|Oct 09, 2012: Taoiseach Enda Kenny (second from left) announces Kerry Group's plans to establish a global technology and customer innovation centre in County Kildare. Stan McCarthy, Kerry Group's CEO is on Kenny's right.|
Finfacts Update, Aug 2013: Irish Innovation: Evidence of science policy failure
On Saturday, October 13, 2012, Michael
Hennigan, Finfacts founder, presented a paper on enterprise policy and the
'knowledge economy' at the Dublin Economics Workshop annual conference in
Galway. The following is a text of a 46-page paper.1. Abstract
Science spending has boosted some Irish science competence statistics but
statistics suggest that the official Irish goal to become a world class
knowledge economy by
2013, is a failure.
Ministers dream of creating local high-technology giants like Google or
Microsoft but any
spinout from university research with potential is acquired by a foreign firm
and there has
been no scaling up of a local high-technology or life sciences firm in the past
Besides, it's usually not the pioneers who triumph. There is no first mover
advantage in high technology.
It is a common misconception that high growth firms are synonymous with the
high-tech sector and in Ireland since the onset of the recession in 2008, two
very rare large jobs
announcements this month, came from indigenous firms in traditional sectors:
gambling. Kerry Group Plc and Paddy Power Plc have used technology developed by
to expand their businesses.
Production of Irish goods and services is dominated by foreign firms and
do not do
research that merits applications for patents at both the Irish Patents Office
and the European
Data shows that business spending on R&D (research and development) has risen
with the introduction of an R&D spending tax credit of 25%. It's a reasonable
not all the spending is strictly R&D. Tax strategies for example have a huge
headline export data.The R&D tax credit is claimed via self-assessment on
Placing university research at the centre of enterprise policy has been naive
as there is
limited international evidence of commercialisation success. How can thousands
startups be nurtured when there is effectively no local market and the
likelihood that public
procurement will be constrained for years?
While there are spillover impacts from research, technology licensing income
as a ratio of
university research spending, is insignificant.
Despite over a half-century of state cash supports to business, Ireland along
Luxembourg, Malta and Cyprus, still does not publish credible survival/mortality
firms. Neither are longitudinal studies done to track Irish success and failure
The Department of Jobs, Enterprise and Innovation told us that 80% of
under the Technology Transfer Strengthening Initiative, which was launched in
are still running while about 30 spinout companies from research are established
with early stage employment of 3-4 people on average.
A high survival rate suggests a failure to grow and likely sheltered
US Bureau of Labor Statistics (BLS) data suggests that 31% of a sample of
firms in sectors
across the economy, survived 7 years while the rate for the 'Information' sector
was 31% in
Year 5 of life and 25% at Year 7. A BLS study shows that of 2,600 high-tech
firms that were
founded in Silicon Valley in 2000, fewer than 1 in 5 were still in business in
In 2010 an official group known as the 'Innovation Taskforce' sketched a
Ireland could add up to 215,000 net high-tech jobs in a decade and vault over
in North California, to become the world's premier location for 'knowledge'
Months later, as an embattled government struggled to save the economy from
gave way to cold reality and another taskforce was established to propose
that could increase the likelihood of job creation.
This rescue group proposed 14 priority areas.
I have in the past pointed to the potential in food and Nestlé, the Swiss
food giant, has over
5,000 working in R&D. On drink, who would have thought that Irish farmers would
as an input to a gin and liqueur maker?
The October 2012 announcement by Kerry Group, the Irish food multinational,
of plans to
build a technology and innovation centre in Ireland, highlights the potential of
focusing on a
sector where Ireland has strengths.
At a global level, the two most successful high-technology clusters in the
past sixty years,
Silicon Valley in North California and Israel, have some key unique features.
A September 2012 report by the Kauffman Foundation, a US entrepreneurship
revealed that an analysis of the Inc. 500 rankings published by Inc. magazine
high numbers of fast-growing US firms are concentrated in unexpected regions and
"Our analysis of these fast-growing firms shows us that high-growth company
come from anywhere," said Dane Stangler, director of Research and Policy at the
"Their firms can be found throughout the country and, rather than following
conventional expectation that high-growth companies are grouped into a narrow
category, they represent exceptionally diverse industry segments. These findings
important lessons for economic development leaders, such as to target firms that
are high growth rather than high-tech."
McKinsey Global Institute said in a 2010 report: "While many policy makers
technologies as the answer to the challenge of job creation, our analysis
governments are likely to be disappointed in such hopes.”
The model of globalisation where there would be knowledge economies in the
low-wage manufacturing would dominate in regions such as Asia, is already out of
Finfacts paper: Ireland’s
doomed goal to become a world-class knowledge economy [pdf]
PowerPoint conference presentation [pdf]
Scientific discovery and the exponential improvement of products, processes
and services to
meet human needs have dramatically impacted the quality of life for a
significant number of
humankind compared with what Thomas Hobbes (1588-1679) wrote in 1651 of "the
man, solitary, poor, nasty, brutish, and short."
Innovation is not just about discoveries in public or commercial
laboratories. It is also about
how technology is utilised and is relevant for both mature and modern business
example, Achille Gaggia launched the espresso coffee machine in Italy in 1948.
was a native of Brooklyn who sought to replicate the atmosphere in Italian
espresso bars and
today Starbucks is a global brand. Ryanair became one of Europe's biggest
having to pay a royalty to anyone.
The focus in Ireland on foreign direct investment (FDI) since the late 1950s
Ireland from an agricultural economy and transferred both technology and modern
management methods to the economy.
In the 1990s, there were high hopes for the emergence of a significant
indigenous high-technology sector, however the main firms struggled in the
aftermath of the dot-com bust.
In 2004, the Enterprise Strategy Group in a report, 'Ahead of the Curve -
Ireland's Place in the
Global Economy,' said Ireland lacked capability in two essential areas:
international sales and
marketing and the application of technology to develop high value products and
It said: "We need to ensure that research in Ireland is led and informed by
(demand-driven), so that we obtain economic value from the research investment."
In 2006, the peak year of the property bubble, policy makers switched focus
from a reliance
on supporting individual firms to seeking to move up the so-called 'value chain'
by becoming a
knowledge economy like countries such as Israel, Sweden, Denmark and Finland
firms would grow, aided by the expansion of university research and the
increasing output of
science and technology graduates.
Israel had not become a master of innovation by choice.
It developed in a semi-arid region, surrounded by enemies and when the Soviet
collapsed, the country became the beneficiary of possibly the largest movement
capital in a short time period, in history.
In November 2006, Micheál Martin, minister for enterprise, trade and
employment, said that a
new strategy on science and technology would "see Ireland secure its position as
one of the
most advanced knowledge economies in the world and become renowned for the
of its research."
The target date was 2013.
In September 2012, a ministerial successor of Martin, Richard Bruton,
minister for jobs,
enterprise and innovation said: "As I have said before, our industrial policy
must not just be
aimed at attracting the next Google or Microsoft to Ireland - - we must strive
to create the next
Google or Microsoft here in Ireland."
In September 2009, Brian Cowen, taoiseach (Irish prime minister), in a speech
inaugural meeting of the Global Economic Forum, an Irish diaspora group, asked
for help to
create a "European Silicon Valley‟ in Ireland.
It was a brave or delusional aspiration. However, in March 2010, an official
group of mainly policy insiders, university presidents and managers of
operations in Ireland, endorsed the goal.
The Innovation Taskforce reported in March 2010 and said there was potential
for "net job
creation in high-tech firms of the order of between 117,000 and 215,000 between
"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
being employed in high-tech firms by 2020 - - a net increase of 215,000 jobs
over the period."
The report said in respect of Silicon Valley: "It is estimated that 320,000
people are employed
in 5,500 high-technology firms."
The analysis was seriously in need of a reality check.
One inconvenient truth was that the oldest technology cluster in Europe had
to grow to only 48,000 jobs after 50 years and 40% of firms employed just up to
According to Eurostat, there were 57,000 employed in Irish high-tech
manufacturing in 2010
and 72,000 in high-tech knowledge intensive services - - a total of 7% of
Irish jobs at foreign multinationals in 2010 were back to the 1998 level while
the Irish-owned tradeable goods and services sectors (items and services that
to be exported) was also back to 1998. The total full-time employment in
indigenous firms was 275,693.
In November 2010, the Irish Government established a new taskforce under the
of Jim O'Hara, a former general manager of Intel Ireland, a unit of the US
The group was asked to identify areas of research that would yield the best
taxpayers‟ investment in research and, ultimately, to create high-quality jobs.
specific areas of "greatest opportunity" were proposed.
O'Hara said: “The 14 areas we recommend stand up well in terms of the
economic impact including jobs. However, it is as much about how money gets
spent in this
area. We recommend a stage-gate process that will require researchers to
economic relevance of their work as well as its scientific excellence if they
are to get funding
under the priority areas. Our other recommendations will also help to move to a
more needs driven approach.” Report
So after 6 years, a policy was to be tweaked.
Danny McCoy, director general of IBEC, the business lobby group, and a former
a public institute, had said after the publication of the Innovation Taskforce
current economic downturn has reinforced the need to foster an economy built on
This is where much of our economic success has come from in the past, and it is
key to future
growth. "Public investment in research and innovation can generate real economic
The recommendation to maintain such expenditure is particularly welcome as it
the country to take full advantage of the global economic recovery. Such a
successfully pursued by Finland in the early 1990s."
Noble sentiments but the following are realities:
a) Foreign-owned firms, mainly American, were responsible for about 90% of
goods and services exports in 2010, unchanged since 2001.
These firms have no significant research and development centres in Ireland
and there is no
evidence that a material amount of high level research is done in Ireland.
In a Central Bank of Ireland paper, 'SMEs in Ireland: Stylised facts from the
real economy and
credit market' (2012), SMEs are shown to account for 26% of a sample of €110bn
in 2008, with indigenous firms accounting for just 14% and Irish-owned SMEs
just 7%! The economists commented: "Of note is the fact that, despite Ireland‟s
reputation as one of
the world‟s most globalised economies, fully 64% of private sector workers are
by indigenous non-exporting firms, with 56% working for indigenous,
SMEs. These statistics highlight the importance of domestic demand for
generation, and suggest that an export-led recovery may not be a panacea for the
b) For new Irish indigenous firms, the absence of a record of developing
sales in the small
domestic market compounded by subdued public procurement for years ahead, is a
challenge for developing exports.
Viktor Slavtchev and Simon Wiederhold say in a paper, 'Technological Intensity
Government Demand and Innovation' (2012), published by the Ifo institute,
Munich, that: "The
main result of the model is that an increase in the share of government
purchases in high-tech industries stimulates corporate R&D activities in the
economy. This is because a shift in
government procurement toward high-tech industries translates into larger
expected profits for
successful innovators and higher incentives for firms to invest in R&D."
A Google or Microsoft could never develop in Ireland because of the small
market. A startup
with potential would be snapped up by an outside firm.
Even when a traditional firm internationalises such as CRH, the global
group, which was formed through a merger in 1970 of two leading Irish public
Cement Limited (established in 1936) and Roadstone Limited (1949), it may
being an Irish firm over time.
Overseas residents hold about 90% of CRH's shares and 1% of its 75,000
payroll is located
In contrast, food companies such as the Kerry Group, continue to have deep
With the exception of SAP, the German software firm, Nokia, the mobile phone
Skype, the Internet phone service, Europe's big firms tend to be both old and in
industries. In the United States, Yollies (young leading innovators formed after
1975) account for 35% of
total R&D of leading innovators; in Europe, a mere 7%! Notably, Japan has almost
firms among its leading innovators.
World Bank: Golden Growth -- Europe and Central Asia (Chapter 5)
Deutsche Bank Research said in a 2011 study that "companies in the US are
a strong startup culture. Over 50% of all US firms in the current (2009) Top
companies ranked by R&D spending) were founded after 1975, in Europe the figure
18% and in Japan a mere 2%. US firms thus invest more in R&D than their
Europe and Japan also on account of their youth and their smaller size. The
also explains why US firms call the shots in advanced technology sectors.
software and IT are business areas that did not even exist until very recently.
companies find it difficult, however, to tap into these new business areas."
c) There is limited evidence of success in commercialisation of university
The OECD (Organisation for Economic Cooperation and Development) says there is
evidence of success" in the commercialisation of university research and
licensing fee income
for universities is insignificant as a ratio of research spending in both the US
(3.4%) and the
Commercialisation is incidental to university research and spinouts rarely
Technology licensing income is generally at low single digits as a percentage
spending even for the world‟s top universities.
For example, in 2007, Stanford University was ranked 10th among US universities
income, at $50m from 986 active licenses. Stanford‟s research expenditures in
$700m and its total budget for 2007-2008 was $3.8bn, excluding the capital
budget and the
budget for hospital and clinical services. Thus, in 2007, licensing income was
1.3% of the budget. Similarly, MIT‟s licensing income was 2.8% of its budget and
the University of
Washington‟s licensing income was 2.3% of its budget.
Public-sector research is considerably smaller than business R&D in the
majority of OECD
countries: government intramural expenditure on R&D was on average 0.29% of
domestic product (GDP) for the OECD area in 2009, and higher education
R&D was 0.44% (including a small percentage funded by business), while business
expenditure on R&D stood at 1.69%. A recent OECD study of public research
Research Institutions: Mapping sector trends'( 2011) found that university
research has now
taken the place of PRIs (public research institutes) as the main performer of
in many OECD countries.
“Today increasingly sophisticated public demand and new challenges due to
require innovative public sector approaches. However, knowledge about public
innovation, and its results, costs and enabling environment, is fragmented.
innovation is rarely institutionalised in government budgets, roles and
processes, and there is
limited knowledge and awareness of the full range of tools available to policy
The OECD says it is currently working on developing analytical and
frameworks to understand and foster public-sector innovation. This includes
Observatory of Public Sector Innovation that will build a classification of the
the innovation process with a view to understanding the factors that support the
of innovations, and their results, in order to map existing innovation
approaches and policies.”
The OECD says that following the passage of the Bayh-Dole legislation in the
in 1980 - - which gave public research institutions incentives to patent and
inventions - - many countries have developed technology transfer and licensing
(TTOs/TLOs) at universities and PRIs. However, only a few countries and a few
institutions have achieved a track record in commercialising the results of
research through TTOs/TLOs. Moreover, many countries, universities and PRIs
base the productivity of TTOs on traditional measures of technology transfer
such as patents
and licenses. Even if these have been increasing in OECD countries, they
represent a very
small share of the knowledge that is transferred from universities and PRIs.
The think-tank said that the UK government is establishing the National
Management Office to support capacity building in technology transfer and
of IP, including via partnerships with UK technology transfer offices and staff
Australia‟s Commercialisation Australia programme provides a range of
support services of the order of US$180m (A$278m) to 2014. Korea has announced
fund of $60m (KRW 50bn) for technology transfer and commercialisation by PRIs.
Science, Technology and Industry Outlook 2012, OECD, Paris.
d) The likelihood is that any spinout from university research with potential
would be sold to a
bigger overseas firm before it scales up and the Irish taxpayer sees any
BiancaMed Limited was founded in 2003 as a spinoff from research undertaken in
School of Electrical, Electronic & Mechanical Engineering in Dublin, Ireland.
Its focus is on
solutions for sleep disorders.
BiancaMed, with a staff of 29, was acquired by ResMed, a US firm, in July
2011. It had raised
€11m in venture funding in the period 2003-2011.
The sale price was not disclosed but Seventure, the French venture capital
led a €6m Series B round in June 2009, said it would make an IRR (internal rate
of return) of
approximately 50% on completion of the deal.
In April 2012, IDA Ireland, the inward investment promotion agency, announced
that it would
financially support the addition of 50 new jobs at ResMed over the succeeding 3
e) The Irish government has sought to attract US venture capital companies to
Ireland and it
has invested directly in US VC funds, via the National Pensions Reserve Fund.
The '2012 NVCA Yearbook,' which is produced by Thomson Reuters and focuses on
market, says that for every 100 business plans that come to a venture capital
firm for funding,
usually only 10 or so get a serious look, and only one ends up being funded. A
promises a 10 or 20% improvement on something that already exists is not likely
to get a
close look. The activity level of the US venture capital industry is around half
what it was at
the 2000-era peak. For example, in 2000 more than 1,000 firms invested $5m or
the year. In 2011, the amount was roughly half that.
In the US in 2011, there were a total of 529 deals in non-high-tech sectors,
from a total of
3,722 deals. In the period 2000-2011, 52% of US firms that held an initial
public offering (IPO)
were prior recipients of VC investment.
About three-quarters of venture-backed firms in the US don't return
according to recent research by Shikhar Ghosh, a senior lecturer at Harvard
Josh Lerner, professor of investment banking at Harvard Business School and the
'The Architecture of Innovation' (Harvard Business Review Press, 2012), argues
venture capital model is no panacea for innovation. The boom-and-bust cycle, the
effects of public markets, and the narrowing of its objectives have made it
something far less
He says: "Investor Peter Thiel (a co-founder of PayPal and an early backer of
aptly expressed the core anxiety: 'We wanted flying cars. Instead, we got 140
characters,'" - -
a reference to Twitter.
A report by the Kauffman Foundation, the entrepreneurship think-tank, in 2009
said that while
the venture industry is known for backing icons such as Google, Genentech, Home
Microsoft and Starbucks, less than one-in-five of the fastest-growing and most
successful companies in the United States had venture investors.
The industry has a 2-and-20 compensation structure (a management fee of 2% of
under management, and 20% of investing gains) for venture capital funds but the
performance of funds is poor.
A 2012 Kauffman report says that over the past decade, public stock markets
outperformed the average venture capital fund and for 15 years, VC funds have
return to investors the significant amounts of cash invested, despite
including Google, Groupon and LinkedIn.
f) The model of globalisation where there would be knowledge economies in the
low-wage manufacturing would dominate in regions such as Asia, is already out of
g) The big successful companies employ a fraction of their counterparts in
the past. General
Motors had over 618,000 employed in the US in 1979 - - in well-paid jobs; today,
Electric employs 133,000 and Apple 47,000.
Only some workers in the West can aspire to reasonable pay while in a global
are no easy pickings for small economies.
h) There has been no serious accountability in respect of Irish public
spending in the science
Innovation has been crucial for human development and in recent times it has
become a buzz
word for politicians and business people.
In 2005, Alan Greenspan, then Federal Reserve chairman, said at the Adam
Lecture, in Kirkcaldy, Scotland, in honour of the author of 'The Wealth of
Nations' that had
been published in 1776:
"For most of recorded history, people appear to have acquiesced in, and in
embraced, a society that was static and predictable. A young twelfth-century
look forward to tilling the same plot of his landlord's soil until disease,
famine, natural disaster,
or violence ended his life. And that end often came quickly. Life expectancy at
birth was, on
average, twenty-five years, the same as it had been for the previous thousand
Moreover, the vassal could fully expect that his children and doubtless their
children, in turn,
would till the same plot...To be sure, improved agricultural techniques and the
trade beyond the largely self-sufficient feudal manor increased the division of
raised living standards and populations, but growth in both was glacial. In the
century, the great mass of people were engaged in the same productive practices
as those of
their forebears many generations earlier."
Ralf R. Meisenzahl and Joel Mokyr, US economists, in a paper, 'The Rate and
Invention in the British Industrial Revolution: Incentives and Institutions'
(2010) stress the
importance of human capital, in particular the role of the 'tweakers' and
'implementers' in the
In 1779, Samuel Crompton invented the spinning mule, which introduced
cotton manufacture. However, as with other inventions of that period, the
authors say that a
few thousand individuals may have played a crucial role in the technological
the British economy and carried the Industrial Revolution. The average level of
in Britain, as measured by mean literacy rates, school attendance, and even the
people attending institutes of higher education are often regarded as
surprisingly low for an
industrial leader. But the useful knowledge that may have mattered was obviously
primarily through apprentice-master relations, and among those, what counted
most were the
characteristics of the top few% of highly skilled and dexterous mechanics and
makers, mill-wrights, hardware makers, and similar artisans."
The US high-tech sector accounts for 9.2m jobs and approximately 5.6% of US
However, in 2011, 84% of venture capital investment of $28.8bn went to the
McKinsey Global Institute said in a 2010 report that in the US, the
accounted for 0.3% of total nonfarm employment. That compares to 11.3% for
India‟s software industry accounts for only 0.1% of that country‟s employment.
Research from the United States shows that startups (up to a year old) and young
firms (up to
five years old) across the economy, have a crucial role in job creation.
From March 2009 to March 2010, US private-sector firms created a net -1.8m jobs.
394,000 companies that began operations in 2010, however, created +2.3m jobs, in
the poor economy.
However, overall the declining job creation from business startups reflects a
startup rate, which fell from 12 to 13% (as a percentage of all firms) in the
1980s to 7 or 8% in
recent years. Data analysed by the Kauffman Foundation shows that from the early
the share of young firms has declined from close to 50% to less than 35% in
The survival rate for young businesses is about 50% in five years but the
survivors have high
average growth rates. In addition, the evidence shows that the high-growth
firms have contributed substantially to productivity growth.
Bart Clarysse, professor of Entrepreneurship, at Imperial College London used
lecture in 2009 to explode the myths surrounding the economic importance of
startups to the Europe. His is co-author of 'The Smart Entrepreneur,' which was
Prof Clarysse said companies, which attempt to commercialise their own ideas
are seen by
policy makers and technology transfer offices as being vital to the economy.
"People think of the big names like Microsoft, Apple, HP, Intel and Xerox as
once being new
tech-startups," he said at the lecture. "Yet most of these highly successful
not develop their own ideas. Typically they took existing technologies,
pioneering - - and sometimes financially unviable - - companies. They bought
businesses to help them succeed and appear credible."
Real technology startups tend to grow slowly, have a poor survival rate and
contribute little to
the wider economy in economic terms. Compared to the US, European startup
is poor. In Europe, after seven operational years these new firms comprise, on
employees with revenues of £250,000 and a mere 36% likelihood of surviving
Prof Clarysse said that in the UK there were over 2,900 of these companies
that had been in
business since 1991. Despite spending over £2.5bn, they are responsible for only
jobs. "They don't become the new Microsoft," he said. "They just stay micro."
He said that policy efforts should not be solely aimed at encouraging
startups and nurturing
technology transfer from universities. Ideally, concentrated funds between £2 -
4m would be
made available for companies that are potential purchase targets, usually by a
via a trade sale. These trade sales can realise high values, even when a startup
has little or
no revenue. Big sale prices are achieved when the new firm's business model is
set up for
sale from the beginning, which is contrary to conventional business thinking and
Prof Clarysse said science policy should support the development of large
companies in the
UK that are able to acquire smaller firms and then be sold on to an overseas
would generate the most significant benefit and cash flow into a national
economy. It is quite
different to the current volume approach of raising numerous companies, many of
never have a significant economic impact.
He suggested that many startups fail because they reach the market too soon.
"There are no
first mover advantages in high-tech," he said. "In fact it's a disadvantage as
cannot reduce the time required to move from product launch to a take off in
sales, some 14.2
years on average. So it's better to join a market late."
High growth firms have received a large amount of interest in recent years
because a small
number of them in an economy are responsible for a significant amount of job
Eurostat, the European Union's statistics office and the Organisation for
Economic Cooperation and Development (OECD) has recommended that high-growth
firms should be
defined as: “All enterprises with average annualised growth greater than 20% per
annum, over a three year period, and with ten or more employees at the beginning
of the observation
period. Growth is thus measured by the number of employees and by turnover.”
The recommended definition of “gazelles” is: “All enterprises up to five years
old with average
annualised growth greater than 20% per annum over a three-year period, and with
more employees at the beginning of the observation period.”
While there is a common misconception that high growth firms would tend to be
crucially, the evidence from several countries shows that high growth firms are
found in a
wide range of sectors and across all regions.
The OECD says that in any country, high-growth firms represent a small
percentage of the
overall number of firms. According to the data collected by the OECD-Eurostat
Entrepreneurship Indicators Programme following the OECD definitions, these
on average around 3-6% and 8-12% of the total business population respectively
growth is measured by employment and by turnover.
The gazelles represent on average less than 1% (by employment) or 2% (by
turnover) of the
total population, and less than one-fifth of high-growth enterprises.
What Governments Can Do to Make a Difference' (2010).
The UK National Endowment for Science, Technology and the Arts (NESTA) said
in a report,
'The Vital 6 per cent,' in 2009 that 6% of all UK firms employing more than 10
generated half of the new jobs created by existing businesses between 2002 and
Neither are high-growth firms exclusive to so-called „high-tech‟ or „growth
sectors‟. High growth firms are almost equally present in the "high-tech" and
"low-tech" sectors. And all major
UK sectors contained between 4 and 10% of high-growth firms. However, the
between different sectors does appear to reflect trends in the economy in the
sectors with the highest proportion of high-growth firms were financial services
(over 9%) and
real estate and business services (around 8%), while the lowest share was found
manufacturing (3 to 4%).
In the US, research has found that in any given year, the top-performing
1% of firms generate
roughly 40% of all new jobs.
A report series released in September 2012 by the Kauffman Foundation
revealed that an
analysis of the Inc. 500 rankings by Inc. magazine showed that high numbers of
US firms are concentrated in unexpected regions and industrial sectors.
"Our analysis of these fast-growing firms shows us that high-growth company
come from anywhere," said Dane Stangler, director of Research and Policy at the
Foundation. "Their firms can be found throughout the country and, rather than
conventional expectation that high-growth companies are grouped into a narrow
category, they represent exceptionally diverse industry segments. These findings
important lessons for economic development leaders, such as to target firms that
are high growth rather than high-tech."
The report said that so-called high-tech sectors constitute only about a
quarter of fast-growing
Inc. firms: IT (19.4%) and Health and Drugs (6.5%). Other major sectors include
Services (10.2%), Advertising and Marketing (8.5%), and Government Services
innovations and growth of firms come from a wide range of industries.
As for R&D spending, Booz & Co., the US consultancy which produces an annual
the global top 1,000 business research and development spenders, says there is
statistically significant relationship between financial performance and
innovation spending, in
terms of either total R&D dollars or R&D as a percentage of revenues.
Many companies - - notably, Apple - - consistently underspend their peers on
investments while outperforming them on a broad range of measures of corporate
such as revenue growth, profit growth, margins, and total shareholder return.
entire industries, such as pharmaceuticals, continue to devote relatively large
shares of their
resources to innovation, yet end up with much less to show for it than they - -
shareholders - - might hope for.
The Wall Street Journal reports that between 2004 and 2007 - - the years
leading to Apple‟s
first iPhone launch - - Nokia, the Finnish mobile phone firm‟s total research
spend was €17.1bn ($22.2bn at today‟s exchange rate), against Apple‟s $2.5bn in
So Nokia spent nine times more than Apple on R&D during those years. Apple,
had only just started shipping its first iPhones and was still generating most
of its revenue
from its range of Mac computers and iPods.
Between 2004 and 2011, Apple‟s revenues increased roughly 1,200% while its
surged by 9,600%. Meanwhile, Nokia has turned into a loss-making device maker,
year‟s revenue just 31% higher since 2004.
To this day Nokia continues to outspend Apple in R&D, spending $7.3bn last
Global R&D spending surged from US$1.25tn in 2010 to $1.33bn in 2011, and is
reach $1.40tn in 2012, with continued strong growth in emerging economies and
growth in established economies. Global business R&D increased by 4% in 2010,
with a 1.9% drop in 2009 in the wake of the financial crisis.
Foreign-born scientists and engineers, whether educated in the United States
or abroad, are
a critical part of the US Science & Engineering (S&E) workforce: about one in
master's degree holders and one in three S&E doctorate holders are foreign born.
reliance is greatest on those with engineering and math/computer science
them, about 40% of master's degree holders and 50% of doctorate holders are
In Silicon Valley in the period 2006-2011, immigrants were among the founders or
founders of 43.9% of startups.
In Silicon Valley
in the period 2006-2011, immigrants were among the founders or sole founders of
43.9% of startups.
4. Science &
Gross Expenditure R&D
as ratio GNP*
GDP (EU25 in 2004)
Business Enterprise Expenditure R&D
25 in 2004)
(data for 2003)
GBAORD: Government Sector Expenditure R&D
25 in 2004)
€23.7bn in constant prices 2002/11
High-tech/Life Sciences Jobs
applications at Irish Patent Office
applications at European Patent Office
GNP (gross national product) is used rather than GDP which is about
22% bigger. GNP excludes the profits of foreign multinationals
operating in Ireland
Research & Development Performance in the Business Sector Ireland 2005/6
Department of Jobs, Enterprise and Innovation information provided to Finfacts:
a) Irish Universities and Institutes of Technology receive very modest income
fees (less than €1m a year).
"It is worth noting that the Irish Technology Transfer system is predicated on
its capability to
deliver wider socio-economic gains through the efficient and effective transfer
of IP to
enterprises which have a propensity to grow and create employment through the
utilisation of the Intellectual Property. The main focus is not on generating
revenue from direct
sale of licences."
“A key part of the Government's plan to create the employment..we need to ensure
Government's core €500m research budget is focused on turning good ideas into
Today we are outlining a series of steps we are taking in order to ensure that
Firstly, we have identified 14 specific areas where we believe our research can
targeted in order to achieve commercial outcomes." Minister Richard Bruton,
March 01, 2012
on the Research Prioritisation Plan.
Recommended Priority Areas of Focus
Networks & Communications
Analytics Management, Security & Privacy
Sustainable Food Production and Processing
Platforms, Content & Applications
Connected Health & Independent Living
Grids & Smart Cities
Processing Technologies and Novel Materials
Therapeutics - synthesis formulation, processing and drug delivery
Innovation in Services and Business Processes
b) Patent applications from Irish residents (including foreign companies and
that were not made in Ireland) in 2011 were at the lowest since 1982.
"The Patents Office does not require applicants to state whether they are
foreign owned or
indigenous. All we ask for is the applicants name and address.
The Patents Office do not (sic) capture indicators of whether the patent
applicant is a public
body or not."
Patent applications per million filed with the European Patent Office (EPO) were
at 115 in
2010 compared with 855 for Switzerland; 380 for Sweden; 332 for Denmark and 306
Finland. Triadic patents filed at the EPO and Japan's Patent Office and granted
at the US
Patent Office were at 17 per million population in 2010 compared Sweden's 96.8;
70.4; Finland's 62.9 and Denmark's 50.5.
c) "There have been approximately 30 spinout companies established in each of
few years, largely as a result of the maturing technology transfer system, which
supported under the Enterprise Ireland Technology Transfer (TT) Strengthening
Initially these companies have modest employment of around 3-4 people on
they are in their pre-commercial stage after establishment."
"A benchmarking exercise carried out in 2011 also demonstrated that the outputs
Irish TT system are generally above the US and European averages for spin outs
licences (as much a 4 times the US average for Spinouts and 20% more
licensed to companies for the amount of expenditure on research)."
"Eighty (80)% of startups established under the Technology Transfer
are still running."
d) The Department's 'Strategy for Science, Technology and Innovation Indicators
2011' report stated that the number of firms applying for R&D tax credits had
dramatically" from under 200 in 2004, to 600 in 2008 and around 1,000 in 2009.
value of credits claimed in 2009 was estimated at €385m "leveraging up to
four-times that in
The Department provided the following information in October 2012:
Development Tax Credit
Number of claims
Estimated cost €216.1m
Estimated cost €146m
Number of claims
"The R&D tax credit is claimed by companies on a self-assessment basis and the
Commissioners has the right to audit the claim under the legislation however the
rejection resulting from audits is not available."
"In Finance (no. 2) Act 2008, there was a legislative change which had a
significant impact on
the 2009 figures. Up until that time, the R&D tax credit could be claimed within
4 years of
the end of the accounting period in which the R&D expenditure took place. But in
Finance (no. 2) Act 2008, the R&D tax credit claim was excluded from this
general rule and
the claim had to be made within 12 months of the accounting year end in which
expenditure was incurred."
A 20% tax credit in respect of research and development expenditure was
introduced in 1997
and revamped in 2004 with the rate raised to 25%. Deloitte, the Big 4 accounting
R&D credits can now be surrendered to key R&D employees which they can use
personal income tax liability, reducing the effective income tax rate to a
minimum of 23%.
Deloitte also says that R&D for the purposes of the relief includes basic
research or experimental development. These activities must seek to achieve
technological advancement and involve the resolution of scientific or
uncertainty. A project does not have to be successful to qualify. Mathematical
the development of new financial products, financial engineering, spread betting
industry products are covered.
Extending an existing application to mobile networks is also covered.
Grant Thornton, a firm of accountants, reported in June 2012 that only a
minority of Irish food
and drink companies are utilising the research and development tax credits
available to them.
e) IDA Ireland, the inward investment agency, has no minimum level for the R&D
of new projects.
f) In September 2012, the European Research Council (ERC) selected 536
researchers across Europe in the latest 'Starting Grant' competition, with a
budget of almost
€800m. Only 4 Irish researchers made the grade.
g) Eurostat, the EU statistics office says that in 2010, the EU27 counted 2.5m
people in fulltime equivalents (FTE) working in R&D. In the EU as a whole, the
business enterprise sector
was the largest sector, employing more than half of R&D personnel (1.3m FTE).
In 2010, 20,483 FTE (full-time equivalent) researchers and support staff were
Ireland: 12,104 in the business enterprise sector and 8,289 in Irish higher
public bodies (987).
R&D personnel as a percentage of persons employed in the business enterprise
2009 was at 0.53% in the EU27; 0.57% in Ireland; 0.82% in Germany; Denmark
Finland 1.14% and Sweden 1.10%.
R&D staff in Ireland in 2005 was at 16,680.
The number of support staff and technicians totalled 12,328 in 2009 while the
total number of
full-time equivalent researchers in 2009 was 14,681. The number of full-time
researchers employed per thousand population in Ireland in 2009 was 7.6 compared
in 2005 and a EU27 average of 6.8.
PhDs in business grew from 830 in 2005 to 1,639 in 2009.
Irish PhD graduates increased from 774 in 2005 to 1,153 in 2010 from the
(+48%). Science and technology PhDs graduates increased by 34% over the period.
According to Eurostat, in 2010, 495,000 workers in Ireland were classified as
working in a
'science and technology' occupation, at 27% of total employment -- compared with
Germany; 40.9% in Denmark; 35.2% in Finland; 541.4% in Sweden and 27.4% in the
EU27 average was 31%.
h) The Organisation for Economic Cooperation and Development (OECD) says in its
Technology and Industry Outlook 2012: "Investment in innovation is likely to
pressure in the years ahead. BERD (Business Enterprise Research and Development)
represents 1.18% of GDP, roughly at the OECD median in 2010. Most BERD (70%) is
out by foreign affiliates. Ireland has a relatively large number of top R&D
investors, and is at
the top of the mid-range of OECD countries in terms of the relative number of
innovative companies. Venture capital is well developed and the ease of
index is well above the OECD median. With 34% of PCT patent applications
international collaboration, Ireland stands well above the OECD median. In terms
financing of public R&D, it performs relatively poorly as compared to the OECD
Graduates in science and engineering and the quality of education in sciences
lie in the
midrange of OECD countries. ICT infrastructures also correspond to the OECD
i) Data from Ireland's Central Statistics Office (CSO) and Forfás, the policy
show that there were almost 1,300 enterprises engaged in research and
activities in Ireland in 2009. More than two thirds of all enterprises spent
less than €500,000
on research and development activities, over one fifth spent more than €500,000
than €2m while over 10% spent €2m or more.
There were 952 Irish owned enterprises engaged in research and development
2009 compared to 331 foreign owned enterprises. Over 77% of all Irish owned
spent less than €500,000 on research and development compared to 42% of all
Performance and Targets, 2003 and 2013 + actual 2009/2010
Strategy for Science, Technology and Innovation 2006 report
Investment in R&D
bn (0.93% GNP)
of Indigenous Companies with meaningful R&D activity (>€100,000)
of Indigenous Companies performing significant R&D (>€2m)
of foreign affiliate companies with minimum scale R&D activity
of Foreign Affiliates companies performing significant R&D
j) In the European Union's ranking of R&D spend by the top 1,000 companies the
EU in 2010,
the top two Irish food companies, Kerry Group and Glanbia are ranked by R&D
spend as a
ratio of global sales at 122 and 3.2% and 627 and 0.6%.
Ireland has 17 companies in the rankings but only 10 when foreign firms with
headquarters are excluded.
The two Irish banks, Bank of Ireland and AIB are among the 11.
Finland has 52 companies.
k) The EU's Innovation Union Scoreboard 2011 says:
Ireland and Luxembourg are outliers in knowledge-intensive services exports as %
services exports because of the dominance of the foreign-owned high-tech sector.
Ireland is below average in sales of new-to-market and new-to-firm innovations
as % of
Ireland is also below the EU average in PCT patent applications to the European
Office per billion GDP.
Ireland is also behind in innovative SMEs collaborating with others as % of
SMEs. It is ahead
in SMEs innovating in-house as % of all SMEs.
Ireland is above average in scientific publications among the top-10% most cited
worldwide as % of total scientific publications of the country and in growth
international scientific co-publications per million population.
Ireland leads in percentage population aged 30-34 having completed tertiary
l) Eurostat says that at an EU level in 2009, about one quarter of
chose science and engineering (S&E) as their main field of study, representing
7.2 % of the
population aged 20–29 years.
Ireland's rate was 3.3% for 'Science, mathematics and computing' and 3.2% for
manufacturing and construction.'
Finland was at 4.8% and 11.7%; Sweden was at 3.2% and 5.9%; Denmark was at 3.2%
3.6% and Germany was at 3.2% and 3.9%.
The EU27 average was 3.0% and 4.2%.
"When in 2004 my University of Manchester colleagues and I discovered graphene,
material one carbon atom thick with extraordinary industrial potential, I set
about trying to
patent it. When I approached a representative of a multinational electronics
received a put-down that I recall whenever I am asked about patents. 'If after
10 years we find
graphene is really as good as it promises, we will put a hundred patent lawyers
on it to write a
hundred patents a day, and you will spend the rest of your life, and the gross
product of your little island, suing us.'”
- - Prof Andre Geim, 2010 Nobel Prize in Physics, 'Patents merely satisfy a
pride,' Financial Times, July 2, 2012.
Patent filings have jumped worldwide, rising from 997,000 applications filed in
1,980,000 in 2010, according to the World Intellectual Property Organization
The annual report of the Irish Patents Office for 2011 says that applications
patents continued to decline sharply in the year. National long term (20 years)
received during 2011 were down 34% on 2010 (from 350 to 230) while the number of
term patent applications (10 years) filed, was down 25% on 2010 (from 442 to
number of patents granted was 250.
Patent applications from Irish residents (including foreign-owned companies
Ireland. However, a filing may not have an Irish resident inventor) in 2011
amounted to 494,
down from 733 in 2010, as shown in the table below. This is a plunge of 33% and
lowest since 1982, according to World Intellectual Property Organisation (WIPO)
Patent grants to Irish residents totalled 195 in 2011, 211 and 286 in 2010 and
A survey of cloud computing patent activity by New Morning IP, a Dublin-based
property consultants, published in July 2012, found that filing of cloud
families by Irish resident applicants is dominated by three global companies;
Skype (acquired by Microsoft in 2011), and Business Objects Software (acquired
by SAP AG
in 2007). They collectively account for almost half of the total. Many of these
Irish resident inventors indicating that the Irish company is acting as a
holding company for all
or a portion of the wider group‟s patents.
Not one of the 20 inventions recorded by Accenture Global Services Ltd names an
New Morning IP says that firms including IBM, HP, Ericsson, Amazon and Nortel
have all filed patent applications which have included at least one Irish
The survey report says that overall, the data shows that the increase in Irish
publications is almost entirely due to three FDI applicants: Accenture, Skype
Objects Software. After filtering out those records, the number of publications
Irish applicants is not growing in line with global growth, indicating that the
cloud sector is falling behind in terms of patenting activity. 'Cloud Computing
- - The Irish
Tony Owens, a director of Irish-based Shibumi Consulting, and formerly of New
says: "The statistics on the Irish patent office in my view are very positive
reducing levels of naïve and/or damaging patenting. Irish patents are not
those granted by the main patenting authorities; the UK, DE, EPO, US, JP, KR and
Applications to the Irish PO are generally granted without examination (they are
to offer examination or search). The only evidence of novelty required is either
search or prior examination and publication of the invention by a full-service
A possible reason why there are few and declining Irish applications is because
an invention without offering either robust examination or meaningful
protection, in a
globalised world within which Ireland is a tiny market. If the true value
proposition of the Irish
PO is becoming better understood by Irish inventors and they are advised (by
attorneys) instead to go for a UK, an EP or WO application, I think that is
Tony Owens adds: "One is struck by the lack of international academic
co-assignees; the low
level of industrial co-assignees; the extent of the focus on bioscience
(biomedicine/immunology/biofoods/microbiology) and the low levels of patenting
technology (i.e. commercially focused solutions to market-relevant problems)."
International patent filings under the WIPO-administered Patent Cooperation
Treaty (PCT) set
a new record in 2011 with 181,900 applications - - a growth of 10.7% on 2010 and
growth since 2005. China, Japan and the United States of America (US) accounted
of the total growth (Annex 1). Chinese telecommunications company ZTE
the biggest filer of PCT applications in 2011.
The WIPO says that the PCT system facilitates the process of seeking patent
multiple countries. It simplifies this process by postponing the requirement to
file a separate
application in each jurisdiction until after a centralized processing and
evaluation have taken place. Examination of the patentability of the invention
offices and the related expenses are postponed, in the majority of cases, by up
to 18 months
– or even longer in some offices – as compared to direct patent filings. The PCT
has 144 member states. Annex 5 presents total PCT filings from all member states
There were 422 Irish PCT applications in 2007 and 421 in 2011.
Top Irish Applicants (Publication Year = 2011)
Accenture Global Services Ltd.
of the Holy and Undivided Trinity of Queen Elizabeth near Dublin
University College Cork
Puritan Bennett Ireland
Scientific Games Holdings Ltd.
The number of ICT (Information and Communication Technologies) related Irish PCT
applications in 1999 was 83, 146 in 2006 and 135 in 2009. The corresponding
biotechnology were: 21, 22, and 30.
Among the top filing countries, PCT applications from China (+33.4%), Japan
Canada (+8.3%), South Korea (+8%) and the US (+8%) saw the fastest growth in
European countries witnessed a mixed performance, with Switzerland (+7.3%),
(+5.8%), Germany (+5.7%) and Sweden (+4.6%) experiencing growth, and the
14%), Finland (-2.7%), Spain (-2.7%) and the United Kingdom (-1%) seeing
large middle-income economies of the Russian Federation (+20.8%), Brazil
India (+11.2%) recorded double-digit filing growth.
The OECD defines patent families as “the set of patents (or applications) filed
countries which are related to each other by one or several common priority
Extending patent protection outside the parent country, usually signalls a
commitment by the owner.
Ireland's research output, measured by number of patent families per thousand
population, is low by international standards and below both the EU27 average
average of the OECD's 34 mainly developed country membership.
The OECD says that triadic patent families are a set of patents filed at three
offices: the European Patent Office (EPO), the Japan Patent Office (JPO) and the
States Patent and Trademark Office (USPTO).
The think tank says the concept of triadic patent families has been developed in
improve the international comparability and quality of patent-based indicators.
registered in the same set of countries are included in the family: home
influence of geographical location are therefore eliminated. Furthermore,
patents included in
the triadic family are typically of higher economic value: patentees only take
on the additional
costs and delays of extending the protection of their invention to other
countries if they deem
The number of Irish triadic patents issued in 1999, 2006 and 2009 was 74, 74 and
The number per million inhabitants in 2009, was 17 in Ireland, with Switzerland
in the lead at
113.5, followed by Japan at 104.48, Sweden at 96.79 and Germany at 70.37.
The OECD says that matching patent and enterprise data show that firms in high-
medium-high-technology manufacturing sectors perform on average 56% of all
Exceptions are Ireland, Poland and the United Kingdom, where more than 50% of
come from firms in the business services sector. Medium-low-technology
seldom contribute more than 10% of patent filings.
The presence of young firms among patent applicants underlines the inventive
firms early in their development and their desire to develop new activities and
may affect their survival and growth. During 2007-09 firms less than five years
old filing at
least one patent application represented on average 25% of all patenting firms,
generated 10% of patent applications. The share of young patenting firms varies
considerably across countries, led by Ireland (42%) and followed by the Nordic
Forfás, the Irish government's policy advisory agency, said in a report in 2004
analysis of the profile of Irish-based companies engaged in patenting showed
none of the top 50 exporters were among the top ten foreign-owned patenting
companies, and leading computer manufacturers were entirely absent. Only one of
top 15 pharmaceutical exporters (Abbot) appeared on the list. Analysis of top
patentees showed that they were mainly SMEs operating in traditional sectors.
omissions tell us more about the state of indigenous industry than those that
The Irish food sector contributes two-thirds of all indigenous industry exports
but no major
food company or co-operative appears on the list (Table 6)."
The number of patent applications from public (government) research bodies in
very small - - as few as 2-3 per year.
Patent quality and commercialisation are issues which have received a lot of
The OECD's 'Science, Technology and Industry Scoreboard 2011' reported that
has declined by an average of around 20% between the 1990s and 2000s, a pattern
nearly all countries studied.
The OECD developed a composite indicator based on six dimensions of patents'
quality: forward citations (number of citations a -patent receives); backward
of -patents and scientific papers a patent cites); patent family size, i.e. the
countries in which the patent is taken; number of claims; generality index,
dispersion of citing patents over technology classes; and grant lag. The index
does not use
The report said that studying patent quality in different sectors has also
allowed the OECD to
assess which countries are doing best in the area of research and development
innovation. The UK, for example, produces semiconductor and environmental
patents that are above average in quality. Korea has a competitive advantage in
innovations and Germany is strong at innovating in solar energy.
Patents from inventors in the United States, Germany and Japan are the most
which suggests that true innovations are being used by many firms in their
generate further innovations, according to the report. However, while these
produced about 70% of the top 1% of highly-cited patents between 1996 and 2000,
share fell 60% five years later.
In recent years, the Nordic countries, China, India and Korea have seen their
of highly-cited patents. The European Union is leading in clean energy
representing nearly 40% of all filings by the late 2000s, followed by the US and
Japan. In this
area, China now ranks 8th worldwide.
The OECD report also ranks research by universities worldwide. Overall, 40 of
the top 50
research institutions are located in the United States, with the rest in Europe.
But a more
diverse picture emerges when looking at subject areas, according to the report.
Denmark for example has the highest quality patents in 'Wind energy,' 'Organic
'Pharmaceuticals' and 'Biotechnology' while Finland leads in 'Polymers.'
Ireland does not head any category.
Prof Andre Geim, cited above, said in the FT: "Patenting is a multibillion
dollar global trade. In
the UK alone, there are about 425,000 patents in force and 50,000 new
applications are filed
every year. The cost per application can range from £5,000 to more than £50,000
if the patent
is to be supported worldwide. Even large companies complain of the staggering
costs, but for
startups and lone inventors, a single application is a huge financial burden.
their desire to protect cherished ideas, non-professional inventors are usually
myths about patents.
Small companies and individual inventors usually have little experience in
patenting. Most are
unaware that more than 90% of patents bring no return. This means that every
thousands of UK inventors spend thousands each to buy a piece of paper that is
serve any useful purpose."
Prof Ted Sichelman of the University of San Diego School of Law (Sichelman, Ted
Commercializing Patents. Stanford Law Review, Vol. 62, No. 2, pp. 341-413, 2010.
http://ssrn.com/abstract=1395558 ) says: "About half, probably more, of all
inventions in the United States are never commercially exploited. Even many of
commercially significant inventions take decades to come to market...In addition
surveys reporting roughly 50% commercialization rates, patentees fail to pay
fees on more than 60% of patents within twelve years after issuance."
Nagaoka Sadao of Japan's RIETI ( Research Institute of Economy, Trade and
John P. Walsh of the Georgia Institute of Technology say in a paper in respect
of Japan and
the US: "Although the two countries have a similar overall level of
commercialization (60% of
the triadic patents), the structure is different: in Japan, we see a higher
incidence of in-house
use relative to the overall level of commercialization, more inventions being
licensed and less
used for startups."
An expert group reported to the European Commission this year that "about 17% of
patents are 'sleeping patents' that are neither licensed, nor used internally,
nor held for purely
Available indicators suggest that "there is a pool of 8% to 24% of European
patents that could
potentially benefit from enhanced valorisation. Since the value of patents is
a small share of these patents probably concentrates a large share of the
potential gains from
commercialisation. This minority of patents with a high commercial potential are
likely to effectively benefit from enhanced patent valorisation."
Dr. Meir Perez Pugatch, University of Haifa, says that "a more structural and
observation suggest that only a fraction of patented technologies are
utilized. It is estimated that less than 80% of patents worldwide are utilized
59). Even worse, it would seem that most of the patented technologies are worth
their registration and maintenance fee. For example, Schankerman (1998:94),
value of patents in France between 1969 and 1982, found that the median value of
different technology fields is surprisingly low: $US 1,631 in pharmaceuticals,
$US 1,594 in
chemicals, $US 2,930 in mechanical and $7,933 in electronic patents. Schankerman
reports that only one% of pharmaceutical patents exceed a value of $US 50,000."
Martina Pasquini, Myriam Mariani and Giovanni Valentini of Bocconi University
say in a paper
that: "Though commercialization can represent a desirable outcome for a patent,
a high rate
of patents is not brought to the market and rests sleeping or unutilized. In the
past, it has
been calculated that multinational firms like Procter & Gamble and Dow Chemical
commercialized only 10% and 19% of their patents, respectively (Chesbrough,
Similarly, Palomeras (2003) reports evidence indicating that Siemens, IBM, and
less than half of their intellectual property portfolios. More broadly, Giuri et
al. (2007), using
data from a survey on 9,017 European patents, show that 36% of these patents are
about half of them are blocking patents, and the other half sleeping patents."
They conclude: "In this work, we showed that knowledge sources exploited by
during the patenting process might influence the nature of inventions and the
patents are commercially exploited. In particular, we showed that the likelihood
commercialization is associated to the joint use of market and scientific
allows coupling market needs with scientific advancements. In line with these
also show that two inventor types, professional and non-professional,
respectively by scientific and market knowledge background, should rely upon the
type they do not embody to be able to develop inventions more likely
Patent applications, residents
Scientific and technical journal articles
6. Journal citations
Thomson Reuters says in its 'Global Research Report - US' that three decades
scientists fielded nearly 40% of the papers in the journals indexed by the
company in the
'Web of Science.' That dataset represents a cross-section of the leading
research literature. In the recent times, that the share of the world literature
which carries a
US author or co-author address is down to some 29%. During the same period, the
European Union nations (the EU27, following the accession of countries in the
bloc) increased their share of research papers moderately, from 33% to 36%,
US in the mid 1990s.
Thomson Reuters say the biggest change has been the steady and accelerating rise
research contributed by nations in the Asia-Pacific region - - from about 13% in
1981 to 31%
in 2009. The year 2008 witnessed Asian nations matching the output of the US,
and now they
have exceeded the US output. It says it should also be noted that Asian nations
as a group
surpassed the US in R&D investments in 2008. That year, Asia‟s investment was
that of the US was $384bn, and the comparable figure for the EU27 was $280bn.
The Batelle/R&D Magazine's 2012 forecast for R&D in purchasing power parity
has Asia at $514.4bn and 1.9% of GDP (gross domestic product); US at $436bn and
GDP and Europe at $338.1bn and at 2% of GDP. Ireland's country rank for 2012 is
R&D spending is at $3.2bn, at a ratio of GDP is at 1.75%.
The 10th annual 'Top 20' listings of countries in an 2011 update of 'Essential
Indicators,' showed that in citations per article rankings based on papers
Thomson Reuters-indexed journals from January 2001 through August 31, 2011,
moved up to a 20th ranking compared with a rank of 36th in 2003.
A report by a unit of Thomson Reuters, that was commissioned by Forfás, an Irish
policy advisory agency and the Higher Education Authority (HEA), showed that in
1998-2007, Ireland showed "an impressive increase (33%) in terms of research
measured as the number of publications indexed by Thomson Reuters across all
This rate of increase far exceeds the average for the comparator group, and is
second only in
growth to China (59%)."
Over the five years to 2007, in terms of the volume of health and
publications, Ireland had moved one place up the rankings within the group (from
18th to 17th
position) by overtaking Singapore.
Over the 10-year period, the percentage of output (34,648 articles and reviews
in all research
fields) which is highly-cited (cited at least four times world average, RBI
adjusted for year and field) ≥ 4 was 6.2%. This compared with the US at 6.8% and
the UK at 6.07%. Output uncited was at 28.5%.
The report said that the proportion of uncited papers in economic and business
high (40.8% cf 28.5% average for Ireland), the percentage above world average is
lower than elsewhere and the percentage that is relatively highly cited is not
much more than
half the Ireland average (3.6% cf 6.2%). 'Research strengths in Ireland: a
bibliometric study of
the public research base,' (2009).
Listed by citations per paper
It's said that a common criticism of global rankings is that they favour
publish in the English language, because most journals counted by bibliometric
(counts of papers and citations per university) are in English. In addition,
academics have a greater culture of citing each other‟s work than academics in
It is claimed that the QS Peer Review for the QS university rankings, "is
independent of any
such language bias, and QS has gone to great lengths to produce our surveys in a
languages, so as not to disadvantage non-native English speaking academics. We
that some bias remains in the citation per faculty count, but we are encouraging
of as many foreign journals as possible. Our current supplier of citations data,
Scopus, has a
database which is generally regarded as being less prone to language bias than
its main rival,
Scopus is the largest abstract and citation database of peer-reviewed research
tracks over 19,000 titles from more than 5,000 international publishers and it
is owned by
Elsevier of the Netherlands, one of the world‟s leading provider of science and
The SCImago Journal & Country Rank is a portal that includes the journals and
scientific indicators developed from the information contained in the Scopus
For the period 1996-2010, with 10,000 chosen as the minimum number for a
documents, Switzerland leads with 21.77 citations per document and 292,254
documents. Ireland has a 15th rank after Germany at 15.56 citations per document
74,033 citable documents.
Kenya is at 19th rank, is ahead of Spain with 13.76 citations per document for
has 13.12 for 547,858 documents.
In Economics, Econometrics and Finance, for 1,007 citable documents, the
document rate was 6.27 compared with 12.87 in Agricultural and Biological
SIR (Scimago Institutions Rankings) World Report 2012 says it aims at becoming
evaluation framework of research performance to Worldwide Research
The report shows six indicators that help users evaluate the scientific impact,
specialisation, output size and international collaboration networks of the
The period analysed in the current edition covers 2006-2010. The tables include
having published at least 100 scientific documents of any type, that is,
articles, reviews, short
reviews, letters, conference papers, etc., during the year 2010 as collected by
leader scientific database Scopus by Elsevier. The report encompasses Higher
Institutions (HEIs) as well as other research-focused organizations from
different sizes, with
different missions and from countries in the five continents. Institutions are
grouped into five
Institutional Sectors: Higher Education, Health System, Government Agencies,
The indicators used are:
Output, measured as the number of scientific papers according to Scopus;
International Collaboration, measured as the ratio of scientific documents an
institution publishes in collaboration with foreign institutions;
Normalized Impact, as the citation rate an institution receives compared to
Average (according to the normalized citation indicator developed at Karolinska
Instituet in Sweden):
Publication Rate into the 25% of "Best Journals" according to SJR indicator
developed by SCImago Research Group:
Specialization Index, value indicating the thematic concentration (close to
1)/dispersion (close to 0) of an institution's scientific output?
Excellence Rate, proportion of an institution's scientific output found in the
formed by the 10% of the highly cited papers in their respective fields.
It is stated that SIR World Report 2012 is not a league table. "The ranking
parameter - - the
scientific output of institutions -- should be understood as a default rank, not
proposal. The only goal of this report is to characterize research outcomes of
as to provide useful scientometric information to institutions, policymakers and
managers so they are able to analyse, evaluate and improve their research
The report tracks 3,290 institutions that together are responsible for more than
worldwide scientific output.
In respect of Irish research institutions, UCD (University College Dublin) gets
rank (WR) of 356; Trinity College, Dublin, 428; UCC (University College Cork)
Galway 797; DCC (Dublin City University ) 1039; University of Limerick 1122; NUI
Maynooth 1663; RCSI (Royal College of Surgeons, Dublin) 1785; Teagasc, the Irish
Agricultural Institute, 2047.
Heading the table are 1) Centre National de la Recherche Scientifique (France)
Academy of Sciences 3) Russian Academy of Sciences 4) Harvard University and 5)
Planck Gesellschaft (Germany).
Research journals are big business and the number of published articles grew
from 1.09m in
2002 to 1.94m in 2010 according to data from Elsevier and the UK Department of
Innovation and Skills, cited by The Wall Street Journal. The number of journals
worldwide has risen from 8,086 in 1970 to 31,758 in 2011.
The Journal reported in August 2012 that "growing pressure on scientific
journals to increase
their influence in the research world is pushing them to ever further lengths to
play the system
that ranks scholarly publications. In July, a publication called Scientific
retracted two papers about regenerative medicine, saying they had excessively
journal, Cell Transplantation."
At issue was the 'impact-factor ranking,' one of the most influential numbers in
The newspaper said that the impact factor (IF) was invented more than 50 years
ago as a
simple way to grade journals, on the basis of how frequently their articles got
cited in the
literature. But concerns have arisen that some journals' impact factor is
artificially inflated by
excessive citations - - which appears to be why the editors of The Scientific
retracted previously published work.
The IF, is reported to be used by researchers in deciding where to publish and
what to read. It
guides promotions, tenure decisions and funding committees around the world, who
someone publishing in a high-impact journal must be doing superior work.
Thomson Reuters calculates the IF by dividing the number of citations of
research papers in a
journal in one year by the total number of papers published in the same journal
in the two
previous years. The IF reflects the citation rate of a journal as a whole, it is
not a measure of
the quality or veracity of any individual paper.
In February 2012, Science, the US magazine, reported on a study, 'Coercive
Academic Publishing,' by researchers at the College of Business Administration,
Alabama, Huntsville, which found that one in five academics in economics,
psychology and business fields had been asked to pad their papers with
references in order to get published.
Allen W. Wilhite and Eric A. Fong "analyzed 6672 responses from a survey sent to
researchers in economics, sociology, psychology and multiple business
(marketing, management, finance, information systems, accounting) as well as
data from 832
journals in those same disciplines. We find that coercion is uncomfortably
appears to be practiced opportunistically. As editors game the system and
the integrity of academic publications suffers."
"While 86% of our respondents view coercion as inappropriate and 81% agree that
reduces a journal‟s prestige, and 64% even say they are less likely to submit to
journal, the majority (57%) still say they would add superfluous citations
before submitting to a
journal known to coerce...Authors in most of the business disciplines appear
more likely to
continue submitting to coercive journals than those in economics and sociology."
The authors said that Thomson Reuters should remove journal self-citations from
its impact factor calculation altogether, to remove any incentive for editors to
In September 2011, Bayer, the German pharmaceutical firm, published a study
showing that it
had halted almost two-thirds of its early drug target projects because in-house
failed to match claims made in medical journals.
The researchers said: "We received input from 23 scientists (heads of
collected data from 67 projects, most of them (47) from the field of oncology.
revealed that only in ~20–25% of the projects were the relevant published data
line with our in-house findings. In almost two-thirds of the projects, there
between published data and in-house data that either considerably prolonged the
the target validation process or, in most cases, resulted in termination of the
the evidence that was generated for the therapeutic hypothesis was insufficient
further investments into these projects."
In December 2001, Gautam Naik of The Wall Street Journal in a report
Goal: Reproducing Study Results' said: "Reproducibility is the foundation of all
research, the standard by which scientific claims are evaluated. In the US
research is a $100bn year enterprise. So when published medical findings can't
by others, there are major consequences.
Drug manufacturers rely heavily on early-stage academic research and can waste
dollars on products if the original results are later shown to be unreliable.
Patients may enroll
in clinical trials based on conflicting data, and sometimes see no benefits or
There is also a more insidious and pervasive problem: a preference for positive
7. International rankings
Ireland has not secured “its position as one of the most advanced knowledge
economies in the world and become renowned for the excellence of its research.”
1) The Programme for International Student Assessment (PISA) is an international
assessment of the skills and knowledge of 15-year-olds. PISA is a project of the
for Economic Co-operation and Development (OECD) and subject areas or "domains"
assessed are reading, mathematics and science. The PISA tests are done on a
In 2009, Korea and Finland were the highest performing OECD countries in reading
with mean scores of 539 and 536 points, respectively. However, the partner
Shanghai-China outperformed them by a significant margin, with a mean score of
Korea, with a country mean of 546 score points, performed highest among OECD
the PISA 2009 mathematics assessment. OECD countries Finland, Switzerland,
Canada, the Netherlands, New Zealand, Belgium, Australia, Germany, Estonia,
Denmark, Slovenia were above the OECD average in mathematics.
Shanghai-China, Finland, Hong Kong-China and Singapore were the four highest
in the PISA 2009 science assessment. In science, New Zealand, Canada, Estonia,
the Netherlands, Germany, Switzerland, the United Kingdom, Slovenia, Poland,
Belgium as well as the partner country and economies Taiwan, Liechtenstein and
Macao China also performed above the OECD average.
Finland had an overall result for reading, mathematics, and science of 536, 541
Ireland's points were 496, 487 and 508.
The OECD average was 493, 496 and 501.
The Irish scores showed that between 2006 and 2009 Ireland dropped from 5th to
for reading literacy, from 16th to 25th place for mathematical literacy, while
results in scientific
literacy remained more stable.
2) The European Union's annual Research and Innovation Scoreboard 2011
The EU's 'Innovation leaders' are Sweden, Denmark, Germany and Finland. The 4
tend to have:
- above-average R&D expenditure, especially in the business sector;
- higher investment in skills and finance;
- strong national research and innovation systems with a key role for
between public and private sectors;
- better results in turning technological knowledge into products and
Austria, Belgium, Cyprus, Estonia, France, Ireland, Luxembourg, Netherlands,
the UK are "Innovation followers."
The performance of Czech Republic, Greece, Hungary, Italy, Malta, Poland,
Slovakia and Spain is below that of the EU27 average. These countries are
The performance of Bulgaria, Latvia, Lithuania and Romania is well below that of
average. These countries are "Modest innovators."
3) World Economic Forum: The Global Technology Report 2011/2012 produced in
association with INSEAD, the French business school, aims at identifying,
benchmarking the drivers of national capacity to leverage ICT to boost
well-being and their impacts.
Ireland's ranking was 25.
4) The Economist Intelligence Unit: Digital Economy Rankings 2010 report
October 2011) assesses the quality of a country‟s ICT infrastructure and the
ability of its
consumers, businesses and governments to use ICT to their benefit. When a
ICT to conduct more of its activities, the economy can become more transparent
"Our ranking allows governments to gauge the success of their technology
those of other countries. It also provides companies that wish to invest or
with an overview of the world‟s most promising business locations from an ICT
Ireland had a 17th ranking in 2010. In 2004, Ireland's e-readiness rank was 15.
5) The World Bank’s Knowledge Assessment Methodology is an online interactive tool that produces the Knowledge
Index (KEI)–an aggregate index representing a country‟s or region‟s overall
compete in the Knowledge Economy (KE).
World Bank Knowledge Economy Index -- Ireland had a No. 11 rank in both 2000 and
6) IMD's annual World Competitiveness Yearbook 2012 says its criteria can be
which analyse competitiveness as it can be measured (e.g. GDP) or soft data,
competitiveness as it can be perceived (e.g. Availability of competent
criteria represent a weight of 2/3 in the overall ranking whereas the survey
data represent a
weight of 1/3.
Ireland has a 20th ranking. It had a ranking of 7 in 2001.
7) World Economic Forum's annual Global Competitiveness Report 2012/2013 uses 12
indicator categories, including innovation.
Ireland has a 27th ranking. It had a ranking of 11 in 2001.
8) In December 2011, the OECD reported that Switzerland topped for the first
time the OECD
fixed broadband ranking, with 39.9 subscribers per 100 inhabitants, followed
closely by the
Netherlands (39.1) and Denmark (37.9). The OECD average was 25.6. Ireland was at
In 2011, the Economist Intelligence Unit (EIU) launched its gBBI (government
broadband index) to assess countries on the basis of government planning, as
current broadband capability.
The EIU said that overall, the developed South-east Asian countries (Japan,
South Korea and
Singapore) are at the forefront of the move towards near-ubiquitous high-speed
All three countries have official targets of providing 1Gbps services to more
than 90% of
households within two to five years.
The EIU produces a subscription report. In a summary table here of the top 14
high speed access, South Korea, Japan, Singapore, Sweden and Finland head the
and Greece is in 14th place.
9) The Global Innovation Index (GII) 2012 produced by INSEAD and the World
Property Organisation (WIPO), ranks 141 countries across more than 80 metrics.
Switzerland is in the lead and Ireland has a 9th rank, ahead of the United
Ireland's technology intensive exports from the foreign-owned sector are not
indicative in itself
of an innovation culture.
The Economist says the "problem is that the model has so many inputs that the
interfere with the stronger ones. Why should 'government's online service' or
rate' or 'paid-for' newspaper daily circulation correlate with innovative ideas?
data dilute things like 'royalty/license fee receipts' or published scientific
articles, which are
probably robust measures?"
The top five countries are Switzerland, Sweden, Singapore, Finland and the
countries just don't correspond well with people's daily experience of
The magazine says: "Close your eyes, dear reader, and empty your mind. Now open
eyes and look around at all the innovative things that surround you: computers,
smart phones, hybrid cars, planes, medical equipment, new drugs, Facebook and
clean water in Africa, 3D printing, car-sharing, self-driving cars, e-books. The
list goes on and
on. Now think of where they came from - - and where you'd like to set up a
startup if you had
the world's next killer idea.
America, the epicenter of many of the newest things, comes tenth in the ranking.
(which pioneered solar panels, hybrid cars and extraordinary new ceramic
planes) doesn't make the top ten. Nor does South Korea, whose celebrated Samsung
world's top maker of mobile phones, flat-panel televisions and flash memory
other things. Instead, Hong Kong with a population of 7m (compared with
Japan's 127m and South Korea's 48m) comes out ahead, at number eight. But what
innovation has come out of Central or Happy Valley other than new methods to
Chinese corporations or new ways to lose one's wealth at the Jockey Club?"
"...the index is misnamed. It is meant to measure the 'enabling environment' for
rather than the product itself. To do this, the indicators are adjusted for
population or GDP."
10) Doing Business 2012, the World Bank index on ease of doing business in 183
is a useful measure of the "enabling environment" for innovation.
In Italy for example, Mario Monti, the prime minister, has targeted the
obstacles that have
been faced by entrepreneurs starting a business in his country.
Ireland has an impressive 10th ranking.
Greece is at 100 with Yemen at 99 and Papua New Guinea at 101.
Italy is at 87 with Mongolia, a communist ruled country until 1990, at 86 and
Jamaica at 88.
11) University rankings 2012
Ireland has no university among the top 100 universities in the 2012 Times
In 2012, University College Dublin (UCD) has dropped from 159 to 187 and Trinity
Dublin (TCD) rises from 117 to 110.
TCD has a 38th ranking in Europe, which it shares with the University of
Sheffield and the
University of Sussex, compared with ETH Zürich – Swiss Federal Institute of
Zürich, Continental Europe's top university, in 4th position.
The Times Higher Education World University Rankings of 400 institutions, uses
performance indicators to examine a university‟s strengths against all of its
core missions --
teaching, research, knowledge transfer and international outlook.
The QS World University Rankings is an annual league table of the world‟s top
universities. The rankings are based on four key pillars -- research, teaching,
TCD is the only Irish university to be ranked in the top 100 at 67. UCD is at
TCD compares with ETH Zürich – Swiss Federal Institute of Technology Zürich,
which has a
world ranking of 13.
TCD had a ranking of 49 in 2008. UCD was at 108.
8. Clusters and venture capital
Michael Porter, the Harvard Business School academic and author of the 1990
Competitive Advantage of Nations,' has defined a cluster as, "A geographically
group of interconnected companies and associated institutions in a particular
field, linked by
commonalities and complementarities (external economies)."
Prof Porter told BusinessWeek that "the more there are no barriers, the more
mobile, the more decisive location becomes. ..Now that globalisation continues
forward, what has happened is that clusters must become more specialised in
locations. The global economy is speeding up the process by which clusters get
focused. There is a footwear cluster in Italy, for example, where they still
advanced products. The design, marketing, and technology still are in Italy. But
much of the
production has shifted to Romania, where the Italians have developed another
cluster. All of
the production companies actually are Italian-owned. Taiwan has done the same by
production to China. The innovation is in Taiwan, but its companies are moving
their cluster that don't need to be in Taiwan."
"I think the US is facing some very serious challenges. But the most important
competitiveness are not national. They are regional and local. National policies
circumstances explain about 20% to 25% of why a regional economy is doing well.
really matters is where the skills and highly competitive institutions are
based. Some of these
assets take a very long time to build. But competitiveness essentially is in the
Recent research on Danish entrepreneurs by Olav Sorenson of the Yale School of
Management and Michael Dahl of Aalborg University, Denmark, showed that location
preference helps venture performance through entrepreneurs' ability to exploit
understanding of their home regions and their social connections within them, or
performance due to remaining close to family and friends when more favourable
conditions exist elsewhere.
"Ventures perform better - - survive longer, generate greater annual profits and
cash flows - -
when their founders locate them in their home regions where they have deep roots
and friends," said Sorenson. "The effect we found is substantial. It's similar
in size to the value
of having prior industry experience."
Michael Porter argues that it is not what a country or region produces, but how
that leads to growth and competitiveness.
Douglas Woodward in his paper, 'Porter‟s Cluster Strategy Versus Industrial
(2005), said that to analysts and observers of regional innovation networks, the
that most commonly comes to mind is California‟s high-technology Silicon Valley
"surprisingly, Porter’s lectures and writings point to California’s
Valley as a primary example of an innovating cluster."
Woodward says: "The central Porter hypothesis is that competitive, productive
firms require a
set of supportive microeconomic conditions to thrive, regardless of natural
Porter‟s emphasis on the importance of raising regional productivity (making
products and services better, not just cheaper) is readily accepted by policy
maintains that the best way to raise firm competitiveness is through encouraging
collaborative, localised clusters of firms, with private-sector councils of
the lead from government. Clusters are geographic concentrations of
companies in related industries, but also encompass specialised suppliers,
institutions, universities, and trade associations. Porter takes spatial
clustering, no doubt
descriptive of successful regional development, and makes it the prescriptive
revamping regional development."
Many OECD countries and regions are combining clusters policies and
strategies. For example, the states of Berlin and Brandenburg (innoBB) have
joint innovation strategy to focus public support on five clusters: health care;
technology; transport, mobility and logistics; optics; and ICT (information and
This inter-regional strategy focuses on “entrepreneurial discovery”, on market
through intra-cluster co-operation and on the development of innovative
technologies. It has
developed an inter-regional structure for venture capital, the Business Angels
Club Berlin Brandenburg e.V. to support entrepreneurs and strengthen innovative
OECD , Science, Technology and Industry Outlook 2012, OECD, Paris,
An OECD working paper, Temouri, Y. (2012), 'The Cluster Scoreboard: Measuring
Performance of Local Business Clusters in the Knowledge Economy,' OECD Local
and Employment Development (LEED) Working Papers, presents results on the
entrepreneurship performance of 80 selected local enterprise clusters in two key
sectors with important roles in local economic growth; high-technology
and knowledge-intensive service activities (KISA).
Cluster performance is estimated through six indicators and a composite index
crystallises different information in one single ranking. The six indicators
entrepreneurialism (share of young firms out of the total); ii) employment
growth; iii) turnover
growth; iv) profitability; v) liquidity ratio; vi) solvency ratio.
The paper says that the top performing clusters in the pre-recession period were
research district and Silicon Valley in the United States, while during the
recession the two
leading clusters in HTM and KISA were the Coimbra biotech cluster in Portugal
science town in Korea.
The author says that in the pre-recession period leading clusters were found in
advanced economies such as the United States, Germany and Sweden, while during
recession well-performing clusters came from a more mixed background that
countries severely struck by the crisis such as Portugal and Ireland.
Comparing Silicon Valley with a small cluster in Portugal has its limitations
young firm in an Irish cluster may well be a unit of a well established US firm.
Some 3,118 US companies received total venture capital investment of $28.8bn in
years of taking on 1,000 or more new companies each year, the industry had
dipped to a
post-bubble low in 2009, when it funded 797 first time companies. That count
2011 to 1,173 according to the 2012 NVCA Yearbook 2012 produced by Thompson
Venture capitalists in Europe put €4.4bn (US$5.9bn) into 1,012 deals for
companies in 2011, a 14% decline in investment and 19% fall in deal flow from
according to Dow Jones VentureSource. This marks the lowest annual deal count
since VentureSource began tracking the region in 2000.
- The UK remained the favourite destination for venture capital investment in
Europe in 2011. Companies in the U.K. raised €1.2bn for 274 deals, a 36% decline in
investment and 17% decline in deals;
- France came in second place as companies raised €728m for 217 deals, a 15%
decline in investment and 18% decline in deals;
- Germany came in third as companies raised €475m for 120 deals, a 23% decline
in investment and 26% decline in deals.
The US still maintains an approximately 70% share of the global VC market,
followed by the
UK, Beijing and Shanghai, based on Dow Jones VentureSource data in 2012 reported
Ernst & Young. However, a later survey in Israel (see below) shows that the
ahead of the UK in 2011.
Ernst & Young said that median pre-money valuation (a term used in private
equity or venture
capital that refers to the valuation of a company or asset prior to an
investment or financing)
was $21m in the US in 2011 and $6.0m in Europe.
The median round size in Europe in 2011 was US$2.7m (up from US$2.6m in 2010).
US it was $5m up from $4.3m in 2010.
In 2011, China saw 382 new VC funds raise a record $28.2bn for investments into
In the US, Europe and Israel, the main exit route for VC-backed companies is
(M&A), representing more than 90% of all exits. Furthermore, VC firms are also
companies to private equity ﬁrms as a third path to liquidity.
Israel attracts far more venture capital per person than any other country - -
$170 in 2010 to
According to an IVC-KPMG survey, in 2011 Israeli companies raised $2.14bn - -
from Israeli venture capital funds. The remainder came from other Israeli and
Some 159 Irish technology companies raised €274m from investors in 2011.
This compares with funds raised of €310.2m in the same period of 2010.
“The Irish venture capital community continues to be the main source of funding
for Irish high-tech SMEs,” commented Regina Breheny, director general, IVCA
(Irish Venture Capital
Association). She said that since the onset of the credit crunch in 2008, 547
Irish SMEs raised
venture capital of €1.1bn. “These funds were raised almost exclusively by Irish
during this period supported the creation of up to 20,000 jobs.
However, research published by University College Dublin in 2011, showed that in
total direct employment by indigenous companies backed by venture capital was
9,733, an increase of 36% on the levels employed in 2007.
Irish venture capital funds supported by Enterprise Ireland, a state agency,
invested a total of
€60m last year.
1) Silicon Valley: Stanford University classmates Bill Hewlett and Dave Packard founded
in 1939. The company's first product, built in a garage, part of Packard's
rented house on 367
Addison Avenue in Palo Alto, California, was an audio oscillator - - an
instrument used by sound engineers. One of HP's first customers was Walt Disney
which purchased eight oscillators to develop and test an innovative sound system
The simple one car garage became the HP workshop and a little shack out back
Hewlett's home. In 1989, California named the garage "the birthplace of Silicon
made it a California Historical Landmark.
In 1976, Steve Jobs and Steve Wozniak co-founded Apple in Jobs' family garage in
However, the myth of the startup in a garage is not the full story about Silicon
region south and southeast of San Francisco Bay in Northern California. The
Index says the geographical boundaries of Silicon Valley vary. Earlier, the
region‟s core was
identified as Santa Clara County plus adjacent parts of San Mateo, Alameda and
counties. However, since 2009, the Silicon Valley Index has included all of San
in order to reflect the geographic expansion of the region‟s driving industries
Don Hoefler, an electronics journalist is credited with coining the name
'Silicon Valley' in
1971. He had begun his career in electronics journalism as a publicist for
Semiconductor, which had pioneered the development of the silicon microchip.
With a population of 3m and 37% foreign-born, Vivek Wadhwa of Duke University
and a team
of researchers in a study of US engineering and technology startups in the
found that there was at least one immigrant key founder in 25.3% of all
technology companies established in the US between 1995 and 2005 inclusive. "We
that together, this pool of immigrant-founded companies was responsible for
than $52bn in 2005 sales and creating just under 450,000 jobs as of 2005." Over
of Silicon Valley startups had one or more immigrants as a key founder, compared
California average of 38.8%. In Silicon Valley, Indian immigrants founded 26% of
startups - - more than the next four groups from Britain, China, Taiwan, and
New research published in October 2012, showed that that the proportion of
immigrant founded companies nationwide has slipped from 25.3% to 24.3% since
2005. The drop is
even more pronounced in Silicon Valley, where the percentage of
declined from 52.4% to 43.9%.
From the 107,819 engineering and technology companies founded in the last six
study examined a random sample of 1,882 companies in a nationwide survey. Of
companies, 458 had at least one foreign-born founder.
The exceptions to this downward trend were immigrants from India. Although
founders in the
study hailed from more than 60 countries, 33.2% of them were Indian, an increase
of 7% in
2005. Indians, in fact, founded more of the engineering and technology firms
born in the next nine immigrant-founder countries combined.
After India, immigrant founders represented China (8.1%), the United Kingdom
Canada (4.2%), Germany (3.9%), Israel (3.5%), Russia (2.4%), Korea (2.2%),
(2.0%) and the Netherlands (2.0%).
Silicon Valley has a workforce of about 1.3m and it added 42,000 jobs in 2011
outside high-tech fell while public services deteriorated due to California's
governance system that makes it easy to spend but hard to tax. San Jose, a city
of almost a
million people has shed a fifth of its workforce in 4 years.
The number of businesses leaving Silicon Valley exceeded the number moving to
every year from 1995 to 2010, with a majority of the movement staying within the
share of businesses moving out of Silicon Valley but remaining in California
54% in 2009 to 77% in 2010.
A 2011 survey reported that there were 7,460 ICT (information and communication
technology) establishments in the cluster employing 215,609 workers, with an
of over $182,000. The average employment is 29.
The Silicon Valley Index 2012 puts high-tech employment including life sciences
Public procurement is important in the early years of a cluster's development
Valley was no exception.
The key developments in the 1950s were when William Shockley, co-inventor of the
seven years earlier, founded Shockley Semiconductor Laboratories in Santa Clara
1955. He recruited 12 young scientists dedicated to the use of germanium and
transistors -- his "PhD production line." Shockley won the Nobel Prize¨ for
Physics in 1956.
However, his management style prompted 8 young scientists to leave company and
Fairchild Semiconductor in 1957.
The so-called "Traitorous Eight" developed a method of mass producing silicon
The group included Gordon Moore and Robert Noyce who were later the co-founders
The new company was profitable in six months with the help of its first sale: an
IBM for 100 transistors at $150 apiece. The order was shipped in a Brillo
scouring pad carton,
picked up at a local supermarket.
In 1958, Robert Noyce developed the monolithic integrated circuit...a
circuit on a fingernail-size wafer of silicon. It was the birth of the
Business from the Pentagon for weaponry and from NASA for the space program,
make the price of microchips commercially viable.
John Harpur, author of the book, 'Innovation, Profit and the Common Good in
Education - - The New Alchemy,' Palgrave Macmillan (2010), writes that Gordon
not hold Stanford University to have been essential to the formation of Silicon
Harpur says Moore emphasises "the relative uniqueness of their technology and
technological opportunity' that was there for exploitation. With respect to
Moore argues that clusters of small startups as envisioned in many technology
miss a key feature of Silicon Valley dynamics, viz the presence of a mix of
large and small
firms. The capacity of a large firm in a new technology to generate more ideas
opportunities than it can exploit puts small startups in a highly favourable
Silicon Valley now has several competitors across the US.
2) Israel: There have been many attempts to clone Silicon Valley but the results
not been impressive.
Israel is the exception and like the original, it's not easy to replicate its
With a population that has grown to almost 8m, developing a country in a
while in a constant state of war, has promoted innovation.
Compulsory military service for both young men and women coupled with work in
development of military technology gave the country a strong research base.
So when the Soviet Union collapsed in 1991, and Israel became the home for 1m
migrants, including the greatest short-term movement of intellectual capital in
country took advantage of a significant opportunity. Israel's overall population
20%. Nearly 40% of the immigrants held academic degrees, many of whom were
engineers and specialised technicians.
Dan Shechtman of the Technion Institute of Technology, won the Nobel Prize in
2011 and he was the fourth Israeli science laureate in the past decade.
The government established the Yozma (Initiative in Hebrew), a state fund of
promote venture capital funding with investments from US firms.
A thriving independent local VC industry began as growth of the US high-tech
The OECD's 'Science, Technology and Industry Outlook 2012' says Israel is a
with world leadership in dynamic high-technology sectors such as software. The
financial crisis only briefly slowed its growth. With BERD (business enterprises
R&D) of 3.51% of GDP in 2010 Israel led OECD countries. GERD (gross domestic
expenditure on R&D) excluding defence, was 4.25% in 2010 -- also the highest of
mainly developed countries in the OECD, which had an average of 1.98%. Israel's
triadic patents per GDP is at the upper middle level and trademark registrations
the OECD median. Its share of top R&D investors corresponds to the OECD‟s median
entrepreneurship Israel leads the OECD in venture capital). The national ICT
in the medium range. With 45% of the adult population with tertiary education,
among leading OECD countries.
Israel has a strong science base and its share in the top 500 universities is
among the OECD
High-tech exports from Israel are valued at about $18.4bn a year, making up more
of Israel‟s exports, according to the Central Bureau of Statistics.
Eighty-five Israeli companies were acquired or merged in 2011, 27% more than the
companies that were acquired or merged in 2010, and four% more than the previous
average of 81. The average deal size increased nearly 85% to $60m from $32.5m in
This increase in deal size reflects a relatively high number of deals above
$100m, with 18% of
the number of deals accounting for 75% of total M&A deal proceeds. Five M&A
exceeded $300m and one deal – the acquisition of online advertising company
DG – surpassed the $500m mark.
Israel's ministry of finance said in 2011 (PowerPoint) that at 280,000, the
accounted for 14% of total employees in the business sector.
Microsoft‟s R&D Center houses 550 engineers and while there are now 45 R&D
globally, only three are considered “strategic” ones outside the US. China and
India host the
Besides Microsoft, up to 220 R&D centres of multinational corporations employing
50,000 Israelis, include Alcatel, Deutsche Telecom, Cisco, Google, HP, Merck,
In the second quarter of 2012, there were 199 new high-tech startups, according
to a report
by the Israel Advanced Technology Industries association compared with 114
were founded in each of the preceding two quarters.
In the book 'Startup Nation' (2009), authors Dan Senor and Saul Singer wrote
that each year
as Europe created 700 to 800 high-tech startups, Israel added 500. After the
Israel is by far the second largest generator of startups.
3) Cambridgeshire, Oxfordshire and Silicon Roundabout:
The area around Cambridge University in the UK, known as Silicon Fen is Europe's
The Financial Times said in 2006 that a comparison between Cambridgeshire and
Clara County in California showed that, for the same geographic size, economic
Silicon Fen was six times smaller and average earnings less than a third of
David Marlow, chief executive of the East of England Development Agency, said in
“The east of England is the UK's ideas region. We have world-leading research
23% of all UK research and development spend is here. But we cannot be content
generate ideas . . . while Cambridge has rightly gained international acclaim
research and scientific innovation, its high-tech firms remain predominantly
There are about 48,000 high-tech jobs in 1,400 firms in the cluster:
- 40% of firms are micro and employ 1-5 people;
- 20% of firms are micro and employ 6-10 people;
- Only about 2.5% of firms employ more than 200 people.
ARM plc is the most successful company to develop in the cluster.
In 1990, Advanced RISC Machines (ARM) spun out of Acorn and Apple's
with a charter to create a new microprocessor standard.
ARM has only 2,000 staff as it licenses its technology to overseas producers
that make chips
that are used in devices such as mobile phones.
Its value in September 2012 was £8bn ($13bn).
Revenues were £492m in 2011 and profit before tax was £157m.
Warren East, ARM CEO, told the BBC that the UK needs to create a better
which technology companies can flourish. ARM works with over 1,000 companies
world - - but very few are based in the UK.
He said he gets frustrated by what he sees as an anti-technology and
anti-business culture in
the UK - - and this needs to change, starting with the way science and
technology is taught in
Autonomy, the business software company, that was hastily acquired by HP for
(£6.6bn) in 2011, was founded by Irish-born Mike Lynch in 1996.
Lynch had completed his Cambridge University doctoral thesis on the work of
the 18th century English mathematician. Over two decades his company grew to be
most valuable listed software business.
However, it also had only 2,000 staff when it was acquired.
The FT reported that a former Autonomy employee said that following the HP
culture of endless conference calls and form-filling was “like being
Mike Lynch was ousted in March 2012 and the FT said HP had maintained that the
was not its corporate systems, but Autonomy‟s poor management. It was simply a
Autonomy not making enough sales, they said.
“You cannot miss your numbers by a wide margin at HP and stay here,” one person
company said. People close to the company indicated that Autonomy fell around
30% short of
its sales targets in the quarter ended April.
Oxford University says that while accurate figures for hi-tech companies are
hard to come by,
Oxfordshire is estimated to be home to 3,500 hi-tech companies employing 45,000
The area around the Old Street roundabout in Shoreditch, East London, known as
or Silicon Roundabout, is estimated to have 3,200 firms and over 48,000 jobs,
according to a
report published in June 2012.
The report says: "Our interviewees were overwhelmingly male, white, British and
educated. Most were in their thirties. The firms that they own and run were
businesses (under 10 staff) and most were less than five years old. Over a third
of all firms
had an international structure of some kind. This is what they told us."
David Cameron, British prime minister, said in November 2010: "Our ambition is
together the creativity and energy of Shoreditch and the incredible
possibilities of the Olympic
Park to help make East London one of the world‟s great technology centres."
Bloomberg reports that according to data from Thomson Reuters, 103 Internet
received global venture capital funding in Germany in 2011, more than in any
China and the US.
The Berlin Chamber of Commerce reports that 1,300 Internet startups have been
the city since 2008, 500 of them last year.
The Economist said that "even in Israel turning tech startups into big companies
For all the comparisons with Silicon Valley, Israel has not begotten a
Intel or a Google. Its best companies are often bought by American giants while
still in their
infancy. The biggest home-grown technology company is Teva, a drugmaker which is
on Nasdaq, an American tech-oriented stockmarket, with a market capitalisation
of $35bn (in
September 2012). In information technology the biggest is Check Point, a
founded by veterans of Unit 8200, an elite army-intelligence group. Also on the
stock exchange, on which Israel has more companies than any foreign country bar
China, it is
valued at $11bn -- no minnow, but no whale.
Very young firms have a good deal of support, which is getting stronger.
which entrepreneurs can shape their ideas and meet advisers and investors, are
this week, for example, UpWest Labs, which intends to bring five to ten Israeli
Silicon Valley for ten-week stints, began its first programme. As well as
people, the hopeful entrepreneurs receive $20,000 in seed money."
In common with other clusters, lack of early-stage venture capital: sums of
$1m-2m or so -- is
Only 29% of venture capital investments in Israel during the first half of 2012
involved early stage startups, researchers have found. While the percentage of
younger companies has grown compared to the three previous years, it is still
2008, before the global crisis hit, according to research conducted by attorneys
and Limor Peled from the firm Shibolet & Co.
When the industry is stable, first-round investments should exceed subsequent
rounds, argues Aviram. "But subsequent investment should only go to the best
he said. "Since the second half of 2008, the first round of investment hasn't
been the largest -
or in other words, the industry is shrinking and that is a serious problem."
In recent decades, IONA Technologies which was founded in 1991 by three staff
Trinity College, has been a rare successful university Irish spinout.
In 1995 the company reported revenue of $8.6m and net income of $2.2m and in the
year it signed a $750,000 contract with Boeing's Commercial Airplane Group to
supply it with
its so-called middleware software.
By 2001, IONA had 650 employees and following a loss in 2007, Progress Software
Massachusetts acquired the firm for $162m in 2008. Approximately 90 former IONA
employees who joined Progress as part of the acquisition were issued with share
In the United States it has been claimed that the "Bayh-Dole Act of 1980 is
arguably one of
the most influential pieces of legislation to impact the field of intellectual
property law in the
twentieth century." It "permits a university, small business, or non-profit
federal funds for research to produce an invention to retain the title on any
patent issued for
The Act spurred the promotion of commercialisation of university research in
There were 671 spinout companies from university research created in the US in
2011; 268 in
the UK and in 2010, 579 were created in Europe, according to ProTon, a
Association of Knowledge Transfer Offices at third level institutions.
In University College Dublin (UCD) 5 new spinout companies were established in
commercialise the output of UCD research programmes. This brings to 19 the total
UCD spin-outs incorporated in the last 5-years.
The Swiss Federal Institute of Technology Zurich (ETH Zurich) produced 22
spin-offs in 2011
and a record 110 over the past five years. ETH Zurich has a 13th ranking in the
University Rankings 2012 and is the top university in Continental Europe. ETH
has a 12th
world ranking in the Times Higher Education World University Rankings 2012-2013.
For an MSc in Finance thesis at the London Business School, Alexander Schläpfer
Oskarsson produced a study of 130 spinouts, concentrating on the economic impact
success of those created by ETH Zurich. The study‟s results revealed that ETH
Zurich spinoffs are more successful than other startups in Switzerland and
highly beneficial to the local
More than seven new jobs were created by every ETH Zurich spin-off, resulting in
a total of
918 positions - - nearly twice what the average Swiss startup creates.
Altogether, ETH Zurich
spin-offs created approximately 1,500 direct and indirect jobs between 1998 to
The aggregate survival rate for ETH Zurich 1998-2007 spinouts was 88.5% (115 out
"Among the total population of 130 ETH Zurich spin-offs, we have found evidence
Capitalist or Business Angel backing in 34 companies (26.1%) with a total of 80
“More and more spin-off companies are being generated by academia and other
institutes all over Europe. They are learning the game -- and not only in the
European countries,” said ProTon board member Andrea Piccaluga, a professor of
management at the Scuola Superiore Sant'Anna in Pisa, Italy.
The real test, of course, is how many of Europe‟s promising tech spin-offs will
globally competitive companies. The overall survival trend in Europe is too
recent to judge,
said ProTon's Piccaluga. He figures that for every 100 spin-offs, there will be
only ten success
stories. “That is not a failure,” he says. “That is the price we have to pay to
produce ten stars.”
The Department of Business, Innovation and Skills said that UK universities
formed one new
company per £24m of research funding during 2010-11. This far exceeds the record
universities (one new company per £56m). Enterprise Ireland, an Irish public
that: "Although the Technology Transfer System in Ireland is relatively young,
results which compare favourably with international data."
However, these British and Irish claims imply that the outcomes are comparable.
The Massachusetts Institute of Technology (MIT) helped to spin-off 26 startups
However, the number of companies started venture capitalised and/or with minimum
of other funding was 16.
Declan Curran, Chris van Egeraat, and Colm O‟Gorman in an Irish paper, 'New
Inherited Competence: The Evolution of the Irish Biotech Sector' (2011), say
that while the
Irish biotech industry comprises a similar number of university and private
and these two cohorts have both generated increasing quantities of patentable
recent years, "we show that in one key respect - - the attraction of investment
funding - spinoffs from Ireland‟s most successful indigenous biotech firm, Elan,
have enjoyed a superior
performance relative to the spin-offs that emerged from Irish universities. For
example, for the
period 2000-2010 five Elan spin-offs attracted twice as much venture capital
funding than the
twenty-one university spin-offs in receipt of venture capital over this same
period. We argue
that innovation competence may be at least as important as technical R&D
spin-off success, and that the spin-off firms from Elan have inherited
business/industry knowledge and high innovation competence from a highly
parent. We also find that private sector startups which were not spin-offs fared
very poorly in
terms of attracting venture capital."
Tim Minshall and Bill Wicksteed in a UK paper, 'University spin-out companies:
Starting to fill
the evidence gap' (2005), say that: "It is arguable that, in the recent past,
have been given too high a profile in policy pronouncements. Because they have
fashion' spinouts have been seen, sometimes uncritically, as a 'good thing.'
Whilst there is a
strong case for moving towards a more cautious appreciation of their
contribution, it would be
unfortunate if the fashion pendulum were to swing back too far the other way.
benefits to universities may well only accrue in the long term and the
distribution of financial
benefits may well be heavily skewed towards a few spin outs. There are, however,
report has instanced, a number of valuable positive spillovers to both regional
economies that are likely to be felt more immediately."
Einar Rasmussen, Oxana Bulanova, Are Jensen and Tommy Clausen, in a Norwegian
'The Impact of Science-Based Entrepreneurial Firms -a Literature Review and
Synthesis' (2012) say that a "2009 evaluation of the FORNY-programme (which
the commercialisation of research) included an analysis of Norwegian SBEFs
entrepreneurial firms) based on a survey and secondary data (Borlaug et al.,
analyses show that the FORNY grant-supported project portfolio from 1996-2007
new companies started on the basis of technology that had been developed in
research institutions. In 2008, about 200 of these firms still existed with a
total turnover of
about NOK 900m (€120m) and 700 employees. Most of these firms are small, and
5% display patterns that make them likely to become high-growth firms (Borlaug
The authors add: "Although many studies asserts that SBEFs play an important
technology transfer or regional development, very few studies provide insights
leads to successful outcomes on these dimensions. There are no large sample
have studied the links between startup conditions and the societal impact of
fair to say, however, that most studies rely on rather simple measures, often
selected on the
basis of data availability. SBEFs have long development paths and successful
remain small for a rather long time period before they start to grow. To be able
to capture this
development the preferred option is to measure the impact over a long period of
such data are not readily available."
“Ireland by 2013 will be internationally renowned for the excellence of its
will be to the forefront in generating and using new knowledge for economic and
progress, within an innovation driven culture.”
Almost a decade ago, the Enterprise Strategy Group, headed by industrialist Eoin
said in the report, 'Ahead of the Curve - Ireland's Place in the Global
Economy': “Until now,
Ireland‟s principal enterprise strengths have been in the operational aspects of
and services, rather than in markets and product development. This is
particularly true of the
foreign-owned sector, which accounts for most of our exports and which, for the
produces goods that were designed elsewhere, to satisfy market requirements that
specified elsewhere, and sold by other people to customers with whom the Irish
little contact and over whom it has little influence."
It was unusual for an Irish official report to present the facts absent the spin
The group wished to have a focus on a) developing expertise in international
promote sales growth b) building technological and applied research and
capability, to support the development of high-value products and services.
The report said: "Despite many excellent individual company performances, few of
indigenous industry sectors have achieved strong growth in exports over the past
Eight years later, the same point could be made.
Foreign firms are still responsible for about 90% of tradeable exports.
exports amounted to €15.2bn in 2011, according to Enterprise Ireland. Total
valued at €164.3bn (Page 4). This total is exaggerated by profitshifting and
booking of foreign
end user services revenues as Irish exports.
Almost two-thirds of Irish indigenous exports are to English speaking countries,
led by the UK.
Both Ireland's enterprise and exports' strategy are all over the map, akin to a
too many products and markets with no profit data to guide focus.
Policymakers often deliberately conflate foreign-owned and indigenous exports
example discussing export potential to BRIC countries.
In June 2006, the Irish government launched the 'Strategy for Science Technology
Innovation 2006-2013' report where targets were set for university scientific
increased R&D spending by both foreign-owned and indigenous firms.
A decade before, there were high hopes that a significant indigenous high-tech
be developed. Software, e-learning and payment processing companies were
meet perceived market demands. By 2006, the survivors of the dot.com bust of
were struggling and the government was persuaded that coupled with collaboration
enterprise sectors, basic research in areas such as microbiology, nanotechnology
neuroscience, could produce 'world-class' companies that would pick up the slack
hoped-for soft-landing of the then out-of-control property bubble.
In 2006, the US publicly traded biotech industry had in aggregate never reported
a profit in 40
years. In 2008, it reported a profit, mainly because of the performance of a
small number of
Today, the Irish internationally trading economy remains essentially an entrepôt
that continues to be dependent on foreign firms, mainly American. The favourable
the existing positive experience of using Ireland as the main European base for
region's markets, appears to be more important than doing R&D in Ireland.
For big companies such as Google and Microsoft, the facility of using Ireland
with its benign
Revenue authorities, as part of an international tax evasion/avoidance strategy,
is also more
valuable than issues such as R&D.
The term 'evasion' is used as posting multi-billion dollar or euro charges in
annual accounts to
offset revenues that have arisen elsewhere, would not be expected to be approved
of a domestic company, without some serious probing.
The concept of a 'knowledge economy' for Irish policymakers was one where 'high
jobs for third-level graduates would become significant in the economy.
However, the model of globalisation where there would be knowledge economies in
while low-wage manufacturing would dominate in regions such as Asia, is already
out of date.
For example, the boom and bust for American, Chinese and German firms in the
solar industry, shows that there are no easy pickings in green energy for even
knowledge economies. For example, Denmark‟s wind energy sector is also
The Economist Intelligence Unit says that research from Zinnov, an India-based
firm, shows that the number of MNC (multinational companies) R&D centres in
India grew almost fourfold between 2001 and 2010, from 557 to 2,009.
In 2010, the total number of Chinese students and scholars attending foreign
research institutes rose to 284,700, thirteen times more than in 1999. Chinese
comprise the highest share of foreign students in the US, the European Union and
The data presented above shows that there is no evidence of a significant rise
activity by indigenous firms reflected in enterprise statistics, while jobs in
both the foreign-owned and indigenous high-tech and life sciences sectors have
been static in the past
decade; patent activity by both foreign-owned and indigenous firms has been low
There is also an inconvenient truth that the Irish are conservative and have
been slow to
embrace the web.
In 2007, household broadband Internet access in Israel was at 76% and 67% in
was 30% in Ireland. The comparable figures for 2011 were 93, 84 and 65%.
As recently as May 2011, Taoiseach Enda Kenny (prime minister) said that 40% of
SMEs didn't have a website.
In 2007, Danny Breznitz, a professor at the Georgia Institute of Technology (the
Tech) said on a visit to Ireland to provide advice to Enterprise Ireland, the
agency for indigenous firms in the internationally traded sectors, that
infrastructure was too narrow in its focus and may not be sustainable. He said
was not creating enough new businesses, and when new businesses are set up, the
supports were not there to keep them innovating - - this was before the economic
Breznitz feared that Irish research was too narrowly focussed on biotech and the
(information, communications and technology industries).
Prof Breznitz said that if a country wants sustained economic growth it has to
innovation, not only on the research side but on the commercialisation and the
In 2006, venture capital investments in Irish business amounted to €192m while
domestic and overseas commercial property was valued at €11bn.
In the period 2002-2011, the State's Science Budget has amounted to €23.7bn in
price terms. The total S&T (science and technology) spending is estimated to
€2.37bn in 2011. Education and Training was at €1.03bn. The next largest
Research and Development (€912m), followed by Technical Services (€236m), Other
activities (€116m) and finally Technology Transfer (€79m).
In recent years in a clear admission of the failure of the science policy to
have an impact on
job creation, four official taskforces have been tasked with finding a winning
Amar Bhidé, argued in 'The Venturesome Economy,' which was published in 2008,
innovation typically comes from scientists and engineers, the obsession with the
US doctorates and technical graduates compared with the rising numbers in China
India, is misplaced because the “high-level” inventions and ideas cannot be
within national borders and Asia cannot prevent America from capitalising on
with better business models.
He said 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,
not fear advances abroad. 'The Venturesome Economy' explains why - - and how it
it that way.
Bhidé said that his study shows how mid-level players combine and extend
innovations. The VC-backed businesses use different people and procedures than
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
the precincts of Bell Labs, the development teams of many of the VC-backed
studied had a close, ongoing relationship with users. Communication and
as crucial as technical virtuosity, and the technical tasks themselves involved
hoc improvisation than classical scientific experimentation.
According to Declan Jordan, an economics lecturer at University College Cork: “A
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
researchers was another post-doctoral position on a different research project.
That so few of these researchers made the switch to related industry may be a
symptom of a
large cohort of doctoral or post-doctoral researchers pursuing research in areas
science that have no obvious interest to industry in the short-term.”
Seán Baker, the chairman of the Irish Software Association, in 2009 told a
Dublin 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
intellectual property inhibited commercialisation.
Dr Baker, a co-founder of Iona Technologies, called for closer collaboration
universities and industry, stressing the need to focus on commercially viable
than “curiosity-based” research. There was a need to show a tangible return on
invested by the government in R&D to avoid a “knee-jerk reaction in today‟s
climate” that might threaten future funding.
He criticised the State‟s approach to driving innovation. “We don’t have a good
handle on a
strategy for R&D. You can’t point to one place and find someone who owns the
The strategy is confusing because it covers both the foreign-owned sector,
dominated by US
multinational giants and the indigenous sector.
Another inconvenient truth reported above is that the Irish have not been very
exporting. Coupled with the fact that high-growth firms are not typically in the
why is this sector at the heart of Irish enterprise policy?
While innovation in a broad sense is important, Irish ministers have foolishly
victims of the hype about high-tech.
We have global recognition of Irish drink brands while our reputation in food is
some parts of Europe.
As cited above, Michael Porter of Harvard points to successful clusters outside
as in the wine-growing region of Napa Valley, California and the fashion
industry in Italy.
Investing more money in research is not going to change the dynamic. The
creating up to 200,000 net jobs in coming years will not be met by focussing on
moving up the international ranking tables.
We don't have to produce PhDs in a wide spectrum of disciplines to meet
There is after all an international market that could be tapped.
Science shouldn't take the lion's share of State's enterprise budget. The
with high-tech should end.
Europe should be the focus of SMEs.
Enterprise Ireland, the State agency, said in 2009: "The countries Germany,
Italy and Spain collectively represent a GDP (gross domestic product) 3.9 times
the size of
the UK, yet the non-food exports by clients companies of Enterprise Ireland, for
countries is 40% of that of the UK."
According to Eurostat, only 4% of Irish primary
level students, learn a foreign language. In November 2009, Irish companies were
warned by several senior executives who run some of the country‟s most
successful indigenous companies, to be cautious about expanding into emerging
markets and focus instead on developed markets. “More fortunes have been lost
than made by getting in too early,” Liam O'Mahony, former CRH CEO, told a
making businesses international at UCD‟s Michael Smurfit Business School. O'Mahony,
ran the world‟s second biggest building materials company from 2000 to 2008 and
IDA Ireland, the inward investment promotion agency, said Irish companies should
expanding into the US, UK and other mature markets before looking at countries
China. “Some of these markets are very large and there is still scope to grow as
long as you
have value propositions,” he said. O'Mahony‟s advice was repeated by John
Glanbia chief executive, and Seán O‟Driscoll, Glen Dimplex chief executive.
“China is a longhaul, a slow-burn,” O‟Driscoll said.
A new enterprise policy is needed but coupled with institutional and governance
reforms of failed systems.
Change comes at glacial speed in Ireland and in the grim 1950s, T.K. Whitaker,
the head of
the Irish civil service, in 1957, in a memorandum to the minister for finance on
the failure of
economic policy and the general sense of hopelessness in the country, warned
that "without a
sound and progressive economy, political independence would be a crumbling
Radical proposals for economic change were put forward in November 1958 in a
'Economic Development,' and a new economic policy was put in place.
Eoin O'Driscoll, the former chairman of the Enterprise Strategy Group quoted
in 2007: “It is not the strongest of the species that survives nor the most
the one most responsive to change.”
The bailout troika -- the European Commission, the European Central Bank and the
International Monetary Fund - - has put pressure on the Irish government to
but there is no appetite domestically to challenge powerful vested interests.
There is no fear that the changes, which were put in place in Sweden and Finland
to economic crises in the early 1990s, will be emulated in Ireland.
Meanwhile, policy makers are deluded by data impacted by distortions caused by
foreign multinational sector.
The Central Bank said in its Quarterly Bulletin in October 2012:
"While Ireland has regained some of the competitiveness lost during the boom,
international measures of competitiveness and productivity growth overstate the
degree of improvement which has occurred. As pointed out previously, the
away from low productivity sectors in recent years has led to an overstatement
recorded improvement. Reflecting this, the gains in competitiveness which have
need to be further reinforced. One important way to do this would be to press
public sector reforms to deliver the maximum possible level of public services
reduced resources available for expenditure. More generally, pay remains high in
public and private sectors, adding to costs and prices in the economy, and no
discouraging expansion and investment projects by exporting firms. While the
difficulties of addressing some of these issues are acknowledged, a lowering of
the cost base,
both public and private, would make a significant contribution to improving
and productivity in a fundamental way. This would make clear that the economy is
adapting to changed circumstances and would be very beneficial to the recovery
While fighting the current crisis, policy makers are silent about preparing for
will emerge in the medium and long-term. It's as if the attitude is to let
sleeping dogs lie.
The facts on enterprise policy already show that relying on faith rather than
evidence can be a
Execute access is denied.