THE KEYSTONE of Scotland's strategy to nurture tech businesses' growth should be scrapped and replaced with a voucher-based private sector model, according to a well known scientist- businessman.

Dr Chris Masters, a research chemist of international standing, and former chairman of the Scottish Higher Education Funding Council, said he would replace Scottish Enterprise's Intermediary Technology Institutes (ITIs) if he was in charge of innovation policy.

The three ITIs, for energy, digital media and life sciences, were established in 2003 to identify future technology markets and fund research and development (R&D) by Scottish companies that could service them.

Masters says Scottish Enterprise's £450 million 10-year funding of the ITIs would be better spent directly by private companies.

His scheme, rejected by ministers several years ago but due for reconsideration under the new government's higher education taskforce, would require the Funding Council to give vouchers to companies to spend on university R&D. The vouchers could be cashed in by the universities, but would expire if a company did not spend them.

Masters, who now sits on the boards of the oil services giant Wood Group and the investment firm Alliance Trust, told the Sunday Herald that business was better placed to identify gaps in the market than ITI "civil servants".

"Let's get real. If there is a market opportunity, it's much more likely that somebody in the private sector will spot it and exploit it.

"I probably would replace the ITIs with this kind of scheme. I'm not saying they are doing any harm, but if you look at the economic benefits they are generating, it's probably pretty minimal. The government will not identify the next Microsoft," he said.

In a week in which Edinburgh University published annual survey figures that show the top eight Scottish universities are more successful at commercialising their research than their US counterparts, he said the priority was tackling Scotland's lagging corporate R&D spend, rather than retaining bodies that bolster existing success.

"It's much easier to make the existing corporations more successful than to create new university spin-off companies. The failure rate of new companies is something like 90%," he said. It was necessary to remove the risk from the companies that would invest in R&D if an improvement in the situation was desired, he added.

Derek Waddell, head of research at Edinburgh University, said that while the universities understood the purpose of the ITIs, the private sector was confused by them. "Where do they fit into the scheme of things in Scottish Enterprise? There is probably some confusion around this within private companies," he said.

Jim Greaves, head of communications for the umbrella body ITI Scotland, conceded that the organisation had not always been good at communicating its message.

"A lot of companies do understand the model, but it is unique so far as I am aware. I think there have been communications issues, but we are now trying to communicate much more widely," he said.

He agreed that there was a problem with corporate R&D spending, but he argued that it was too early to question the economic benefits of his organisation since it was only in the fifth year of a 10-year investment programme. He also said that much of the investment work would be lost if the scheme was scrapped halfway through its life cycle.

He said: "We are an easy target just now. We have only just entered our delivery phase, so it's too early to say whether we are providing economic benefit. We have signed nine commercial licences for the IP intellectual property we have developed to date, which demonstrates that the model is working. We had filed 87 patents by the end of the 2006-07 financial year, involving over 500 researchers. Our paymasters at Scottish Enterprise are happy that we are on track."

He added that the ITIs were full of people from the private sector, and said: "If I were a private company, I would under Masters' scheme be very tempted to put my money into a short-term development programme that has already shown promise rather than a longer-term development that might be beneficial to the Scottish economy. Short-term projects can be funded by venture capitalists, but we were set up because funding was not available for the longer-term projects".