Abstract Smart technology covers a broad area of inquiry from complex devices utilizing optoelectronics and sensors for monitoring structural integrity to research into molecularly intelligent materials. Much smart technology is still embryonic, but promises considerable benefits in a wide range of industry sectors. Two years ago the first Smart Structures Research Institute was inaugurated at the University of Strathclyde, in Scotland, to stimulate the development of these new technologies in Europe. This paper explores the options for developing the technology within different industry sectors. The authors discuss the nature of ‘demand’ in innovation and demonstrate that an awareness of ‘complementary assets’ is important at a very early stage of the innovations process. The Institute's successes in bringing together partners in collaborative research, establishing a communication network and exploiting different public funding schemes at different stages of research are all important ways in which it has influenced the dynamics of innovation. The authors conclude that assessing the future prospects of a research institute must include a number of market and organisational issues as well as technical inputs, and that the process of assessment itself serves as a further influencing factor on future direction and focus.