onset of the research. Many thanks are also due to
Daniele Doneddu to Jennifer Childs for providing detailed feedback on my writing.
Many thanks to those at the National Centre for Product Design & Development Research
(PDR) at Cardiff Metropolitan University, especially Peter Dorrington, Andy Walters and
Gavin Cawood. Peter, Andy, and Gavin provided continued support and feedback throughout
the PhD.
I would also like to thank Professor David Vincent Ford and everybody in his Health
Informatics Group at Swansea University. It was inspiring to observe Professor Ford’s
leadership and forward thinking. Leading the Health Cloud and Life Science Exchange
projects were truly learning, growing and rewarding experiences for my personal growth.
These experiences also informed me as a researcher and helped to develop this investigation.
This research would not have been possible without the support and input from those at
University of Wales Trinity St. David, Cardiff Metropolitan University, Swansea University,
the Life Sciences Sector Panel, NISCHR, MediWales, ABPI Cymru, NHS Wales and many
other institutions for their data, reports, insight and support.
Last, but not least, I would like to thank the anonymised interviewees who provided their time,
thoughts and experiences that are at the core of this study.
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Declaration
This work has not previously been accepted in substance for any degree and is not
being concurrently submitted in candidature for any degree.
Signed ...................................................................... (candidate)
Date ..........................................................................
Statement 1
This thesis is the result of my own investigations, except where otherwise stated.
Where correction services have been used, the extent and nature of the correction is
clearly marked in a footnote(s).
Other sources are acknowledged by footnotes giving explicit references. A
bibliography is appended.
Signed ..................................................................... (candidate)
Date .........................................................................
Statement 2
I hereby give consent for my thesis, if accepted, to be available for photocopying and
for inter-library loan, and for the title and summary to be made available to outside
organisations.
Signed ..................................................................... (candidate)
Date .........................................................................
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Table of Contents
Abstract ....................................................................................................................................... i
Acknowledgements ................................................................................................................... ii
Declaration ............................................................................................................................... iii
Table of Contents ...................................................................................................................... iv
List of Figures ........................................................................................................................ viii
List of Tables ............................................................................................................................. x
Abbreviations .......................................................................................................................... xii
Introduction .............................................................................................................. 1
1.1. Origins of the Research ................................................................................................... 1
1.1.1. Institutions ............................................................................................................... 1
1.1.2. Prince of Wales Innovation Scholarship .................................................................. 1
1.1.3. Allerna Therapeutics ................................................................................................ 2
1.1.4. Wider Scope to the Original Research Design......................................................... 3
Context ..................................................................................................................... 6
2.1. The Welsh Economy ....................................................................................................... 7
2.1.1. Industrial Revolution (1750-1900) .......................................................................... 7
2.1.2. The Modern Welsh Economy (1900-Present) ......................................................... 8
2.1.3. Wales: A Lagging Region ........................................................................................ 9
2.2. Micro, Small and Medium-Sized Enterprises (SMEs) .................................................. 17
2.2.1. SME Life Cycle ..................................................................................................... 17
2.2.2. The Effect of SMEs on the Economy .................................................................... 19
2.2.3. Policy Supporting SMEs ........................................................................................ 21
2.3. Life Sciences ................................................................................................................. 25
2.3.1. Definition of Life Sciences .................................................................................... 25
2.3.2. The Effect of Life Sciences on the Economy ........................................................ 27
2.3.3. Policy Supporting Life Sciences ............................................................................ 30
2.4. Welsh Life Sciences Strategy ....................................................................................... 36
2.4.1. Welsh Life Sciences Hub ....................................................................................... 37
2.4.2. Welsh Life Sciences Fund ..................................................................................... 38
2.4.3. Welsh Life Sciences Brand .................................................................................... 39
2.4.4. Welsh Life Sciences Ecosystem ............................................................................ 39
Knowledge Economy and Systems of Innovation within Life Sciences ................ 41
3.1. Knowledge .................................................................................................................... 42
3.1.1. Knowledge as an Input to Production .................................................................... 43
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3.1.2. Knowledge is More Important as a Product Itself ................................................. 44
3.1.3. Codified Knowledge is Valued More than Tacit Knowledge ................................ 46
3.1.4. Advances in ICT Accelerate the Economy. ........................................................... 47
3.2. Knowledge-based Economy ......................................................................................... 48
3.2.1. Pillars of the Knowledge-based Economy ............................................................. 49
3.3. Diffusion of Innovation ................................................................................................. 56
3.3.1. Innovation 1.0: Closed Innovation ......................................................................... 57
3.3.2. Innovation 2.0: Open Innovation ........................................................................... 59
3.3.3. Innovation 3.0: Embedded Innovation ................................................................... 60
3.4. Systems of Innovation ................................................................................................... 63
3.4.1. National Systems of Innovation ............................................................................. 65
3.4.2. Regional Systems of Innovation ............................................................................ 67
3.4.3. Sectoral Systems of Innovation ............................................................................. 68
3.4.4. Triple, Quadruple and N-tuple Helix ..................................................................... 69
3.4.5. Clusters and Competitiveness ................................................................................ 71
Developing the Investigation.................................................................................. 73
4.1. Initial Research ............................................................................................................. 74
4.1.1. Literature Review .................................................................................................. 74
4.1.2. Participatory Observation ...................................................................................... 75
4.1.3. Pilot Interviews ...................................................................................................... 79
4.1.4. Internal Discussion Group ..................................................................................... 82
4.2. Defining the Research Aims and Objectives ................................................................ 83
4.3. Formulating the Research Questions ............................................................................ 85
Research Design ..................................................................................................... 86
5.1. Epistemology and Ontology .......................................................................................... 87
5.1.1. Epistemology ......................................................................................................... 87
5.1.2. Ontology ................................................................................................................ 89
5.2. Methodology ................................................................................................................. 90
5.2.1. Grounded Theory ................................................................................................... 92
5.3. Data Collection ............................................................................................................. 94
5.3.1. Data Collection Process ......................................................................................... 95
5.3.2. Semi-Structured Interview Questions .................................................................... 99
5.3.3. Sampling .............................................................................................................. 100
5.4. Data Analysis: Research Question 1 ........................................................................... 103
5.4.1. Declaration of Bias .............................................................................................. 104
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5.4.2. Open Coding ........................................................................................................ 105
5.4.3. Theoretical Sampling ........................................................................................... 109
5.4.4. Selective Coding .................................................................................................. 109
5.4.5. Theoretical Coding .............................................................................................. 110
5.5. Data Analysis: Research Question 2 ........................................................................... 110
5.6. Data Analysis: Research Question 3 ........................................................................... 110
5.7. Research Ethics ........................................................................................................... 112
Results: Stakeholders’ Views of the Welsh Life Sciences Sector ........................ 114
6.1. Open Coding: Emerging Core Themes ....................................................................... 114
6.2. Selective Coding: Core Categories ............................................................................. 121
6.2.1. Actors ................................................................................................................... 121
6.2.2. Networks .............................................................................................................. 125
6.2.3. Institutions ........................................................................................................... 130
6.2.4. Ecosystem ............................................................................................................ 138
6.2.5. Global Context ..................................................................................................... 146
6.2.6. Summary of Selective Coding ............................................................................. 150
6.3. Thematic Coding: Framework for the Welsh Life Sciences Sector ............................ 152
Results: Stakeholders’ Gaps in Knowledge ......................................................... 155
7.1. Qualitative Mapping of the Life Sciences Sector in Wales ........................................ 156
7.2. Quantitative Mapping of the Life Sciences Sector in Wales ...................................... 158
Results: Welsh LS Intervention Strategy ............................................................. 160
8.1. Key Welsh LS Interventions Derived from TOWS Analysis ..................................... 160
8.2. Key Welsh LS Interventions Derived from TOWS Analysis ..................................... 163
8.3. Framework for Key Welsh LS Interventions .............................................................. 164
Discussion ............................................................................................................ 166
9.1. Research Question 1: Stakeholders’ Views of the Welsh Life Sciences Sector ......... 166
9.1.1. The Welsh LS Sector and the Knowledge Economy ........................................... 168
9.1.2. The Welsh LS Sector and the Diffusion of Innovation ........................................ 171
9.1.3. The Welsh LS Sector and Systems of Innovation................................................ 172
9.2. Research Question 2: Stakeholders’ Gaps in Knowledge ........................................... 177
9.3. Research Question 3: A Welsh LS Intervention Strategy ........................................... 180
9.3.1. Outcomes of the Linear TOWS Framework ........................................................ 180
9.3.2. Derivation of the Welsh LS Sector Intervention Model ...................................... 182
A Welsh LS Sector Intervention Model ............................................................. 184
10.1. Input .......................................................................................................................... 186
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10.1.1. Step 1: Welsh LS Sector Mapping ..................................................................... 186
10.1.2. Step 2: Documentation of Best Practice for LS ................................................. 189
10.2. Transformation .......................................................................................................... 192
10.2.1. Step 3: Source New Innovation ......................................................................... 193
10.2.2. Step 4: Clinical Trials ........................................................................................ 198
10.2.3. Step 5: Healthcare Innovation Assessment ........................................................ 199
10.2.4. Step 6: Procurement and Adoption .................................................................... 201
10.3. Output ....................................................................................................................... 203
10.3.1. Output 1: Innovation, Health and Wealth .......................................................... 204
10.3.2. Output 2: Case Studies ....................................................................................... 205
10.3.3. Output 3: Improvement of Outward Perception ................................................ 205
10.3.4. Output 4: Wales Becoming More Globally Competitive ................................... 206
Conclusions and Further Work ........................................................................... 208
11.1. Key Findings, Recommendations and Next Steps .................................................... 208
11.2. Contribution to Knowledge ....................................................................................... 210
11.3. Limitations of the Research ...................................................................................... 212
11.3.1. Limitations of the Researcher ............................................................................ 212
11.3.2. Limitations of the Data Sources ......................................................................... 213
11.3.3. Limitations of the Methodology ........................................................................ 214
11.4. Further Research ....................................................................................................... 214
Appendix 1. References ......................................................................................................... 217
Appendix 2. Interviewees ...................................................................................................... 239
Appendix 3. TOWS and Gap Analysis .................................................................................. 243
A3.1. SO “Maxi Maxi” Strategies ..................................................................................... 243
A3.2. WO “Mini Maxi” Strategies ..................................................................................... 247
A3.3. ST “Maxi Mini” Strategies ....................................................................................... 256
A3.4. WT “Mini Mini” Strategies ...................................................................................... 259
Appendix 4. Evidence Supporting the Welsh LS Intervention Model ................................... 263
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List of Figures
Figure 2-1. Map of the Convergence Area of West Wales and the Valleys ............................ 11
Figure 2-2. Overall Process for a Start-up Knowledge-based Company ................................. 18
Figure 2-3. Dead Mouse Model of Innovation ........................................................................ 19
Figure 3-1. Evolution of a Knowledge Economy in Modern Economies ................................ 44
Figure 3-2. Patent Applications and Patent Grants Worldwide, 1883-2011 ............................ 45
Figure 3-3. US Unemployment Rates and Median Earnings by Education Level, 2011 ......... 51
Figure 3-4. OECD Fixed Broadband Subscriptions by Technology, 2011 .............................. 53
Figure 3-5. Diffusion of Innovation: ‘The Chasm and ‘The Tipping Point’ .......................... 57
Figure 3-6. Linear (or Stage Gate) Model of Innovation ......................................................... 58
Figure 3-7. Chain-Link Model of Innovation .......................................................................... 59
Figure 3-8. Open Innovation .................................................................................................... 60
Figure 3-9. Evolution of Embedded Innovation ...................................................................... 61
Figure 3-10. Simplified Model for Embedded Innovation in the Life Sciences ...................... 62
Figure 4-1. Networks Established through Participatory Observation .................................... 79
Figure 4-2. Pilot Interviews Data Coded into Themes ............................................................. 81
Figure 5-1. Summary of the Research Design ......................................................................... 86
Figure 5-2. Sample of Field Note Data Transcription ............................................................. 99
Figure 5-3. Stakeholder Interviews: Subsector and Geographic Stratification ...................... 103
Figure 5-4. Glaser Grounded Theory Methodology .............................................................. 104
Figure 5-5. Initial Coding of Interview Field Note Data in Microsoft Excel......................... 106
Figure 5-6. Example of Coding Process in NVIVO 10 Software .......................................... 107
Figure 5-7. TOWS Strategic Alternatives Matrix .................................................................. 112
Figure 6-1. NVIVO Word Frequency for Interview Questions 2 to 5 ................................... 116
Figure 6-2. Core Category: SWOT Analysis for Actors ........................................................ 122
Figure 6-3. Core Category: SWOT Analysis for Networks ................................................... 126
Figure 6-4. Core Category: SWOT Analysis for Institutions ................................................ 131
Figure 6-5. Core Category: SWOT Analysis for Ecosystem ................................................. 138
Figure 6-6. Core Category: SWOT Analysis for Global Context .......................................... 147
Figure 6-7. Framework for the Welsh Life Sciences Sector .................................................. 154
Figure 7-1. Gaps in Knowledge: Understanding ................................................................... 157
Figure 7-2. Gaps in Knowledge: Benchmarking ................................................................... 159
Figure 8-1. Linear TOWS Framework Applied to Welsh LS TOWS Analysis ..................... 165
Figure 9-1. MediWales’ Picture of Health Map .................................................................... 176
Figure 9-2. Richard Arvid Johnson’s Systems Model of Action-Research Process .............. 182
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Figure 10-1. Recommended Welsh LS Sector Intervention Model ....................................... 185
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List of Tables
Table 2-1. Economic and Political Timeline for Wales, 1750-1900 .......................................... 8
Table 2-2. Economic and Political Timeline for Wales, 1900-Present ...................................... 9
Table 2-3. EU Structural and Cohesion Fund Support in Wales, 2000-2020 .......................... 10
Table 2-4. Timeline of WG Plans and Strategies for Innovation, 1998-Present ...................... 13
Table 2-5. Sectors Identified in Flagship Welsh Government Policies, 2002-Present ............ 16
Table 2-6. European Union and United Kingdom Thresholds for SMEs ................................ 17
Table 2-7. SME Share of Enterprises of the EU, UK and Wales in 2011................................ 20
Table 2-8. UK BIS SME and Start-up Funding Schemes ........................................................ 23
Table 2-9. Economic Impacts of the US Biopharmaceutical Sector, 2009 ($ in billions) ....... 28
Table 2-10. Economic Impacts of the UK Life Sciences Industry, 2012 ................................ 29
Table 2-11. Economic Impacts of the UK Life Sciences Industry, 2012 ................................ 30
Table 2-12. Three Pillars of the United Kingdom Life Sciences Strategy ............................... 31
Table 3-1. Further Topics and Reading ................................................................................... 41
Table 3-2. Definitions of Knowledge-based Economy ............................................................ 48
Table 3-3. Mapping the Four Pillars of the Knowledge Economy .......................................... 49
Table 3-4. Worldwide Corruption Perceptions Index (CPI) of Select Countries, 2007-2011 . 55
Table 3-5. Involvement of Stakeholders in the Embedded Innovation R&D Process ............. 63
Table 3-6. Factors Affecting Learning and Catching Up in Different Sectors ........................ 68
Table 4-1. Developing the Investigation .................................................................................. 73
Table 4-2. Researcher’s Life Sciences Sector Participation .................................................... 76
Table 4-3. Pilot Interviewees by Gender, Location, Subsector and Interaction Type ............. 79
Table 4-4. Internal Discussion Group Members ...................................................................... 82
Table 4-5. Research Questions ................................................................................................ 85
Table 5-1. Assumptions Inherent in Objectivism and Constructivism .................................... 88
Table 5-2. Positivism and Interpretivism vs. Ontology, Epistemology, Methodology ............ 90
Table 5-3. Methodology and Methods ..................................................................................... 91
Table 5-4. Comparison of the Glaser and Strauss Schools of Grounded Theory .................... 92
Table 6-1. Open Coding of Interview Data ............................................................................ 117
Table 6-2. Selective Coding: Core Themes and Categories versus SWOT Analysis ............ 151
Table 6-3. Data Analysis Map: From Codes to the Basic Social Process .............................. 153
Table 8-1. TOWS Analysis Codes ......................................................................................... 161
Table 8-2. TOWS Category Scoring ...................................................................................... 162
Table 8-3. Key Welsh LS Interventions Derived from TOWS Analysis ............................... 163
Table 9-1. Learning and Catching Up: Theory across Interview Data .................................. 174
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Table 9-2. Clustering: Theory across Interview Data ............................................................ 177
Table 11-1. Key Findings, Recommendations and Next Steps .............................................. 209
Table 11-2. Summary of the Study ........................................................................................ 211
Table A2-1. Interviewees by Location, Position, Subsector and Interaction Type ................ 239
Table A3-1. SO “Maxi Maxi” Strategies ............................................................................... 243
Table A3-2. WO “Mini Maxi” Strategies .............................................................................. 247
Table A3-3. ST “Maxi Mini” Strategies ................................................................................ 257
Table A3-4. WT “Mini Mini” Strategies ............................................................................... 259
Table A4-1. Evidence Supporting the Welsh LS Intervention Model ................................... 263
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Abbreviations
BBC = British Broadcasting Corporation
BETS = Department of Business, Enterprise, Technology and Science (Welsh Government)
BIS = Department for Business, Innovation and Skills (United Kingdom)
BLS = Bureau of Labor Statistics (United States)
BPIB = The Health and Wellbeing Best Practice and Innovation Board (Health and Social
Services, Welsh Government)
BRIC = Brazil, Russia, India, China
CAGR = Cumulative average growth rate
CE mark = Conformité Européenne mark (meaning ‘European Conformity mark’)
CMU = Cardiff Metropolitan University
CRO = Contract Research Organisation
CPI = Corruption Perceptions Index
DH = Department of Health (United Kingdom)
DVLA = Driver and Vehicle Licensing Agency (United Kingdom)
FDA = Food and Drug Administration (United States)
ECDA = European Diagnostics Cluster Association
EIR = Economic Incentive Regime
ERDF = European Regional Development Fund
EMA = European Medicines Agency
ESF = European Social Fund
EST = Department of Enterprise, Science and Technology (Welsh Government)
EU = European Union
GDP = Gross Domestic Product
GDP/Cap = Gross Domestic Product per Capita
HE = Higher Education
HR = Human Resources
IB = Investigational Brochure
ICH = International Conference on Harmonisation
ICT = Information and Communications Technology
IDG = Internal Discussion Group
ILS = Institute of Life Science, Swansea University
IT = Information Technology
JEREMIE = Joint European Resources for Micro to Medium Enterprises
KAM = Knowledge Assessment Methodology
KBBE = Knowledge-Based Bio-Economy
KBE = Knowledge-based Economy
KEI = Knowledge Economy Index
KTE = Knowledge transfer and exchange (KTE)
KTN = Knowledge Transfer Network
KPI = Key Performance Index
LS = Life Sciences
LSSP = Life Sciences Sector Panel (Welsh Government)
LVAD = Left Ventricular Assist Devices
Mini-HTA = mini Health Technology Assessment
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MIT = Massachusetts Institute of Technology
MPhil = Master of Philosophy
NAICS = North American Industry Classification System
NESTA = National Endowment for Science, Technology and the Arts
NISCHR (AHSC) (CRC) (PCU) = The National Institute of Social Care and Health Research
(Academic Health Science Collaboration) (Clinical Research Centre) (Permissions
Co-ordinating Unit)
NGO = Non-Governmental Organisation
NHS = National Health Service (United Kingdom)
NIH = National Institute of Health (United States)
NSI = National Systems of Innovation
NWIS = NHS Wales Informatics Service
NWSSP = NHS Wales Share Services Partnership
OECD = Organisation for Economic Co-operation and Development
ONS = Office of National Statistics (United Kingdom)
PhRMA = Pharmaceutical Research and Manufacturers of America
PDR = The National Centre for Product Design + Development Research (CMU)
PhD = Philosophiae Doctor (‘Doctor of Philosophy’)
PMA = Premarket Approval
PMDA = Pharmaceuticals and Medical Devices Agency (Japan)
POWIS = Prince of Wales Innovation Scholarship
QuANGOs = Quasi-Autonomous Non-Governmental Organisation
R&D = Research and Development
RGDP(/Cap) = Real Gross Domestic Product (per Capita)
RIS = Regional Innovation Systems
SBA = Small Business Act (Europe)
SEWAHSP = South East Wales Academic Health Science Partnership
SIC = Standard Industrial Classification (UK)
SIG = Special Interest Group
SME = micro, Small and Medium-sized Enterprises
SWOT = Strengths, Weaknesses, Opportunities, Threats
TBD = To Be Determined
TOWS = Turning Opportunities and Weaknesses into Strengths
TRL = Technology Readiness Level
TSB = Technology Strategy Board (not to be confused with TSB Bank)
UK = United Kingdom
UKTI = United Kingdom Trade and Investment
US(A) = United States (of America)
UWIC = University of Wales Institute Cardiff, also known as Cardiff Metropolitan University
WEF = World Economic Forum
WEFO = Welsh European Funding Office
WAG = Welsh Assembly Government
WG = Welsh Government
WHSSC = Welsh Health Specialised Services Committee
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Introduction
The purpose of this chapter is to provide a brief introduction to the research. The sections
below briefly outline the origins of the research; the research questions; and the research
design, approach and methodology.
1.1. Origins of the Research
The development of this investigation was the result of multiple factors, including those
related to the institutions involved, the scheme and company initially funding the project, as
well as the researcher’s personal interests with life sciences (LS) innovation. These themes
will be described in further detail below.
1.1.1. Institutions
From its onset, this PhD project was developed within a multidisciplinary team within three
higher education institutions: University of Wales, Cardiff Metropolitan University and
Swansea University. This research was conducted at Cardiff Metropolitan University
(formerly the University of Wales Institute, Cardiff or UWIC) through The National Centre
for Product Design & Development Research (PDR) according to the University of Wales
Regulations (Wales, 2010). During the course of this research, Professor Marc Clement, the
Director of Studies, was Executive Director of the Institute of Life Science (ILS) at Swansea
University, which facilitates both research and interactions between industry, government and
academia.
1.1.2. Prince of Wales Innovation Scholarship
This research was funded through the Prince of Wales Innovation Scholarship (POWIS),
whose resources are provided by the European Regional Development Fund (ERDF), the
Welsh Government (WG) and the participating company Allerna Therapeutics Ltd. Managed
by the Global Academy at the University of Wales, the Prince of Wales Innovation
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Scholarship was designed to attract university graduates from across the world to conduct
research and development projects within Welsh companies. These scholarships fund
‘industrial PhDs’, where each scholar is placed within a company to pursue an industrially-
driven project together with a higher education degree.
1.1.3. Allerna Therapeutics
Allerna Therapeutics Ltd (Allerna) was founded in 2006 to develop ground-breaking
therapies for allergic diseases. The company is based in the ILS at Swansea University and
within their extensive product pipeline, their lead candidate is indicated for the treatment of
moderate to severe asthma. Allerna utilises antisense technology through small inhibitory
ribonucleic acid (siRNA) molecules. Antisense technologies are specifically designed to
prevent a single gene from being expressed precisely targeting a single pathway involved
with disease with the intention of having fewer side effects. As the POWIS scheme decreed, a
research project was designed and submitted by Allerna for a scholar to design, execute and
report a preclinical development package which would bring its lead candidates to clinical
trials, as well as to perform further business development of the enterprise. An academic
project with an industrial application, as the POWIS scheme intended.
Although applying for a different position within the POWIS scheme, the researcher was
selected from a pool of candidates based on his previous experience with academic research,
antisense technologies, nonclinical development and the desire to undertake business
development. As a former resident of the San Diego biotechnology cluster, the researcher
brought with him a set of expertise, networks and know-how that could not be sourced within
Wales at the time. Up to the end of this research project, Allerna continues to be the only
Welsh company developing antisense technologies.
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1.1.4. Wider Scope to the Original Research Design
As the research progressed within Allerna, the research topic grew to embrace a wider scope
than originally intended due to four reasons:
1. The previous involvement of the researcher in a wide range of LS projects from San
Diego, California
2. The general aims and objectives of the POWIS Scholarship
3. The involvement of the researcher in a wider range of LS projects within Wales
during this investigation
4. The involvement of the Director of Studies with the Welsh LS ecosystem, influencing
the researcher’s interests and world view
5. The need for in-depth research in the Welsh LS sector, which is wider in scope than a
confidential industrial science project at a single company.
Prior to this investigation, the researcher has held multiple LS positions within academia and
industry in San Diego, California (see Section 4.1.2). This led the researcher to the Prince of
Wales Innovation Scholarship and to Wales, as well as influenced the wider scope to the
original research design. Since the researcher was from outside of the Welsh LS ecosystem, it
allowed for a new and impartial view to be applied to the LS sector in Wales.
The POWIS scheme was designed to bring international expertise into Wales to drive forward
the Welsh economy. Hosted events through the University of Wales Global Academy built a
sense of community between the multidisciplinary POWIS scholars. These scholars were
working in disparate fields such as engineering, marketing, transportation and information
technology. Furthermore, tasks such as the “CEO Academy”, residentials and additional
courses further exposed scholars to areas such as management, finance and strategy for
critical discussion within this group. This “ecosystem” infused the topics of innovation,
entrepreneurship, business development and regional development into the world view of the
researcher and eventually injected these themes into the research itself.
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While performing the project as outlined by Allerna within the ILS, the researcher took on
additional responsibilities at a biotechnology company and a medical device company. When
the research funding came to an end, the researcher took on further salaried positions assisting
a healthcare IT spinout project from Swansea University and the Life Science Exchange
project. An outline of these positions is further elaborated in Chapter 4. These broad
experiences opened up the researcher’s world view, not only within innovation and
entrepreneurship, but specifically within the context of the LS sector in Wales and its relation
to the rest of the world.
Concomitant to this project, Professor Clement also held active roles within academia (Vice-
Chancellor of the University of Wales and Director of Enterprise and Innovation within the
College of Medicine at Swansea University), industry (Chairman of Calon Cardio-
Technology Ltd and Vice Chairman of CyDen Limited) and WG (Board Member of
Arthurian Life Sciences, Board Member of Sêr Cymru, Board Member of the National
Research Networks, Member of the Life Sciences Hub Task and Finish Group) to name a few.
Professor Clement directly influenced the researcher’s world view by opening the
researcher’s eyes to the needs of the wider Welsh LS sector. Furthermore, Professor Clement
provided direct insight, knowledge, networks and introductions which helped to shape the
research project within weekly tutorials.
The research design, approach and methodology identified a greater need for a different type
of research. This type of research was aimed at making a greater impact to the broader
economic and innovation systems. Rather than researching and reporting on a single industrial
project, the need to investigate the mechanisms at the foundation of the entire LS sector was
identified. An in depth study into this sector and a contribution to knowledge that would assist
the sector in progress within the knowledge-based economy was planned. The rationale
behind this was that by providing evidence for the needs of LS sector support and intervention
strategy and model, the Welsh Government and other institutions could facilitate any strategy
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or policy necessary with their available resources. This endeavour came at a critical time,
given WG’s efforts to build up the LS sector through initiatives further explained in Chapter 2
and allowed this research to affect the policy-making of the WG and associated innovation
systems directly.
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Context
In order to enable effective progression through the literature review, study design and study
execution, this chapter is intended to provide some context regarding the Welsh Life Sciences
(LS) sector. Its purpose is to highlight and describe further key concepts related to this field of
research such as the knowledge-based economy, the Welsh economy, SMEs and the LS sector.
Each of these concepts will contribute to laying the foundation for understanding the research
questions introduced in section 4.3.
Over the last three centuries, Wales has undergone significant changes, evolving from an
industrialised region to become an active participant in both the post-industrial (service-based)
and knowledge (information-based) economies (Falkus and Gillingham, 1987, Day, 2002,
Davies, 2007, World Atlas, 2012). During the last two decades, it has undertaken a number of
key interventions and has received substantial financial support from the European Union
(EU), aimed at closing the economic gap within Europe (European Commission, 2011c).
Since the creation of the National Assembly in 1998, the Welsh Government (WG) has
implemented a string of innovation-based initiatives in an attempt to invigorate the Welsh
knowledge-based economy. However, to date the economy is still lagging behind the rest of
the United Kingdom (UK), Europe and the rest of the world’s developed economies. Top
performing regions are now deeply infused with the globalised knowledge-based economy,
driven by innovation and micro-, small- and medium-sized enterprises (SMEs). SMEs have
been shown to create jobs, drive innovation and are considerable contributors to modern,
successful economies (European Commission, 2005, Ayyagari et al., 2007, Beck et al., 2008,
BIS, 2011b, European Commission, 2011a, European Commission, 2011b).
Amongst the sectors which offer the substantial potential benefits to Wales lies LS, a high
value sector able to facilitate the creation of quality jobs and to strengthen the a supply chain
(BIS, 2011c, PhRMA, 2011). It drives economic growth through “multiplier effects” for
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employment, personal income, gross value added (GVA) and tax revenue, also generates
products that benefit society and human health (PhRMA, 2010). One of the key features of
the LS sector is the greater level of collaboration required between actors within academia,
industry and government compared to other sectors[also known as the triple helix model
(Leydesdorff and Etzkowitz, 1996)], which can result in increased research productivity and
commercialisation activity (Campbell et al., 2004, Blumenthal et al., 1996). This
consideration highlights the importance to any developed country of having a coherent
framework, strategy and policy which enables a thriving and sustainable LS sector (Campbell
et al., 2004).
2.1. The Welsh Economy
In order to reach a better understanding of the modern Welsh economy, it is important to take
into consideration its evolution over time. The Welsh economy has evolved from industrial
roots (Falkus and Gillingham, 1987) through the Industrial Revolution to modern times. The
sections below will outline how the Welsh economy progressed from the mid-eighteenth
century, its involvement with the EU and associated support mechanisms and WG policy to
support economic growth in the region.
2.1.1. Industrial Revolution (1750-1900)
Until the mid-1700s, the Welsh economy was reliant on primary and secondary economic
sectors such as agriculture and basic manufacturing. As the Industrial Revolution took root in
Europe during the eighteenth century, the necessity for raw materials skyrocketed due to the
demand driven by war, steamships and railways. Wales relied on internal resources such as
commodities, rather than knowledge-based industries. Due to the availability of natural
resources, including iron, copper, coal, tin and slate, Wales experienced sustained growth,
especially within mining and refinement industries (Falkus and Gillingham, 1987). Table 2-1
outlines the major economic and political events of Wales from 1750 to 1900 (World Atlas,
2012).
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Table 2-1. Economic and Political Timeline for Wales, 1750-1900
Year
Event
1750
Industrial Age began; Wales became largest producer of iron and copper in
the world
1800
First of great Welsh canals built
1801
The population of Wales and Monmouthshire was 587,245
1811
Wales became a non-conformist nation and broke with the Church of
England
1831
Merthyr Uprising sparked by workers in debt; troops brought in, more than
24 citizens died
1839
Rebecca Riots occurred in mid and south Wales resulting in toll gates
destroyed in protest against high fees and taxes
1850-1860
Coal fields in South Wales developed
1851
The population of Wales was about 1.2 million
1867
Great Reform Act gave vote to male householders; Welsh Liberal Party
formed
1891
US passed McKinley Tariff, caused severe financial blow to Welsh industry
SOURCE: Adapted from The World Atlas (2012)
2.1.2. The Modern Welsh Economy (1900-Present)
The growth from the eighteenth century was sustained until the beginning of the twentieth
century, but by the 1920s, reliance on older heavy industry (such as mining and smelting)
rather than light industry (such as manufacturing) led to economic difficulties. Starting in the
early 1920s, a national identity for Wales began to grow rapidly, especially with the founding
of the National Party (Plaid Cymru) in 1925. The Welsh export economy collapsed during the
inter-war recession (1920s-1930s) as a result of increasing protectionism and the rise of
foreign competitors. In the 1940s and onwards, the steel, tinplate and coal industries were
consolidated and modernised. Due to this decline in the heavy industries, there was a major
shift towards service sector employment, causing an imbalance in the employment sector
distribution. To demonstrate this decline in the industrial economy, service jobs accounted for
60% of employment by the 1980s (Day, 2002) (also see Section 3.1.1).
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As the twentieth century progressed, the declining Welsh coal and metal industries were
replaced by ‘branch plant’ assembly facilities and administrative positions. Government
agencies such as the Royal Mint in Llantrisant, Companies House in Cardiff, the Driver and
Vehicle Licencing Agency (DVLA) in Swansea and the Intellectual Property Office in
Newport became some of the major employers in Wales (Day, 2002). The Welsh Act of 1978
introduced the concept of a government assembly for Wales, but was defeated in 1979. A
further referendum in 1997 resulted in the formation of a Welsh Assembly (Davies, 2007).
Table 2-2 outlines the major economic and political events of Wales from 1750 to 1900.
Table 2-2. Economic and Political Timeline for Wales, 1900-Present
Year
1900 - 1903
1901
1913
1916
1925
1927
1976
1978
1979
1984
1997
1999
2008
2010
SOURCE: (World Atlas, 2012)
2.1.3. Wales: A Lagging Region
Certainly, the lack of real and consistent [economic] strategy has had a
major impact on the nation’s economic potential and, consequently, much of
the billions of European Structural Funding, as well as the money available
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from the Welsh Government’s own funds, has been largely squandered,
despite having the highest proportional spend of any region on economic
development. Professor Dylan Jones-Evans, Director of Enterprise and
Innovation, University of Wales (2011)
Today, Wales is a lagging region within the UK and the EU. Although there have been
multiple initiatives and policies to improve the economic climate of Wales, the region has
remained in the lower echelons of UK, EU and world rankings.
2.1.3.1. European Support for Wales
West Wales and the Valleys have qualified for European funding interventions in both 2000
and 2007 through the Objective 1 and Convergence programmes, because their GDP lies
below 75% of the EU average GDP per capita (see Figure 2-1 and Table 2-3). Furthermore,
many WG initiatives have been enacted to promote the Welsh economy since its inception in
1998.
Table 2-3. EU Structural and Cohesion Fund Support in Wales, 2000-2020
Programme
Amount (€)
2000-2006
2007-2013
2014-2020
European Regional Development
Fund (ERDF)
1,163,011,000
1,250,378,189
TBD
European Social Fund (ESF)
615,220,000
833,585,460
TBD
Total
1,778,231,000
2,083,963,649
TBD
TBD = To be determined, SOURCE: (European Commission, 2011c)
European Structural Funds were created by the Cohesion policy, also known as the Regional
policy of the EU. The Structural Funds consist of the European Regional Development Fund
(ERDF) and the European Social Fund (ESF). The aims of the ERDF and ESF are provided
verbatim from the European Commission are:
The ERDF aims to strengthen economic and social cohesion in the EU by correcting
imbalances between its regions. In short, the ERDF finances:
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direct aid to investments in companies (in particular SMEs) to create sustainable jobs;
infrastructures linked notably to research and innovation, telecommunications,
environment, energy and transport;
financial instruments (capital risk funds, local development funds, etc.) to support
regional and local development and to foster cooperation between towns and regions;
technical assistance measures (European Commission, 2012a)
Figure 2-1. Map of the Convergence Area of West Wales and the Valleys
The area of Wales is depicted on the left with Convergence areas highlighted in yellow. The
Convergence area contains the 15 Local Authorities of Isle of Anglesey, Conwy,
Denbighshire, Gwynedd, Ceredigion, Pembrokeshire, Carmarthenshire, Swansea, Neath Port
Talbot, Bridgend, Rhondda Cynon Taff, Merthyr Tydfil, Blaenau Gwent, Caerphilly and
Torfaen.
SOURCE: Welsh European Funding Office (WEFO, 2012)
The ESF sets out to improve employment and job opportunities in the EU. It intervenes in
the framework of the Convergence and Regional Competitiveness and Employment
objectives. The ESF supports actions in Member States in the following areas:
adapting workers and enterprises: lifelong learning schemes, designing and spreading
innovative working organisations;
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access to employment for job seekers, the unemployed, women and migrants;
social integration of disadvantaged people and combating discrimination in the job
market;
strengthening human capital by reforming education systems and setting up a network
of teaching establishments (European Commission, 2012b).
Objective 1 funding has been shown to have a positive impact within the EU. In their
literature and data review of the impact of Structural Funds on economic growth, Mohl and
Hagen (2010) argue that:
Objective 1 payments in particular do, in fact, promote regional economic
growth, whereas the total amount of Objectives 1, 2, and 3 do not have a
positive and significant impact on the EU regions' growth rates... Our
estimation results show that Objective 1 payments, in particular, have a
positive and statistically significant impact on the regions' GDP. Broadly
summarising, we find that a 1% increase of Objective 1 payments, i.e. those
funds used for the poorest regions, leads to a small but positive impact on the
regional GDP per capita by approximately 0.05%.
Although growth in GDP per capital was observed, no significant employment growth effects
were observed in Objective 1 regions (Becker et al., 2010).
Some studies have not been positive about the results and outcomes of such grant funding
schemes. Reports have suggested that large amounts of grant support, such as those provided
by EU Structural Funds, could lead to a “grant dependency mentality” (Telesis Consultancy
Group, 1982, Culliton, 1992, AndreossoO'Callaghan and Lenihan, 2006), which is not
always conducive to sustainable innovation (Leamon and Lerner, 2012, Abreu et al., 2011,
Cooke, 2009). Furthermore, Bachtler and Turok (2013) argue in their book, The coherence of
EU regional policy: Contrasting perspectives on the Structural Funds, that:
Local authorities claim that this lack of innovation is largely because of the
retrospective receipt of EU funding. They argue that because EU funding is
not normally approved until after project have been implemented, they
cannot risk applying for assistance for schemes which they are not already
committed to proceeding with and which they are confident will meet the
relevant eligibility criteria. Given this, and the bureaucratic delays which
frequently occur between approval and payment of grant aid, authorities
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believe that they must inevitably ‘play safe’. This [in] turn encourages the
development of patchwork quilt of ad hoc, unco-ordinated [sic], ‘funding
driven’ initiatives.
Wales qualified for the first round of European Structural Funding from 2000-2006 for a sum
just under 1.8 billion. It qualified again for Structural Funding from 2007-2013 for the sum
of 2.0 billion. Despite these two rounds of Structural Funds, there are strong indications
from WG and the EU that a substantial fraction of Wales will again qualify for a further round
of funding during the period 2014-2020 (National Assembly for Wales, 2012, Welsh
Government, 2012e). The exact amount of Structural Funds Wales has received to date is
outlined in Table 2-3.
2.1.3.2. Welsh Government Policy
Since the creation of the National Assembly in 1998, the WG has instituted a number of
innovation initiatives in the attempt to invigorate the Welsh innovation and knowledge-based
economy (Zhang and Pugh, 2011). As a brief outline, a timeline of relevant WG plans and
policies is set out in Table 2-4.
Table 2-4. Timeline of WG Plans and Strategies for Innovation, 1998-Present
Year
Title
Description/ Details
1998
Pathway to Prosperity
The first economic plan for Wales
1999
Education and Training
Action Plan for Wales
Emphasises the need for a skilled workforce to
make transition into the knowledge economy.
1999/2000
Entrepreneurship Action
Plan, Strategy and
Implementation
Aims to build a culture of entrepreneurship, give
more people the skills and motivation to start a
business, entrepreneurship education.
2000
A Better Wales
10-year plan with targets for improving life for
everyone in Wales
2001
The Learning Country
Importance of learning and training to ensure long
term sustainable economic growth and social
development.
2002
Reaching Higher
Highlights key role of HEIs in both the economy
and society.
2002
A Winning Wales
WG’s first economic strategy: innovation and
entrepreneurship are key themes.
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Table 2-4. Timeline of WG Plans and Strategies for Innovation, 1998-Present
Year
Title
Description/ Details
2002
Wales for Innovation
Encourages business innovation through equipping
people to innovate, improving support and
maximising potential of HEIs.
2002
Skills and Employment
Action Plan for Wales
Brings issues of skills and employment together,
addresses need to raise skills.
2004
Creative Success; a
strategy for the creative
industries in Wales
Supports and encourages creative industries that
could make a significant contribution to the Welsh
economy
2004
Knowledge Economy
Nexus; role of HE
Report encourages greater links between university
and industry, views them as key strands of the
Welsh innovation system
2004
The Wales Spatial Plan
20 year policy, promoting a sustainable economy is
one of its key themes, different approaches across
Wales.
2005
Skills and Employment
Action Plan for Wales
Need for employers, employees and public sector
agencies to work together to support high quality
jobs in a growing economy.
2005
Wales: A Vibrant
Economy
Strategic framework for economic development,
builds on A Winning Wales, key objectives are to
raise quality of jobs and increase employment rate.
2005
Social Enterprise Strategy
for Wales
Underlines importance of social and community
enterprise to the Welsh economy, especially in
poorer areas and their potential to be innovative.
2006
Science Policy for Wales
Advances in science, engineering and technology
drive the knowledge economy and have a positive
impact on society, culture and economy.
2007
One Wales Agreement
Coalition government promises to create jobs,
stimulate enterprise and business growth, promote
tourism and enhance skills to the end of creating a
‘prosperous society’.
2007
Commercialisation in
Wales
Report reviews commercialisation initiatives,
suggests clearer strategy from government needed
and fewer but more effective programmes.
2008
Skills That Work for
Wales
This strategy describes the ‘One Wales’ ambition
for a highly-educated, highly-skilled and high-
employment Wales.
2008
Spatial Plan Update
Goals include: increasing employment rate,
improving skills levels, regeneration programmes
across Wales- all Wales approach to economic
development.
2009
For Our Future- Higher
Education Strategy
Dual role of Welsh HEIs in economy: raising the
skill levels of Welsh workforce, exploiting the
knowledge base to support businesses.
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Table 2-4. Timeline of WG Plans and Strategies for Innovation, 1998-Present
Year
Title
Description/ Details
2009
Social Enterprise Action
Plan for Wales
Explains role of social enterprises in the economy,
highlights their innovation potential, business
support.
2010
The Heart of Digital
Wales
Review of creative industries, suggests creation of
new creative industries fund, government should be
supporting a wide range of businesses, not directing
them.
2010
Economic Renewal: A
New Direction
5 main priorities: investing in high quality and
sustainable infrastructure; making Wales a more
attractive place to do business; broadening and
deepening the skills base; encouraging innovation;
targeting business support
2012
Science for Wales
A strategic agenda for science and innovation in
Wales
SOURCE: Adapted from WG and National Endowment for Science, Technology and the Arts
(NESTA) documents (Welsh Government, 2002, Welsh Government, 2005, Welsh
Government, 2010, Zhang and Pugh, 2011, Welsh Government, 2012d, Zhang and Pugh,
2012)
Many of the plans and strategies put forth by the WG have been intended to promote the
economy through technology, innovation and skills. Professor Jones-Evans argues that many
of these plans and strategies have been unsuccessful (Jones-Evans, 2011), although no clear
reason is provided. Over the years, the plans and strategies issued by the WG have changed
focus on which specific sectors to support through policy, initiatives and resources. Many of
these are high-value sectors to Wales, with LS explicitly introduced as a priority sector in
2010. Table 2-5 outlines the sectors of focus for each of the changing WG policies. For each
of the nine priority sectors identified in Economic Renewal: A New Direction, a sector panel
of five members and a chair has been appointed. These sector panels have no direct
administrative or political powers. The purpose of these sector panels is, strictly, to advise the
Welsh ministers and policy teams.
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Table 2-5. Sectors Identified in Flagship Welsh Government Policies, 2002-Present
A Winning
Wales, 2002
Wales: A Vibrant
Economy, 2005
Economic Renewal: A
New Direction , 2010
Additional
Sectors, 2011
- Aerospace
- Automotive
components
- Food-related
business
- Opto-
electronics
- Aerospace
- Agri-food
- Automotive
- Creative
industries
- Financial
services
- High-tech
- Tourism
- Advanced materials
and manufacturing
- Creative industries
- Energy and
environment
- Financial and
professional services
- Information and
Communications
Technology (ICT)
- Life sciences
- Construction
- Food and
Farming
- Tourism
SOURCE: Adapted from: (Welsh Government, 2002, Welsh Government, 2005, Welsh
Government, 2010, Zhang and Pugh, 2011, Zhang and Pugh, 2012)
In order to attract inward investment into Wales, the WG has launched the “Just Ask Wales”
campaign on 13 March 2014 (Welsh Government, 2014a).
The new marketing campaign is part of the Welsh Government drive to
attract more foreign-owned companies looking to grow and expand to
consider a future in Wales. The year-long campaign will initially focus on
London, South East England, and the M4 corridor. It will include advertising
at central London Underground stations, as well as rail stations at
Paddington, Liverpool Street, Heathrow, Woking, Slough, Reading and
Bracknell. A suite of sector-specific posters and marketing materials have
been created for the ‘Just Ask Wales’ campaign, directing businesses to the
new website. Advertising will also appear in newspapers such as the
Financial Times, Telegraph and London Standard… The integrated
marketing and communications campaign will run alongside the programme
to develop international trade which supports businesses to access overseas
markets. It includes traditional paid-for print, poster sites, digital activity,
email, and will be supported by sector specific business and media events in
London and Cardiff at dates to be announced. Welsh Government (2014a).
When launching the campaign, The Minister for Economy, Science and Transport (EST)
stated (Welsh Government, 2014a):
The foreign direct investment market is extremely competitive so in order to
build on our successes and gain a competitive advantage, we have to
differentiate what Wales has to offer. Our “Just Ask Wales” campaign
emphasises our strengths and focuses on customer requirements what
companies need in order to grow and how we can deliver for them. We are
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launching it in the South East of England as our proximity to London is a
major advantage for many businesses. Among the other key elements we are
highlighting are the skills, support, space and speed of decision making in
Wales as well as the number of highly successful companies already based
here that have benefited from Welsh Government support. We have a clear,
coherent and consistent message running across the campaign based on our
ability to deliver, our ambition to attract trade and investment to Wales and
the can-do attitude of the workforce and Government. Minister for
Economy, Science and Transport (EST) (2014)
2.2. Micro, Small and Medium-Sized Enterprises (SMEs)
According to the European Commission, the category of micro, small and medium-sized
enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and
which have an annual turnover not exceeding €50m and/or an annual balance sheet total not
exceeding €43m (Table 2-6). An enterprise is considered to be any entity involved in
economic activity, regardless of its registration status. This includes self-employed persons
and family businesses engaged in craft or other activities and partnerships or associations
regularly engaged in an economic activity (European Commission, 2005). The UK uses the
same thresholds to measure business activities for SMEs.
Table 2-6. European Union and United Kingdom Thresholds for SMEs
Enterprise
Category
Headcount: Annual
Work Unit (AWU)
Annual Turnover
Annual Balance
Sheet Total
Micro
< 10
≤ €2 million
≤ €2 million
Small
10 to 49
≤ €10 million
≤ €10 million
Medium-sized
50 to 249
≤ €50 million
≤ €43 million
SOURCE: (European Commission, 2005)
2.2.1. SME Life Cycle
A gap between government-funded research and industry-funded applied research and
development exists and has been described as the (cash flow) “valley of death,” which in
many aspects parallels “The Chasm” in regard to innovation (Sensenbrenner, 1998). The
concept of the “valley of deathfocuses more on the lack of liquidity or solvency rather than
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the failure of a technology to become adopted. Furthermore, Evans has argued that the “valley
of deathwas attributed to the need for capital through the stages of research, development
and commercialisation (Evans, 2002). As seen in Figure 2-2, the process from research to
commercialisation runs at a loss until a new product is launched and is successful. Once a
product’s sales overcome the cumulative losses incurred during the research, development
and launch of the product, a business is in profit and can be viewed as successful. This model
is ideal when it comes to a one company, one product approach; however, it does have its
limitations when a company has multiple products in development.
Figure 2-2. Overall Process for a Start-up Knowledge-based Company
SOURCE: Adapted from (Osawa and Miyazaki, 2006)
SMEs are the largest number of companies in an economy, but they are under-researched in
the open innovation literature(Gassmann et al., 2010). In relation to SMEs, open innovation
has been identified as a necessary model to overcome hurdles, such as a lack of a personnel or
capital goods. Aldrich and Auster described the lack of resources and tangible assets in SMEs
as the liability of smallness (Aldrich and Auster, 1986). Although these hurdles and
liabilities” exist, SMEs do have the ability to overcome their liability of smallness through
open innovation processes (Gassmann and Keupp, 2007, Van De Vrande et al., 2010).
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In a presentation given to the ILS (Clement, 2007), Professor Marc Clement described a
company life cycle model which integrates many of the models of innovation and SMEs of
Moore, Rogers, Gladwell and others described in Section 3.2.1 above (see Figure 2-3). It is
useful to note that this model is most applicable to a company developing a single product.
Multiple products may be developed in parallel or in series, allowing for multiple “Death
Valleys” to exist within a single company’s product development pipeline. Also, for this
model, it should be noted that although the x-axis represents time, the time necessary to move
on to the next stage of maturity will be different for every company.
Figure 2-3. Dead Mouse Model of Innovation
This life cycle model represents revenue growth of a product over time. During this journey,
an SME must overcome “Death Valley” as well as multiple stages of innovation to survive.
Note: LE=Large enterprises, SME=Micro, small and medium-sized enterprises.
SOURCE: Adaptation of Moore’s Dealing with Darwin (2005) by Professor Marc Clement
(2007) and author (minor modifications, formatting, labels, etc.).
2.2.2. The Effect of SMEs on the Economy
Micro, small and medium-sized enterprises (SMEs) are the engine of the
European economy. They are an essential source of jobs, create
entrepreneurial spirit and innovation in the EU and are thus crucial for
fostering competitiveness and employment. (European Commission, 2005)
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According to Beck, cross-country comparisons suggest a strong, positive association
between SME development and economic growth(2005). The European Commission’s
website states that the 23 million SMEs in the EU represent 99 percent of businesses and are a
key driver for economic growth, innovation, employment and social integration (European
Commission, 2012c). According to data from the UK’s Department for Business Innovation
and Skills (BIS), SMEs represent 99.9 percent of all enterprises, account for 58.8 percent of
employment and 48.8 percent of private sector turnover in the UK, as seen in Table 2-7.
SMEs are even more vital to the Welsh economy, accounting for 99.9 percent of enterprises,
74.8 percent of employment and 59.0 percent of all private sector turnover.
Table 2-7. SME Share of Enterprises of the EU, UK and Wales in 2011
Region
Enterprises
Employment
Turnover
Europe
99.8%
66.9%
58.4%
United Kingdom
99.8%
58.9%
48.8%
Wales
99.9%
74.8%
59.0%
SOURCE: Adapted from (BIS, 2011b, European Commission, 2011a)
Data collected by Ayyagari, Beck and Demirguc-Kunt for 76 developed and developing
countries indicate that, on average, SMEs account for close to 60% of manufacturing
employment (Ayyagari et al., 2007, Beck et al., 2008), which is further corroborated by
research undertaken by the European Commission (2011a) and UK BIS data (2011b). In 2011,
the European Commission published a large study analysing the important role small and
medium-sized enterprises play in creating more and better jobs, with the following
conclusions (2011b):
85% of net new jobs in the EU between 2002 and 2010 were created by SMEs. This
figure is considerably higher than the 67%-share of SMEs in total employment.
During this period, net employment in the EU's business economy rose substantially,
by an average of 1.1 million new jobs each year.
With 1% annually, the employment growth for SMEs was higher than for large
enterprises with 0.5%. A clear exception is the trade sector, in which employment in
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SMEs increased by 0.7% annually, compared to 2.2% in large enterprises. This is
due to the strong increase of large trade enterprises, in particular in sales,
maintenance and repair of motor vehicles.
New firms (younger than five years) are responsible for the overwhelming majority of
the new jobs. New enterprises operating in business services create more than a
quarter (27%) of the new jobs, while the new firms in transport and communication
contribute least (6%).
According to the United Kingdom’s Fact Sheet drafted by the European Commission, the
UK’s economy relies less on micro firms than other EU economies and, correspondingly,
large enterprises play a more prominent role (European Commission, 2011e). Even so,
according to the UK Office of National Statistics (ONS), SMEs account for almost 50% of
turnover and almost 60% of employment as seen in Table 2-7 above. SMEs in Wales overtake
both the EU and the UK in terms of the percentage of enterprises, turnover and employment.
Although Wales exceeded Europe’s employment numbers by 12 percent, turnover was higher
by only 1 percent; possibly suggesting that the total gross value added (GVA) per employee
was lower in Wales than in Europe.
2.2.3. Policy Supporting SMEs
2.2.3.1. Europe SME Policy
In Europe, arguments in support of the contribution of SMEs can be found in the Lisbon
Strategy (2000-2010) for economic growth as well as in its successor, the Europe 2020 (2010-
2020) strategy. Additionally, the Small Business Act (SBA) for Europe provides a framework
for supporting SMEs throughout the region. The SBA sets in motion 10 principles to guide
the conception and implementation of policies both at EU and Member State level (European
Commission, 2008b), as follows:
1. Create an environment in which entrepreneurs and family businesses can thrive and
entrepreneurship is rewarded
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2. Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second
chance
3. Design rules according to the “Think Small First” principle
4. Make public administrations responsive to SMEs’ needs
5. Adapt public policy tools to SME needs: facilitate SMEs’ participation in public
procurement and better use of State Aid possibilities for SMEs
6. Facilitate SMEs’ access to finance and develop a legal and business environment
supportive to timely payments in commercial transactions
7. Help SMEs to benefit more from the opportunities offered by the Single Market
8. Promote the upgrading of skills in SMEs and all forms of innovation
9. Enable SMEs to turn environmental challenges into opportunities
10. Encourage and support SMEs to benefit from the growth of markets.”
A progress report issued in 2011 by the European Commission praised the SBA, stating that it
has made leaps forward in improving the business environment, increased the EU’s role in
access to finance, improved access to markets and placed entrepreneurship into the new
innovation policy (2011d).
2.2.3.2. United Kingdom SME Policy
The UK has set up clear policies to assist with SME growth, mainly by providing access to
otherwise inaccessible finance, as seen in multiple schemes listed to support SMEs financially.
The BIS states that its aim is to attain more UK entrepreneurs and businesses to be able to
access the finance they need to enable greater levels of enterprise, whether expressed through
start-up or growth(BIS, 2012a). Financial support may constitute an initial enabler for SME
support since, based upon the most recent survey of SMEs by the BIS, Ten percent of SMEs
identified cash flow as their main obstacle and 51 per cent in total mentioned it as being an
obstacle per se (BIS, 2012b). In addition to financial support, the UK has tried to provide
other services such as business information and advice as well as a wide range of solutions for
small businesses support (BIS, 2012a) . Relevant SME and start-up funding schemes in the
UK can be found in Table 2-8.
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Table 2-8. UK BIS SME and Start-up Funding Schemes
Scheme
Description
Enterprise
Finance
Guarantee (EFG)
EFG is a loan guarantee scheme designed to facilitate additional lending
to viable SMEs lacking the security or proven track record for a
commercial loan. It is not a replacement for commercial products and will
account for 1%-2% of total lending to SMEs. The Government provides
the lender with a 75% guarantee for each individual loan, subject to a cap
on total claims arising from a Lender’s portfolio.
Enterprise
Capital Funds
(ECFs)
For many young innovative firms equity finance is the best option to
reach their high growth potential; however, many struggle to obtain this
form of finance. This is often because the relatively high costs of
undertaking due diligence in early stage companies, in relation to the deal
size, often means that investors prefer to make larger investments in later
stage companies. This disconnect is called the 'equity gap'. Enterprise
Capital Funds (ECFs) address this market weakness. The ECF uses
government funding alongside private sector investment to bridge this
gap. Eleven such funds have been launched since 2006 with £344.5
million of public and private investment committed.
UK Export
Finance
This provides a range of services including: insuring UK exporters
against non-payment by their overseas buyers; helping UK exporters sell
goods and services by guaranteeing bank loans to overseas buyers;
guarantees to banks issuing contract bonds on behalf of UK exporters;
guarantees to banks providing working capital loans to exporters for
specific export contracts; and insuring UK investors in overseas markets
against political risks.
Business Angel
Co-Investment
Fund
The £50m Business Angel Co-Investment Fund aims to support angel
investments into high growth potential early stage SMEs, particularly in
the areas worst affected by public spending cuts. The fund has been
created with a grant from the Regional Growth Fund and is able to make
initial equity investments of between £100K and £1M in to SMEs
alongside syndicates of business angels (subject to geographical
restrictions and upper limit of 49% of any investment round). Investment
decisions will be made by the independent Investment Committee of the
fund based on detailed proposals put forward by business angel
syndicates.
The National
Loan Guarantee
Scheme (NLGS)
Launched in March 2012 to reduce the cost of bank loans for smaller
businesses. The scheme will allow banks to raise up to £20bn of funding
guaranteed by the Government over two years, allowing the banks to lend
directly to smaller businesses at a lower cost.
Business Finance
Partnership
(BFP)
The BFP will invest an initial £1.2bn in loan funds, alongside private
sector co-investors. These funds will then lend to mid-sized businesses,
helping to diversify the channels of finance available to them. The
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Table 2-8. UK BIS SME and Start-up Funding Schemes
Scheme
Description
Government has already committed to spend £700 million through
managed funds that lend directly to mid-sized businesses in the UK. The
Government is also considering options for investing through other non-
bank lending channels that reach SMEs. BIS has been allocated £100
million to invest through the Small Business Tranche of the BFP.
Seed Enterprise
Investment
Scheme (EIS)
EIS provides income tax relief of 50% for individuals who invest in
shares in qualifying companies, with an annual investment limit for
individuals of £100,000 and cumulative investment limit for companies
of £150,000. In addition, the Government will offer a capital gains tax
holiday for investments made into the new scheme. This will provide for
a capital gains tax exemption on gains realised on disposal of an asset in
2012-13 and invested through SEIS in the same year.
SOURCE: Adapted from BIS (2010a, 2012a)
Furthermore, the UK government has supported technology transfer through the Technology
Strategy Board (TSB, not to be confused with TSB Bank) and associated Knowledge Transfer
Networks (KTNs), providing access to new technology, networks and opportunities.
According to the TSB, KTNs aim to deliver the following benefits (Technology Strategy
Board, 2014):
Improving business performance through innovation and new collaborations by
driving the flow of people, knowledge and experience between business and the
science-base, between businesses and across sectors
Driving knowledge transfer between the supply and demand sides of technology-
enabled markets through a high quality, easy to use service
Facilitating innovation and knowledge transfer by providing UK businesses with the
opportunity to meet and network with individuals and organisations, in the UK and
internationally
Providing a forum for a coherent business voice to inform government of its
technology needs and about issues, such as regulation, which are enhancing or
inhibiting innovation in the UK
2.2.3.3. Welsh SME Policy
In a similar way to initiatives throughout the UK, Wales has also implemented support for
SMEs. In March 2012, Business Minister Edwina Hart unveiled a £40 million Wales SME
Investment Fund to support SMEs and create up to 4,000 new jobs. These funds will:
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Increase the number of SMEs eligible for investment from Finance Wales by more
than 50%
Allow the tens of thousands of businesses that sell directly to consumers to be eligible
for Finance Wales investment
Provide good value for Welsh Government funding by recycling investment returns to
produce an ‘evergreen’ fund for SMEs in the future
Leverage in £2 of private sector funding for £1 of Welsh Government funding
invested
Provide a funding mix of loans, mezzanine and equity, typically ranging in size from
£50,000 to £2 million.
These funds complement an existing £150 million European-backed Wales Joint European
Resources for Micro to medium Enterprises (JEREMIE) fund (Welsh Government, 2012a)
which provides the WG’s main source of commercial finance for eligible SMEs.
2.3. Life Sciences
2.3.1. Definition of Life Sciences
In general, the term ‘life sciences’ (LS) can cover any of the fields of science involving living
organisms, including areas such as botany, immunology, neuroscience and bioinformatics. To
further characterise LS within the scope of this research project, the term can be broken down
into three main sectors:
pharmaceuticals
biotechnology
medical technology businesses with wide ranging activities including research,
testing, manufacturing and the provision of specialist services,
as defined in 2010 by the WG’s policy statement Economic Renewal: a new direction (Welsh
Government, 2010). Each of these three sectors works together in combination with other
industries, with the ultimate goal of producing an end-user product such as a
biopharmaceutical drug, medical device, or a diagnostic test. Ultimately, this collaborative
work benefits the end-user (the patient), but also has many positive spill-over effects for
society.
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To complicate the semantics further, Dr Ronald Rader from the Biotechnology Information
Institute claims, “criteria for what is biotechnology and biopharmaceutical are unfixed,
subjective, adaptable to the needs of the moment, presumed to be continually evolving and
rarely defined(Rader, 2008). The same is true for the term ‘medical technology businesses,’
which has already been given an ambiguous characterisation above. The focus of this specific
research project will be LS companies involved within the biomedical industry and human
health, in line with a definition that is much in line with the one provided by the State of
California:
The biomedical industry encompasses all life sciences based research and
commercial organizations that are pursuing innovative research and
technological development to benefit human health. (California Healthcare
Institute et al., 2012)
This definition has been selected in an attempt to reduce the ambiguity inherent in the term
LS, as well as to satisfy the need to bind this research within a certain boundary. Although
many of the policies and definitions in the UK and Wales include industrial biotechnology
(encompassing agriculture, algae farms for renewable energy, amongst others) as part of the
LS definition many of the relevant initiatives and support institutions within Wales focus
specifically on human health. Examples of this include: MediWales, the Arthurian Life
Sciences £100 million venture capital fund and the Life Science Exchange project. Lastly, the
researcher’s experiences before and during this research were all directly related to the
advancement of the LS within the context of human health (e.g. biopharmaceuticals,
biotechnology, medical devices and e-health).
The biomedical industry is multinational and multidisciplinary. This has a tremendous impact
on the world’s economies, as well as on the individual health outcomes of patients. The
industry involves a wide range of entities and stakeholders, including pharmaceutical
companies, medical device companies, hospitals, doctors, patients and their families.
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2.3.2. The Effect of Life Sciences on the Economy
2.3.2.1. Life Sciences Globally
The importance of the LS industry is recognised globally as a driver of innovation and
economic growth of economies by regions around the world (Jones Lang LaSalle, 2011,
OECD, 2012, Rosiello, 2008, Kasabov and Delbridge, 2008). The economic effects of the LS
industry is far reaching, having tremendous impacts on economies and outperforming other
sectors based on economic outputs (Battelle Memorial Institute, 2011, PhRMA, 2011).
According to IMS Health, a leading healthcare market research group, world pharmaceutical
sales reached almost 1 trillion US dollars or over 1.4 percent of the world’s Gross Domestic
Product (GDP). The pharmaceutical sector alone is forecast to grow at a three to six percent
cumulative average growth rate until 2016, after adjusting for inflation (IMS Health, 2012). A
similar forecast exists for medical devices. Furthermore, the medical device industry in the
US and worldwide is immense in its economic impact (sales in 2009 were $260 billion
worldwide, $120 billion in the US alone, $64 billion in the European Community and $45
billion in Japan; in 1998 the US medical equipment trade surplus was $18.2 billion)(Gad
and Spainhour, 2011).
As seen in Table 2-9 Error! Not a valid bookmark self-reference., the biopharmaceutical
sector in the US is directly responsible for $382.4 billion in direct economic impact and over
674,000 jobs. Further to this, due to indirect and induced multiplier impacts, the industry is
responsible for a further $535.4 billion in output and an extra 3.3 million jobs in the US
economy (PhRMA, 2011). The Pharmaceutical Research and Manufacturers of America
(PhRMA) has concluded that the biopharmaceutical sector’s direct contribution to US GDP in
2008 was approximately three and a half times the average contribution of the other sectors in
the rest of the US economy. In a report titled Economic Contribution to the Nation produced
by Battelle (the world’s largest non-profit independent research and development
organisation), the biopharmaceutical sector (a subsector of the LS sector) has indirect and
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induced impacts on 430 other sectors and subsectors. Additionally, each job in the
biopharmaceutical sector contributed more than double the average contribution from jobs in
the rest of the economy (PhRMA, 2010).
Table 2-9. Economic Impacts of the US Biopharmaceutical Sector, 2009 ($ in billions)
Impact
Employment
Personal
Income
Value
Added
Output
State &
Local
Tax
Revenue
Federal
Tax
Revenue
Direct Effects
674,192
$80.00
$130.70
$382.40
$4.40
$15.40
Indirect Impacts
1,403,511
$92.10
$142.30
$261.60
$12.40
$18.60
Induced Impacts
1,935,738
$85.90
$152.90
$273.80
$15.80
$18.50
Total Impact
4,013,441
$258.00
$425.90
$917.80
$32.60
$52.50
Impact
Multiplier
5.95
3.22
3.26
2.40
7.43
3.40
Personal Income: Measures cash, benefits and non-cash payments to individuals in the
company; Value-added: The difference between an industry’s total output and the cost of the
intermediary input; Output: The dollar value of production; Impact Multiplier: (Induced
Impacts) ÷ (Direct Effects). SOURCE: Adapted from PhRMA (2011)
2.3.2.2. Life Sciences in the United Kingdom
The UK Department for Business, Innovation and Skills (BIS), in conjunction with the UK
Trade and Investment (UKTI) and Department of Health (DH), has put together a nationwide
database for the LS industry and related companies in order to enable key stakeholders to gain
a better understanding of the landscape. BIS has determined that the UK LS sector generated
a turnover of over £50 billion and employed 167,672 people in 4,578 companies in 2012 (BIS,
2012c). Details of the economic impacts of the UK LS industry can be found in Table 2-10.
The majority of the employment and turnover was a result of the pharmaceutical sector, yet
almost 70% of the companies were in the medical technology sector. As explained in section
2.3.1, industrial biotechnology has not been included. Based on the figures, industrial
biotechnology’s effect on the UK’s economy should be negligible, as this subsector accounts
for less than one percent of overall turnover, employment and the number of companies.
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Table 2-10. Economic Impacts of the UK Life Sciences Industry, 2012
United Kingdom
Wales
Impact
Turnover
(£billions)
Employment
Number of
Companies
Turnover
(£billions)
Employment
Number of
Companies
Pharmaceutical
30.1
69,284
387
0.1
341
3
Medical
biotechnology
3.7
25,662
979
0.3
2,202
47
Medical
technology
16.0
71,144
3,129
1.0
5,191
167
Industrial
biotechnology
0.4
1,582
83
0.0
258
14
Total
50.2
167,672
4,578
1.4
7,992
231
SOURCE: (BIS, 2012c)
2.3.2.3. Life Sciences in Wales
Europe and the UK have thriving LS sectors, but the size of this industry in Wales is not in
proportion to the data described above (BIS, 2011d, BIS, 2012c), even after per capita
adjustment. According to the most recently published data by MediWales in 2009, the Welsh
LS sector consists of 322 companies employing over 15,000 people (MediWales, 2009). It is
believed that these companies contribute more than £1.4 billion to the economy, not counting
the spill-overs to academia and the public sector. Of these companies, 69 percent were
medical technologies and 93 percent were SMEs (MediWales, 2009). As described in Table
2-10, the Strength and Opportunity 2012 report from the UK BIS department outlines the
landscape of the medical technology, medical biotechnology, industrial biotechnology and
pharmaceutical sectors in the UK, claims Wales has around 8,000 employees across 231
companies (BIS, 2012c). These numbers differ from the numbers reported by MediWales.
Although Wales accounts for approximately 5% of the population of the UK, it is not pulling
its weigh in the pharmaceuticals sector because it accounts for only less than 1% of UK
turnover, employment and the number of companies, as seen in Table 2-10.
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Table 2-11. Economic Impacts of the UK Life Sciences Industry, 2012
Wales
Percentage of the UK (%)
Impact
Turnover
(£billions)
Employment
Number of
Companies
Turnover
(£billions)
Employment
Number of
Companies
Pharmaceutical
0.1
341
3
0.3%
0.5%
0.8%
Medical
biotechnology
0.3
2,202
47
8.1%
8.6%
4.8%
Medical
technology
1.0
5,191
167
6.3%
7.3%
5.3%
Industrial
biotechnology
0.0
258
14
0.0%
16.3%
16.9%
Total
1.4
7,992
231
2.8%
4.8%
5.0%
SOURCE: (BIS, 2012c)
For example, San Diego, California has a thriving LS ecosystem that evolved from a strong
<