R&D key to Irish exporting companies remaining competitive

Investment into research and development by Enterprise Ireland client companies grew to almost €1 billion last year, but that figure still needs to rise further if Irish companies are to remain competitive on international markets.

"Research, development and innovation (RDI) enables companies to make products and services that are better, cheaper or more novel than those in global markets," explains Enterprise Ireland research and innovation executive Louise Maye. "Our companies must innovate if they want to export. Innovation remains an integral part of any business, both new businesses getting started and established companies wishing to continue to grow, expand and adopt new and emerging technologies."

The critical importance of innovation to exports was revealed in research carried out by the Economic and Social Research Institute in conjunction with the Department of Business, Enterprise and Innovation. “The ESRI study found that a product lifetime in an export market is extraordinarily short with an average of just one to three years,” says Maye.

The report also found that “support for innovation and ongoing adjustment and experimentation is a key policy takeaway for success of exporting companies”.

Disguises trends

However, that €1 billion figure disguises some worrying underlying trends. “This is a great achievement but the R&D intensity, that is the percentage of turnover spent on R&D, has remained static for a few years,” she notes. “Of greater concern is the R&D vitality figure. R&D vitality is the percentage of total revenue that comes from new or renewed products or services released within the last three years. This has actually decreased from 15 per cent to 10 per cent in the period since 2014. It is a concern that these important measures are not showing growth.”

The apparent contradiction between these figures and the overall spend on RDI is explained by an uneven performance by companies, according to Maye. “We have some client companies that spend a relatively high proportion of sales revenue on RDI but quite a lot do not spend enough. And quite a few of those would benefit a lot from spending more. The figures speak for themselves in terms of the difference spending on RDI can make.”

The figures she refers to are contained in the Enterprise Ireland Annual Business Review for 2018 which was published earlier this year. The review found that RDI-active companies which avail of Enterprise Ireland supports do considerably better in terms of exports, overall sales and employment than those which do not avail of such assistance.

These supports are divided into in-company assistance and supports for collaboration with higher education institutions (HEIs) and other organisations. “Enterprise Ireland supports and de-risks RDI either by supporting companies to do it within the company, or by collaborating with HEIs or by sourcing or licensing new technologies from HEIs.”

The effect of these supports is striking. When compared to companies which engaged in R&D and innovation without Enterprise Ireland support, companies which availed of in-company support had exports 2.74 times higher with employment 1.72 times higher. Companies assisted with collaboration had exports 2.3 times higher and employment 1.55 times higher. Those that availed of both types of support did even better with exports 3.6 times higher and employment 1.97 times higher – they also enjoyed turnover 2.4 times higher.

Maye is keen to point out that these supports are by no means restricted to Enterprise Ireland client firms and they are open to firms of all sizes and types. The Innovation Voucher initiative is a case in point. This provides vouchers worth €5,000 to small businesses to introduce them to innovation, linking them with a network of knowledge providers, on both sides of the Border. “Around 50 per cent of innovation vouchers go to non-clients,” she notes.

Supports

Another case is the Agile Innovation Fund which supports the development of new or substantially improved products, services or processes, where the total project cost is less than €300,000. "We have had a lot of Local Enterprise Office client companies applying for Agile Innovation Fund support during the past year."

The Innovation Partnership programme, which helps industry to engage in collaborative research projects with Irish universities and institutes of technology to develop new products and services, and the technology centres, which conduct market-relevant R&D in partnership with collaborating groups of companies, are examples of other supports which are open to non-Enterprise Ireland clients.

According to Maye, Brexit makes research, development and innovation more important than ever for Irish firms. “You can’t just go with what you know any more,” she says. “You need something more efficient that performs better than the competition and you have to invest in R&D in some way, shape or form to produce that.

Diversification into new markets is more important than ever in light of Brexit and R&D will give companies a competitive advantage in those markets. The evidence shows that companies that invest in R&D and avail of Enterprise Ireland supports do better. Companies should inquire about those supports even if they are not Enterprise Ireland clients.”

[ Enterprise-ireland.com ]