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News : Innovation Last Updated: Feb 10, 2011 - 6:41 AM

Innovation: Ireland's 'smart economy' strategy, universities and free-lunch entrepreneurship
By Michael Hennigan, Founder and Editor of Finfacts
Dec 30, 2010 - 9:23 AM

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Innovation: Ireland's faith-based 'smart economy' strategy was reaffirmed this week as the Government's hoped for engine of growth despite the evidence that it isn't working. Apart from the wanton waste of public funds at a time of austerity, there is the important issue of universities as vested interests seeking public funds from amateur politicians and the inherent risks of academics in the dual roles of tenured professors and for-profit scientists in pursuit of what could be termed free-lunch entrepreneurship.     

In a thought-provoking book, Innovation, Profit and the Common Good in Higher Education (Palgrave Macmillan, 2010), John Harpur a lecturer in the Computer Science Department, National University of Ireland Maynooth, explores the current commercialization and innovation policies in higher education; the role of universities in guaranteeing economic prosperity; conflicts of interest and the questionable evidence in support of current policies.

This week, Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, said the Government will invest €570m in science, technology, innovation and enterprise in 2011 (the annual science budget exceeds €1bn). O’Keeffe said he would continue to implement the recommendations of the Innovation Taskforce which "aims to make Ireland the best place in Europe to turn research into jobs and to start and scale an innovative firm."

The Innovation Taskforce report was published in March 2010 and is a flawed set of aspirations where the vision of creating a Silicon Valley in Ireland is set forth with potential for creating 117,000 to 235,000 new jobs in high-tech over a decade.

It ignores the need for a market, which has been crucial to success in the United States. It also ignores the related issue of responding to market tastes as exemplified in the phenomenal success of the reborn Apple under the stewardship of Steve Jobs  - - now the world's most valuable technology company.

In common with many successful innovative companies, Apple's genesis was not in a university lab. Finnish mobile phone company Nokia, which dates from the 1860s, was selling toilet paper in Ireland before its success in telephony.

John Harpur cites Gordon Moore, a co-founder of chipmaker Intel, as saying that Stanford University was not essential to the formation of Silicon Valley; its business modes and models, and the sustained, rapid technology-based growth were neither started nor made fundamentally possible through the presence of "this university." 

Moore said the narrative of Silicon Valley has been affected by "timeline distortion" and the favouring of creation "myths" giving primacy to one contingency over another. Harpur says Moore is wary of the "twin" tendencies to use "snapshots" of Silicon Valley as a basis for constructing causal explanation of events and supporting architectures for future technology success.

Moore says clusters of small start-ups in technology parks miss the dynamics of Silicon Valley with its mix of large and small firms. The capacity of a large firm in a new technology to generate more ideas and opportunities than it can exploit puts small start-ups in a highly favourable position e.g. the success of the Apple iPhone has spawned the extensive development of 'apps.'

Harpur says it is moot whether the old Schumpeterian notions of  conflict and disruption can be adequately captured in current higher education commercialization policies.

In 2006, the Irish Government published a science strategy with the goal to spend €8.2bn and be recognized as a 'world-class knowledge economy' by 2013.

The plan stressed the need to develop a 'fourth level' in universities by increasing the output of PhDs.

Prof. Amar Bhidé said in his book The Venturesome Economy, that the US venture capital-backed businesses he studied, 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 - - people who are close to users.

UCC economist Dr Declan Jordan wrote in The Irish Times last year that: “A census of post-doctoral researchers that left Science Foundation Ireland-funded projects in 2007 found that 9% went to work in science and engineering businesses. A further 10% went to work in industry in other sectors. The most common destination, at 38%, for these post-doctoral researchers was another post-doctoral position on a different research project.”

He added: “It is worrying, given the significant taxpayer investment, that there is so little movement of researchers from funded projects into business. The most effective method of knowledge transfer from universities to businesses is on two legs.” 

The Economist says in an article on PhDs in its Christmas issue, The disposable academic - - Why doing a PhD is often a waste of time, that there is an oversupply of PhDs. Although a doctorate is designed as training for a job in academia, the number of PhD positions is unrelated to the number of job openings. Meanwhile, business leaders complain about shortages of high-level skills, suggesting PhDs are not teaching the right things. The fiercest critics compare research doctorates to Ponzi or pyramid schemes.

The self-styled newspaper says universities have discovered that PhD students are cheap, highly motivated and disposable labour. With more PhD students they can do more research, and in some countries more teaching, with less money. A graduate assistant at Yale might earn $20,000 a year for nine months of teaching. The average pay of full professors in America was $109,000 in 2009 - - higher than the average for judges and magistrates.
PhD students and contract staff known as 'postdocs,' do much of the research these days and there is a glut of postdocs too. In Canada 80% of postdocs earn $38,600 or less per year before tax - - the average salary of a construction worker. The Economist says the rise of the postdoc has created another obstacle on the way to an academic post. In some areas five years as a postdoc is now a prerequisite for landing a secure full-time job.

While these armies of low-paid PhD researchers and postdocs boost universities’, and therefore countries’, research capacity. Yet that is not always a good thing. Brilliant, well-trained minds can go to waste when fashions change.

John Harpur cites the potential for fraud at universities with ghost-written scientific papers, multiple authorship with a professor claiming the position of 'honorary' author and so-called 'salami-slicing' where the same research is reported in several papers to help boost a university's league rankings.

Harpur cites a report which found that a lot of research articles largely consist of a reproduction of existing knowledge and few new insights while a workshop organised by the Organisation for Economic Cooperation and Development (OECD) revealed that only a "tiny fraction" of companies become R&D leaders. Canadian CEOs said their greatest challenge, was finding someone technically proficient with commerce skills.

The risk for a money-challenged Ireland is that we overproduce PhDs and end up subsidising foreign companies overseas rather than foreign companies based in Ireland.

Minister Batt O'Keeffe said this week that nearly half of the new projects won in 2010 by IDA Ireland, the inward investment agency, were research and development-based.

This claim cannot be relied on as it could range from little to a lot! No detailed information is available.

Foreign-owned companies are responsible for about 90% of Ireland's tradeable goods and services exports and it is believed that very little original research is done in Ireland.

Research & development is broadly defined and it can include work at technical call centres or in localisation of software systems.

John Harpur says data on business spending paint a muddled picture with static real current spending in the period 2001-2007 coincident with rising capital expenditure, which suggest that companies were cautious about human capital investment.

Last August, Harvard University said that it had found a prominent researcher, Marc Hauser, “solely responsible” for eight instances of scientific misconduct.

Fraud or scientific misconduct can happen without the motivation of riches. However, there is no shortage of examples where pharmaceutical companies have paid for research but on condition that adverse findings are concealed.

At a time when the OECD's PISA tests have debunked the myth of Ireland's world class education system, John Harpur raises concerns about the impact on undergraduate teaching of the focus of universities on money-making activities.

University presidents have become lobbyists in a country dominated and ruined by vested interests while well-funded communications departments feed the media with dubious claims on world-beating discoveries, feeding into official spin and delusion.

The quote: “Academic politics are so vicious precisely because the stakes are so small,” is attributed to former Harvard University professor and diplomat, Henry Kissinger, US President Woodrow Wilson, the thirteenth president of Princeton University, and others.

However, John Harpur raises very important issues in relation to Irish public policy. He deserves credit for being a rare insider in Ireland to address inconvenient truths to little emperors. His book is well researched and international in its scope.

We applaud people who are willing to rattle the cages of conventional wisdom and conservatism.    

So in conclusion, what is the result of the billions spent on university research:

  • Only vested interests would claim that university research could become an engine of Irish jobs growth

  • In a clear signal of failure, last November the Government established the fourth advisory group or taskforce since December 2008 to advise on the floundering 'smart economy' strategy

  • Spin permeates Irish enterprise policy and university presidents as lobbyists and fund-raisers feed this corrosive system 

  • The example of Germany shows that high university enrollment is not necessarily a predicator of economic success

  • According to Enterprise Ireland 100 spin-outs from university research resulted in the creation of 1,000 jobs in 10 years

  • Most high tech firms never exceed a staff of 10 workers

  • The default exit for a venture capital investment in a young Irish tech firm is a sale to an American firm before the taxpayer sees any value-added

  • Where is the market for a large number of Irish firms that have a 25% chance of reaching a seventh birthday?

  • Without a domestic market, it's difficult for a firm to become a successful exporter

  • Start-ups are essential for growth in an economy but innovation is a lot more than in the narrow area of high tech

  • The model of knowledge workers in rich countries and low-cost manufacturing elsewhere is becoming increasingly redundant

  • It's foolish to believe that high spending on R&D is a guarantee of success

  • We risk using scarce tax funds to subsidise other countries through graduate exports

  • This month, the Irish National Pensions Reserve Fund (NPRF) announced a $50m investment in US venture capital firm Polaris Venture Partners. Taoiseach Brian Cowen said it was a 'coup' that the firm decided to open an office in Dublin, even though we are paying them for it

  • In 2000/05, Ireland invested €35.5m in MediaLab Europe, a digital research service using Massachusetts Institute of Technology (MIT) branding. Before it failed in 2005, MIT collected €10.6m directly and €24.9m was paid by the Government to the company. It also made a property which had cost €22.5m available to the company for its operations at a nominal rent. It too was a 'coup.'

  • The biotech industry made its first profit after 42 years, in 2008  -- the 3 biggest firms were responsible for the lion's share of the earnings

  • With the exception of Israel, which was the beneficiary of the greatest movement of intellectual capital in history over a limited time, after the collapse of the Soviet Union, the Silicon Valley model has not been successfully replicated elsewhere. Israel had the advantage of developing a commercial high tech sector as it already had a significant defence research capability.   

SEE: also Finfacts article; Irish Innovation: Ireland banking on the faith-based smart economy strategy

Smart economy and money moving to emerging world: what to do? - - "The term smart economy is divisive because it has connotations of elitism. When we refer to the smart economy, are we suggesting the rest of the world is dumb? I don't think it has been thought through. To me the smart economy is about doing things better and doing more with less,"  said Seán O'Driscoll, the chief executive of one of Ireland's most successful indigenous manufacturers, Glen Dimplex.

Prof. Venohr said: "China may be the world's factory but German companies are building it.”

These companies are generally family run and have a focus on innovation in the broadest sense, quality and customer service.

University of Limerick spinout ChipSensors sold to US firm; Second UL spinout sale raises questions on huge Irish public investment in research

Net job growth in US driven entirely by start-ups

IDA Ireland Horizon 2020 Strategy: Lack of coherence on changes facing existing Irish-based multinationals/ challenges of adapting model for China and India - - Prof. Seamus Grimes

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© Copyright 2011 by Finfacts.com

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