Innovation
European Commission launches fantasy innovation indicator; Irish patent filings at 30-year low
By Michael Hennigan, Finfacts founder and editor
Sep 13, 2013 - 5:22 PM

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The European Commission on Friday announced that Sweden, Germany, Ireland and Luxembourg are the EU member states getting the most out of innovation, according to a new proposed innovation indicator. It can only be termed a fantasy indicator as Ireland's patent filings at the Irish Patents Office in 2012 were at the lowest since 1982 while the Commission stupidly treats an increase in tax-related services revenue diversions to Ireland that are booked as exports, as a indicator of rising innovation output.

To compound this fantasy, Seán Sherlock, junior minister for research, brags about "high level of patenting." Is he ignorant of the facts or trying to fool the public?

There were 492 Irish  resident applications in 2012 down from 494 in 2011 and the lowest level since 434 applications were filed in 1982, according to World Intellectual Property Organisation (WIPO) data.

PCT (Patent Cooperation Treaty) patents makes it possible to seek patent protection for an invention simultaneously in each of a large number of countries by filing a single "international" patent application.

PCT applications from Irish residents fell from 428 in 2006 to 415 in 2011 and 390 in 2012.

The "Indicator of Innovation Output" measures the extent to which ideas from innovative sectors are able to reach the market, providing better jobs and making Europe more competitive. The indicator was developed at the request of EU leaders to benchmark national innovation policies, and shows that significant differences remain between EU countries. The EU as a whole performs well in an international comparison, even though it remains behind some of the most innovative economies worldwide.

The OECD said in its Economic Survey of Ireland that was published on Thursday that "Ireland offers a supportive environment for innovation, according to international scoreboards, but this largely reflects the presence of high-tech multinational firms, while “indigenous” (domestic) enterprises are characterised by low productivity."

Just over one quarter of foreign firms supported by IDA Ireland, the inward investment agency, do minimum level and up R&D.

The proposed indicator is based on four components chosen for their policy relevance.

  • Technological innovation as measured by patents;
  • Employment in knowledge-intensive activities as a percentage of total employment;
  • Competitiveness of knowledge-intensive goods and services. This is based on both the contribution of the trade balance of high-tech and medium-tech products to the total trade balance, and knowledge-intensive services as a share of the total services exports;
  • Employment in fast-growing firms of innovative sectors.

It would likely surprise the chairborne 'experts' in Brussels that  most of the staff in a high tech company such as Google Ireland work in sales and general administration. Besides, they don't know but should know that computer services exports are exaggerated by tax-related diversions from other countries. 

About 90% of Irish headline exports are made by foreign firms and they do not do research in Ireland that merits patent filings.

As to services exports, in 2012, about 40% resulted from tax-related diversions of revenues from other countries. Google books almost half its global revenues in Ireland.

Irish ministers, addicted to spin, of course love foreign distortions of reality such as this current one and Seán Sherlock, junior minister for research, lauded Ireland being in the highest category of “top performers.”

Sherlock said “Ireland’s performance under the new 'Indicator of Innovation Output' is highly significant as it measures the extent to which ideas from innovative sectors are able to reach the market, providing better jobs and making Europe more competitive.”

“This is a very positive indication of improvement in Ireland’s competitiveness in key areas of the economy. The top performers in the EU owe their ranking to doing well on several or all of the following factors: an economy with a high share of knowledge-intensive sectors, fast-growing innovative firms, high levels of patenting and competitive exports. “.

Sherlock pointed out that the indicator was developed using state-of-the-art statistical analyses, and international quality standards by Eurostat, the OECD and the IMF were taken as a reference when constructing the indicator. “This is testament from an authoritative source that we are on the right track to recovery and our innovation performance is playing a major role."

Sherlock would neither recognise balderdash or "state-of-the-art statistical analyses."

It is fantasy and and this year Microsoft was declared Ireland top exporter, having increased revenues by 37% through tax-related accounting transactions.

Finfacts reports::

Irish Innovation: Evidence of science policy failure mounts

Irish Economy: GDP up 0.9% in 2012; US MNC tax moves raised computer services exports by 15%

Irish Economy 2012: At least a third of value of Irish services exports is overstated

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