Kymata, a spin-off company from Glasgow University, could ease the global communications traffic jam and bring down costs.

Its work on planar optoelectronics has produced a system that can "funnel" many more conversations into existing fibre-optic lines and "filter" them back out the other side. This will vastly increase the amount of information that can be sent through existing telephone lines.

This technology is one of 40 examples of groundbreaking, commercially important research that are highlighted in a publication from the Committee of Scottish Higher Education Principals, which is taking a lead in stressing higher education's role in the Scottish economy.

Its brochure, The ÁñÁ«ÊÓƵ of Innovation, says Scotland has a worldwide reputation for scientific innovation, from the telephone and penicillin to Dolly the sheep. This reputation does not rest on the past because Scottish higher education institutions are creating products and processes that the world's economy will rely on in the future, it says.

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The 16-page booklet gives pithy accounts of intriguing projects ranging from a Robert Gordon University "zero heating" house - which relies on heat produced by the occupants, appliances and the sun - to a Scottish Agricultural College move towards "super milk", which could cut the risk of cancer and heart disease.

In a separate, more sober document, Coshep warns the Scottish Executive of the dangers of marginalising higher education in trying to develop a knowledge economy. The executive is consulting on new enterprise networks, and Coshep says staff in enterprise agencies lack a thorough understanding of higher education.

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Universities and colleges should be the main partner in areas such as research and development, high-level skills training and future strategies, it says. "However, too often the sector is not brought on board or consulted until the later planning stages of an initiative. This greatly reduces the positive impact that higher education institutions can have on the Scottish economy."

One solution could be staff secondments between enterprise agencies, higher education institutions and business, it suggests.

Coshep criticises Scottish Enterprise, the national development agency and the Local Enterprise Company network as being "not particularly effective" in delivering training. It says this role should be transferred to training providers, including higher education institutions. It also proposes that the role of broker should eventually go to the Scottish University for Industry.