Enhancing Rural Innovation OECD Report

Jane Craigie

Scotland is one of five countries involved with the OECD Enhancing Rural Innovation project, alongside the economically, socially and physically diverse nations of Canada, Japan, Switzerland and the USA.

Painting a picture of Scotland’s rurality becomes clearer by understanding its geography and inhabited areas. Rural Scotland, settlements with a population of less than 3,000, accounts for 98% of the land mass and is home to 17% of the population. Remote rural accounts for 6% of the population and 70% of the land area. The country has over 790 offshore islands, with 93 of those inhabited.  

By their very nature, rural, remote and island communities must be entrepreneurial, innovative, and cooperative. Failure to be so drives the loss of local economies, people, and services. To Scotland, its rural economy is vital, it underpins much of its strong tourism, food, and drink sectors, as well as a share of its science and technology sectors, manufacturing, and service economy.  

Rural Scotland is home to a third of Scotland’s companies and around 15% of its workforce; between 2010-2018, it is these businesses that accounted for most of the firm-level productivity growth prior to the COVID-19 pandemic. Remote areas alone accounted for 81.3% of total productivity growth, accessible rural areas, 25% and urban areas made a net negative contribution (-6.6%). The pandemic had a profound effect on rural places, but the decline in firms and labour was not as substantial as in urban areas and accessible small towns.  

Innovation is high on the policy agenda for the Scottish Government; in mid-2023, it launched its Scottish National Innovation Strategy. Coupled with this, developing rural leaders – from all generations - with an entrepreneurial and change-making mindset, has been a central area of ongoing investment via Scottish Enterprise, the government’s economic and trade development agency. In total over 750 rural leaders from all over Scotland, representing all sectors, organisation types, including social enterprise, have completed the programme and remain engaged with alumni activities and collaboration.  

Entrepreneurialism and social innovation are strong in Scotland, often where profit isn’t the sole goal. Those involved provide goods and services that replace centralised offerings, including for healthcare and social services.  

Highly progressive firms are also on the increase in Scotland, such as the Saxavord UK Space Station at Lamba Ness in Unst, Shetland, represent exciting future opportunities. Old concept businesses, such as distillers of gin and whisky have adopted a range of important adaptations to their historic, profit-driven focus, into socially-rooted intent – such as providing meaningful, local employment, e.g. Harris Distillery and one, Arbikie Distillery, which is committed to a wholly circular model.    

Collaborations with universities and academic institutions and the Scottish Government and regional agencies continue to be an important enabler to future innovation, as does the educational infrastructure for skills development for rural and island communities, in particular via the University of the Highlands and Islands and SRUC, Scotland’s Rural College.  

Linked to innovation, the National and Economic Strategy for Scotland has a firm commitment to a just, net-zero transition, to developing rural women, strong intergenerational connections and young rural people with their enterprise skills and to further develop the well-being economy.  

About the report and Missions 

Amanda Fox, Head of Rural Economy for the Scottish Government said: “Innovation is at the heart of unlocking opportunities in rural regions. This project will provide Scotland with a powerful overview of where rural innovation is flourishing and how and where we could do better, as well as demonstrating the areas where we have much to show the rest of the world.”  

 During OECD’s Mission, the team visited 15 entrepreneurs and enterprises in the four regions, including Dunnet Bay Distillery and AMTE Power in the far north, construction company J&D Pierce in Ayrshire, and BASF Callanish in the Other Hebrides.   

 “To ensure that we captured the innovation that exists in communities, we organised for the OECD Mission to meet seven very different Scottish Development Trusts – Thurso, the Kyles of Sutherland, Galloway Glens, Kirkcudbright and Beith, and in the Outer Hebrides the Galston and West Harris Trust,” Ms Fox adds. “In terms of landscape, visits included the Galloway and Ayrshire UNESCO Biosphere and the Threave Landscape Restoration Project.”  

 Commenting on her involvement in the Scotland Mission, where OECD visited the four case study regions, the head of OECD study, Michelle Marshalian said:  

“Scotland’s rural entrepreneurs and rural innovation are solving some of the challenges of rural regions that are not necessarily able to be addressed directly or indirectly through government support.  In Scotland, we saw were a lot of great entrepreneurs with traditional businesses, such as science and technology companies, that were taking a local approach to developing innovative new ways of solving problems. 

I produced four podcasts during the process of developing the Enhancing Rural Innovation Report for Scotland which help to further illustrate the importance of innovation in a rural context.

  • Episode 1: Michelle Marshalian, OECD - In this Episode, host Jane Craigie, speaks to Michelle Marshalian, OECD's lead author of these reports. Michelle speaks about what rural invovation spans, and what OECD discovered in Scotland. https://www.buzzsprout.com/2251719/episodes/13638896  
  • Episode 2: Phil Raines, Scottish Government - Phil discusses why Scotland became involved with the OECD Enhancing Rural Innovation Project, what rural innovation means to Scotland's rural places and communities and his observations about Scotland's rural economy. 
  • Episode 3: Julian Pace, Scottish Enterprise - Julian has had a long history with Scottish Enterprise, he founded the organisation’s Rural Leadership Programme and was instrumental in developing Scotland's relationship with the OECD Rural team. 
  • Episode 4: Rob Clarke, Highland and Island Enterprise - Rob talks about the Highlands and Islands of Scotland, the OECD project and rural innovation's importance to Scotland's economy. 


The report is available to read free online and can be accessed by the link below: