Ireland needs more integrated approach to innovation

The Government’s plan to prepare a new strategy for science, technology and innovation (SSTI) is timely. It comes on foot of a decade that started with an exceptionally rapid expansion in funding and ended with reduced funding focused firmly on research linked directly to immediate job creation.

During the same time period, there was only a modest increase, relative to GDP, in the scale of investment in research, development and innovation (RD&I) in businesses in Ireland.

With the prospect of an improving economic climate, there is now an opportunity to take better account of the fact that the yields from successful SSTI investments are medium to longer term.

Building a strong strategy requires that enterprise-level RD&I in Ireland is linked to both the national research and innovation system and to European and global research and innovation systems. The nature and scale of this relationship is different for multinational enterprises and small and medium-sized enterprises (SMEs), and current policies under IDA and Enterprise Ireland recognise this. But the international evidence is clear that for success, policy also needs to ensure the vital connection between innovation and exporting at the enterprise level is supported.

Innovation

According to the Innovation Union Scoreboard 2014, Ireland ranks ninth on the performance of research and innovation systems in the EU countries.

Sweden tops the list, followed by Denmark, Germany and Finland. These states have balanced research and innovation systems, with very good performance on all aspects evaluated (research and innovation inputs; business innovation activities; innovation outputs; and economic effects).

Ireland is in the group of innovation followers, ahead of France and Austria but lagging behind Luxembourg, the Netherlands, Belgium and the UK.

The source of Ireland’s weaker performance lies in three main areas: the scale of finance and support for innovation (R&D expenditure in the public sector; venture capital investment); enterprise investment (R&D expenditure in the business sector; non-R&D innovation expenditure); and intellectual assets (such as patent applications and community designs).

To put these international comparisons into perspective, three important factors should be recognised: Ireland’s research and innovation policy has only really developed strongly in the past 15 years, while the other EU countries have had implemented such policies for a longer time; Ireland committed exceptionally low levels of resources to R&D in the higher education sector until the early 2000s; and Ireland has a low corporate tax rate, which created little incentive for enterprises to undertake research until the government granted increased allowances for research and development in the early 2000s.

The most recent competitiveness report on EU member states points out that Ireland’s innovation performance has increased over time but at a lower growth rate than the average for the EU. The report identifies the decline in both the number of SME innovators and the number of SMEs co-operating in innovation activities with others as current challenges for RD&I in Ireland.

In relation to multinationals, the international evidence indicates that the location choice of newly-established R&D activities is determined by a combination of demand-driven factors (related to adapting products and services to market conditions) and supply-driven factors. The supply-driven factors are particularly open to policy influence. In addition to enabling economic conditions, these factors include availability of high-quality R&D personnel; proximity to centres of research excellence; technological strengths; and the quality of research-industry links.

Persuasion

Attempts to persuade multinationals to locate innovative functions in Ireland will not succeed unless there are sound objective reasons for them to undertake such activities in Ireland. Consequently, the policy approach must include measures to strengthen the efficiency of the national RD&I system and facilitate its links with the European and global systems.

In relation to SMEs, policy supports to RD&I investment are not likely to succeed unless enterprises have a capacity to acquire, absorb, and transform knowledge into innovation outputs.

The Irish evidence suggests that SMEs are less engaged in product innovation – which is necessary if they are to create jobs and succeed as global exporters – than in other types of innovation, .

In terms of policy supports, there could be considerable benefits in Enterprise Ireland operating integrated schemes rather than a series of separate programmes. We understand that Enterprise Ireland has currently over 100 support programmes, a result of a pattern of adding further schemes and leaving existing ones in place. This puts a heavy burden both on Enterprise Ireland and on the enterprises. An integrated policy approach would deal better with the complexity of the innovation cycle and differences in enterprise scale, absorptive capacity, internationalisation, and engagement with other entities. It would also help avoid duplication, reduce overheads and potentially enhance co-operation with higher education institutions.

In order to consolidate the support programmes, rigorous independent evaluations would be needed to identify which programmes work well and which do not. These evaluations would require appropriate methodologies to evaluate the effectiveness of multiple interventions.

Making sure we have an SSTI policy that delivers is crucial. The age-old metaphor– “the chain is as strong as the weakest link” – is very relevant here both in relation to RD&I policies for enterprises and for investment in research and development in the higher education sector, since research and innovation are on a continuum.

Dr Frances Ruane is director and Dr Iulia Siedschlag is associate research professor at the ESRI.