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News : Innovation Last Updated: Aug 24, 2010 - 11:45:44 AM

Innovation Ireland Taskforce's aspirational report; US banks / credit-card companies contribute most money for start-ups - - not venture capital companies
By Michael Hennigan, Founder and Editor of Finfacts
Mar 12, 2010 - 9:10:01 AM

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The Innovation Ireland Taskforce's report which was launched by Taoiseach Brian Cowen on Thursday, is an aspirational rather than a strategic document. It does not set out costs and supporting start-up growth and jobs targets with credible data. In the US banks and credit-card companies contribute most money for start-ups, not venture capital companies, as commonly thought.

There are some useful proposals on support funds; increasing interest and competency in maths and science; tax breaks; updating bankruptcy laws; developing linkages between start-ups and multinationals, creation of placement schemes in companies for both graduate and undergraduates; marketing of Ireland as a leading innovation location and destination of choice for European and other overseas investors and putting entrepreneurship at the heart of enterprise policy.    

The goal is that by 2020 Ireland will have a significant number of “large, innovation-intensive companies, which are Irish headquartered and owned” and the aim is to create 117,000 to 215,000 net new jobs - - at the lower end, the likely level of employment in all IDA Ireland supported companies in December 2010. The upper end is merely a fantasy.

In a system of limited accountability and powerful vested interests, where the political leaders who had embraced construction as the engine of growth, have now turned to university research as the great hope for the future, it's important the current consensus approach is questioned.

The 28-strong Innovation Taskforce mainly comprised university presidents, senior civil servants, State enterprise agency managers and multinational company managers. Very few of these have any experience of entrepreneurship and many of them are high earners on a guaranteed income for life. Nevertheless, they say we need a sea change in attitudes -- in public and private sectors - - towards innovation and entrepreneurship, to recognise that they involve risk, and occasionally result in failure.

They recommend that the diaspora be engaged and this year Minister for Foreign Affairs Micháel Martin wrote to 300 "influential" Irish overseas to invite them to join a new global network. Last year, Martin explained his reason for holding his Cork teaching job open since 1989 was that he had a young family to support. The unreality of his position is illustrated by the fact that at 50, if he was to cease being a minister and TD this year, he would earn over €200,000 in his first year of retirement.

IBEC and the US Chamber of Commerce in Ireland endorsed the plan - - neither group had any issue with whether the amount of public funding would be optimally used - - some public spending is of course always good!

Former ESRI economist Danny McCoy, now IBEC director general , said a policy as advocated was successfully pursued by Finland in the early 1990s.

Of course we have all heard of Nokia but that company was selling toilet paper in Ireland before venturing into mobile phones. Nokia had acquired Jeyes Ireland also makers of the disinfectant"Jeyes Fluid." It did not develop from university research.

Deutsche Bank said last week that government incentives have only limited importance in the US and contribute only roughly 1.5% of the total initial capital injections for start-ups. Banks and credit-card companies contribute - -  in contrast to widely held beliefs - -  the bulk, i.e. 39%, of start-up money.

A key aspect of the taskforce report, is using Silicon Valley as a template:

“It is instructive to consider the example of Silicon Valley. The Silicon Valley area has a population of approximately 2.5 million and an employment pool of 1.4 million (by way of comparison, total employment in Ireland is approximately 2.1 million out of a population of 4.5 million). It is estimated that 320,000 people are employed in 5,500 high technology firms.

Were Ireland to achieve levels of employment in high-tech firms comparable with Silicon Valley, the numbers would increase substantially. More realistically, Ireland might aspire to be a leader in Europe and aim to have 15% of employment concentrated in high-tech firms. This would result in almost 346,000 people being employed in high-tech firms by 2020 - - a net increase of 215,000 jobs over the period.”

Silicon Valley has a market of more than 300 million!

This is why the likes of Facebook can get traction but after 7 years, the US survival rate for a high-tech company is 25% - - not an issue covered in the report.

Amar Bhidé, an Indian-born professor, now at Harvard University, 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.

Where is the initial market for Irish spin-outs from universities?

ETH Zurich (Swiss Federal Institute of Technology Zurich) has a 23rd ranking in the Academic Ranking of World Universities - -  the highest in the European mainland - - but only produces less than 1,000 jobs from over 100 spin-outs in 10 years.

Why would Irish universities produce tens of thousands of jobs?

There is no detail on survival rates or markets.

Last year, serious questions, were raised on the Irish policy of relying on university research to provide new sources of growth for the Irish economy. Irish Software Association (ISA) chairman and co-founder of Iona Technologies, Dr. Seán Baker, told a meeting of researchers and software executives, that research needs to involve commercial input from a much earlier point in the process. He also warned academic researchers that overvaluing intellectual property inhibited commercialisation.

"People think of the big names like Microsoft, Apple, HP, Intel and Xerox as once being new tech-start-ups," said Professor Bart Clarysse of Imperial College, London, in 2009. "Yet most of these highly successful companies did not develop their own ideas. Typically they took existing technologies, developed by pioneering - - and sometimes financially unviable - - companies. They bought other businesses to help them succeed and appear credible."

The taskforce report says: "The Taskforce believe that the implementation of the recommendations in the report, supported by a favourable economic context, has the potential to contribute to net job creation in high-tech firms of the order of between 117,000 and 215,000 between now and 2020."

Over 200,000 net jobs? It wasn't achieved in Ireland at the height of US tech boom and where will the markets be?

This is Irish fantasy policy making.

Politicians, business groups and even technology journalists may buy dreams of big job creation gains based on no sound evidence but Finfacts will not be part of that consensus.

Innovation Taskforce Report

Taoiseach launches Innovation Ireland Taskforce report; Says important marketing message for Ministers to carry abroad for St. Patrick's Day

Innovation Ireland Taskforce: Yet another 120,000 jobs plucked from the air by insiders?; In UK 2,900 high-tech companies in business since 1991 have only 40,000 jobs

Spin cannot hide lack of new thinking on jobs - - Irish Times article by Michael Hennigan 

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