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News : Innovation Last Updated: May 13, 2011 - 8:23 AM

Bruton announces €55m funding of initiatives for commercialising Irish R&D; More funds for failed 'smart economy' project?
By Michael Hennigan, Founder and Editor of Finfacts
May 12, 2011 - 12:05 PM

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Minister for Jobs, Enterprise and Innovation Richard Bruton TD today announced five major initiatives aimed at commercialising Irish R&D; supporting  innovation and high growth businesses. Announcements included a first centre in cloud computing to make Ireland a world leader in this high growth sector. The announcement appears like more funds for the failed 'smart economy' project before there is a serious assessment of the €2.5bn annual science budget.

The announcements were made as part of speech to the Irish Internet Association’s annual conference, entitled “Open for Business,” but so far, while there are several reports on spending produced each year, there is little data on outcomes for a reason.

University research will never become a jobs engine and even in the best technology universities in the world, the number of spinouts from research is insignificant. For the Irish taxpayer, the key problem is that the default route for a spinout with potential, is to be sold to a bigger American firm, before there is any significant value added for the Irish economy.

The Minister’s announcements include:

  • A €5m applied research centre in cloud computing
  • A €6m research centre in energy/smart grid
  • €44m in funding for Principal Investigator research teams in life sciences, ICT and energy
  • Funding and supports for 25% more high-growth and high-potential start-up companies

The 'smart economy' project was launched in December 2008 as a rebranding of existing science policy with the objective of it becoming an engine of jobs growth.

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.

Finfacts wrote last month that high-tech innovation is a popular focus of political leaders, including President Obama and Prime Minister Cameron. However, while innovations in various countries will help employment grow over the long term, as new technology spreads throughout an economy and transforms other, larger sectors, the sector itself is not a job creation engine.

Eurostat, the EU's statistics office, says that in 2006, 1.1% of total employment in the EU27 was in high-tech manufacturing. In Ireland the rate was 2.7% with 53,000 employed and US-owned Intel the biggest employer. Manufacturing as a percentage of total employment was 18.2%, 13.3% in Ireland and 22% in Germany.

McKinsey, the management consultants, say that the semiconductor and biotech industries, each employ less than one-half of 1% of US workers.

The so-called smart economy has got the lion's share of Irish enterprise public funding in recent years with research and development spending in higher education almost trebling from €322m in 2002. As a ratio of GDP (gross domestic product), it is now above the average for the OECD area of mainly developed countries.

According to Forfás, science related public spending across 39 government departments and agencies rose from €1.2bn in 1999 to €2.5bn in 2009.

While research can have several benefits, direct commercialisation is not a significant one. For example, in the US the income from intellectual property is 4% of university research spending and in England in 2009, only £73m was earned.   

The OECD says there is "little evidence of success" in the commercialisation of university research and according to Enterprise Ireland, it has assisted 100 spinout companies from universities and public research institutes over a decade and about 1,000 jobs were created.

The brutal reality is that the default route for the odd spinout with international potential, is to be acquired by a US firm  - good news for founders but not the taxpayer.

A UCD study shows that in 2009, firms supported by venture capital companies, employed 9,700 people.

We said in April that Minister Bruton must do a reality check on the high-tech sector that is not led by the many vested interests. He must also reject arguments that Ireland should aim to spend 3% or more of GDP on R&D like for example Sweden and Finland.

These countries have world class indigenous companies while multinationals will continue to do little original research in Ireland.

Irish enterprise policy must be driven by an understanding of the science personnel demands of the multinational and indigenous sectors. Otherwise, we as a bankrupt state, may be producing highly skilled people for other countries.    

What is the result of the billion 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;

  • Startups 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;

  • Last December, 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;

  • Last January, it was announced that the latest Irish high tech hope, Norkom, was to be acquired by UK defence industry giant British Aerospace;

  • About 7,500 full-time equivalent researchers on the public payroll.

“Today’s announcement represents a series of initiatives aimed at addressing the commercialisation gap, to ensure that good ideas can become great businesses which create jobs," Richard Bruton said today. “In my statement on Tuesday’s Jobs Initiative I said, as I have been arguing for some time now, that if we are going to grow the economy and create jobs we have to focus on three things: 1) reducing costs to business 2) improving access to finance, and 3) encouraging research, developing and innovation.

“I was pleased that the Minister for Finance announced, as well as substantial measures on costs and access to finance, a significant change to the R&D tax credit regime to make it more attractive for multinationals to employ researchers and locate R&D facilities here. Today I am delighted to announce a series of measures that my Department will be implementing in the short term to significantly improve the supports to the innovative Irish companies that will create the jobs of the future.

“If we are to develop the companies of the future in Ireland, we must not only fund high-tech research in our universities and support high potential start-up companies, but also crucially address the gap in between the two -commercialisation. The Programme for Government commits to addressing that gap in order to develop ideas into workable businesses so as to create the jobs of the future and get the economy growing again. Applied research centres and principal investigator teams are highly advanced models which partner researchers with both universities and industry partners, to ensure that commercialisation can happen.

“In particular, cloud computing is an area which both Fine Gael before the election and the Programme for Government identified as a key priority. According to a recent report by Microsoft, Ireland’s cloud computing industry could be worth €9.5billion per annum and employ 8,600 people by 2014. The new applied research centre announced today, which will connect both multinationals and Irish enterprises with researchers, can see Ireland take the lead in this crucial high growth area."

Summary of projects:

1. Applied research centre in energy/smart grid, €6m (Science Foundation Ireland)

The Government will provide €6m to immediately commence a new energy research centre, funded through Science Foundation Ireland under its Strategic Research Clusters programme. This new Energy SRC, which is being hosted at UCD, will support the employment of 40 high-quality research personnel. This is an area where Ireland is already strong and has the potential to become a world leader.

The Energy SRC will partner with industries involved in developing the smart grid, ESB, Eirgrid, Bord Gais, Intel, Ericsson, Siemens, and many others. The industry partners already employ in excess of 20,000 people in Ireland and this initiative will help to secure these jobs and will underpin future job creation. The 25 industry partners connected to this Energy SRC have committed a further €2.3m in funding over 5 years.

Ireland’s natural advantages in this area include its very high wind penetration, abundant wave power and moderate climate. These factors provide an ideal test bed to rapidly develop, pilot, and integrate new technologies and together with the high profile of the industry
collaboration, have been pivotal in increasing the demand for engagement with the new Energy SRC.

The Sustainable Energy Authority of Ireland acknowledges that the smart grid will play a critical role in underpinning the energy needs of a revitalised Irish economy, and will lead to the creation of significant employment opportunities.

2. Principal investigator research teams, €44m over 5 years (Science Foundation Ireland)

44 Science Foundation Ireland funded Principal Investigator (PI) Awards will support close to 300 top-class researcher positions in a broad range of areas.

The areas of research covered by these awards will include:

  • in the Life Sciences – cancer, early diagnosis of the childhood cancer Neuroblastoma, lung disease, genetics for improved disease treatment, investigation of therapeutic interventions for Alzheimer’s disease, Huntington’s disease, and Improved crop and plant cell
  • in the ICT area – neonatal neurological monitoring, graphics for gaming, resource management in data centres, advanced telecoms networks, autonomic management of smart cities,
  •  in energy – wave energy, and energy conversion and storage devices.

The 44 research projects have attracted 23 industry partners including Inercept Pharma Ltd., Pevion Biotech Ltd, Sigmoid Pharma (Ireland), as well as informal collaborators such as Nestle, Kerry Group, and Alimentary Health. On the ICT side, industry partners include Intel Labs Europe, IBM, Alcatel-Lucent/BLI, Aquamarine Power (Edinburgh), Infineon, Disney Research, ESBI, France Telecom, Howard Science (UK), and a host of others.

3. Applied research centre in cloud computing, €5m over 5 years

The Programme for Government identified Cloud Computing as an area of particular future potential.

Cloud Computing provides for the delivery of hosted services via the internet and can represent significant cost savings to the end user, for example through avoiding the initial financial investment in hardware, ongoing maintenance, and necessary technical staff. It also represents a huge opportunity for companies in Ireland to develop products and service which capitalise on this new approach to computing.

Indeed, a recent report commissioned by Microsoft predicts that Ireland is poised to capture a significant piece of the world cloud computing market. The report suggests that by 2014, the cluster of firms involved in this industry in Ireland could generate €9.5bn per annum and employ about 8,600 people. The availability of Cloud Computing will boost the formation of new businesses and the creation of new jobs across the Irish economy.

I can announce that a new applied research centre in Cloud Computing will be established as part of the Government’s efforts to support the development of cloud computing in Ireland.

4. Competitive start-up fund, €750,000 (Enterprise Ireland)

Following on a pilot programme launched by Enterprise Ireland for start up companies in the internet and games apace, a further competitive fund for start ups will be rolled out in Cleantech, Industrial and Life-sciences sectors. This will be launched end May 2011.

The total value of fund this year will be €750,000 and it will support 15 companies. It will be a competitive process for companies which will each receive a €50,000 equity investment to support the company to deliver their
product or service or to get the project to a key funding milestone.

Companies will also be provided with a mentor who will work with the company for a period of about 10 days.

5. Increased resources for the High Potential Start Up programme (Enterprise Ireland)

In recognition of the importance of High Potential Start Up companies to job creation in new and emerging areas of opportunity, the Government will increase resources available to support HPSUs, so that by 2014 100 will be created each year compared to 80 in 2010.

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© Copyright 2011 by Finfacts.com

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