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News : Innovation Last Updated: Aug 25, 2010 - 2:37:18 AM

Innovation, The Venturesome Economy and Ireland
By Michael Hennigan, Founder and Editor of Finfacts
Dec 1, 2008 - 10:00:49 AM

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President-elect Obama's commitment to maintain America’s technology leadership in the world, through an increase in public funding of basic research, has coincided with the publication of a new book on innovation, The Venturesome Economy, which questions the value of such an approach while in Ireland, billions of euros continue to be spent on university research in pursuit of the goal to become a "world class knowledge economy" by 2013 but the Irish approach lacks a clear strategy or an informed public debate.

Amar Bhidé, an Indian-born professor at the Columbia Business School, argues in The Venturesome Economy, that while innovation typically comes from scientists and engineers, the obsession with the number of US doctorates and technical graduates compared with the rising numbers in China and India,  is misplaced because the “high-level” inventions and ideas cannot be easily contained within national borders and Asia cannot prevent America from capitalising on their inventions with better business models.

Bhidé says when breakthrough ideas know no borders, a nation’s capacity to exploit cutting-edge research regardless of where it originates is crucial:America's venturesome consumption—the willingness and ability of its businesses and consumers to effectively use products and technologies derived from scientific research—is far more important than its share of such research.In fact, Prof Bhidé says a venturesome economy benefits from an increase in research produced abroad: the success of Apple’s iPod, for instance, owes much to technologies developed in Asia and Europe.

Many players—entrepreneurs, managers, financiers, salesmen, consumers, and not just a few brilliant scientists and engineers—have kept the US at the forefront of the innovation game. As long as their venturesome spirit remains alive and well, America need not fear advances abroad. The Venturesome Economy explains why—and how it can keep it that way.

Bhidé says his study shows how mid-level players combine and extend higher-level innovations. The VC-backed businesses use different people and procedures than the typical lab doing high-level research: They employ a much smaller proportion of PhDs in their technical staff, and their overall workforces contain a larger proportion of managers and sales and marketing staff. In contrast to the physicists who developed the modern transistor inside the precincts of Bell Labs, the development teams of many of the VC-backed businesses he studied had a close, ongoing relationship with users. Communication and persuasion were as crucial as technical virtuosity, and the technical tasks themselves involved more ad hoc improvisation than classical scientific experimentation.

Finfacts Report: Apple's iPod: Capturing Value in a Global Innovation System

Bhidé says the development and effective use of innovations requires multilevel, multifaceted advances and he asks: Why has the US maintained (or possibly expanded) its productivity and per capita income lead while the EU and Japan have increased their shares of PhDs, scientific articles etc.?

Finfacts 2005 Report: "It ain't what you do, it's the way that you do I.T." - Why US multinationals win the productivity race

The Venturesome Economy

Introductory Chapter

Final Chapter

Innovation is not a zero-sum game - - Amar Bhidé

“Should the industry of Ireland, in consequence of freedom and good government, ever equal that of England, so much the better would it be... for England. As the wealth and industry of Lancashire does not obstruct but promote that of Yorkshire, so the wealth and industry of Ireland would not obstruct but promote that of England.”

 -Adam Smith, 1779, author of the seminal work Wealth of Nations, which was published in 1776

Ireland and Innovation

It's currently a golden time to be involved in university research in Ireland.

The National Development Plan has allocated over €8 billion for the goal of becoming a world class knowledge economy by 2013.

Never mind, the lamentable record in developing a national broadband system and policymakers' consistent inability to get value for money from public spending projects, there is hardly another developed country, where the huge allocation of public funds, would not even merit a serious debate.

In the past year, it was reported that Ireland's policy to promote innovation through interaction between businesses and third-level institutes is having a disappointingly limited effect, according to a study carried out by two economists from University College Cork (UCC).

In an article in the Irish Times Innovation magazine last January, Declan Jordan and Eoin O'Leary from UCC wrote:"The massive public investment in research at third level may have a disappointingly limited effect on future Irish prosperity."

The article was based on a paper presented by the economists to the Statistical and Social Inquiry Society of Ireland.

"Our study is just one of a number of recent studies that fail to find the positive role for third-level colleges on which the Government has shaped Irish innovation policy."

The economists say that the Government policy is based on a "science-push" view of innovation, where scientific laboratories are the source of the new products and processes introduced in Irish businesses.

"It overlooks the majority of business innovations that are non-technological, the shining example of which is Ryanair," they wrote. "It is also misguided in that business innovation is usually market-led. Historically, third-level institutes have rarely been the main source of business innovation in any country."

In their first survey of 184 high-technology businesses in 2004, Jordan and O'Leary found that the greater the frequency of direct interaction with academics, the lower the probability of both product and process innovation.

In 2007, they undertook a similar survey of nearly 200 small and medium enterprises in the southwest and southeast and found interaction with third-level institutes had no effect on innovation.

The authors say possible reasons for these disappointing results might be that academics are either not interested or not offered enough incentive to interact with business, and that businesses do not appreciate the level of expertise available in universities and institutes of technology.

More research is necessary to answer these questions. This might include analysis of the barriers to university-business linkages as well as the nature of these relationships when collaboration is present.

They conclude -one inescapable fact is clear: this research is now urgent if the interaction between business and third level is to be the cornerstone of our multi-billion drive towards creating an innovative economy.

Last month, Stephen Collins, Irish Times Political Editorreported that the Taoiseach Brian Cowen is finalising an economic recovery plan which will be unveiled in the next few weeks. It will contain a range of tax incentives and grants designed to make Ireland the most attractive place for companies engaged in research and innovation.

Cowen is reported by his advisers to be hoping the plan will have the same positive impact in helping the State out of the economic downturn as the Financial Services Centre had in the late 1980s.

We noted then that individual initiatives could be positive but as as an overall strategy, it appears to be more a public relations effort as two decades after the last serious effort to address the dangerous challenges facing the country, Ireland and the world has changed -- more specifically America has changed and Ireland is banking again on the US.

The Irish-owned high tech sector has not met the 1990's expectations of success and apart from providing graduates to support the policy of encouraging American companies to establish R&D facilities in Ireland, the reality is that Irish start-ups can be nurtured to a certain level until the founders sell to a US company, leaving open the question of the  long-term benefit to the Irish economy.

Ireland's leading home-grown high tech firm Iona Technologies, was sold to a US company in 2008.

Finfacts Report: The Irish Mind and the Knowledge Economy: Should we bank everything on fuzzy leprechaunic political dreams? - -including access to Jordan/O'Leary paper.

Finfacts Report Dec, 2008: Coughlan appoints Enterprise Feedback Group on plan for Ireland to become a world-class knowledge economy by 2013

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© Copyright 2007 by Finfacts.com

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