Innovation

Taskforce

Report of the Innovation Taskforce

March 2010

 

 

 

 

 

 

 

Ireland - The Smart Economy

 

Innovation Taskforce

Report of the Innovation Taskforce

March 2010

 

 

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© Government of Ireland 2006

 

 

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7        Additional Proposals to Support Marketing Ireland as a

 

Foreword

In December 2008, the Government published its medium-term economic framework - Building Ireland's Smart Economy - which contains five key action areas for driving productivity growth across all sectors of the economy, public and private. This report from the Innovation Taskforce is concerned with one of those action areas which involves positioning Ireland as an International Innovation Hub. 

When the Taskforce first met just over six months ago I referred to the Government's vision for Ireland as "an innovative, high-value export-led economy with some of the world's leading research-intensive multinationals and thousands of innovative small and medium enterprises." I am pleased that the Taskforce has endorsed this vision. However, while the Taskforce has shown that the 'glass is more than half full' in terms of Ireland's current performance and potential in innovation, it has also made clear that Ireland still has a distance to travel if we are to develop an Innovation Ecosystem to match our ambitions.

In this Report, the Taskforce has produced many recommendations, all focused on supporting the entrepreneur and enterprise as the heart of this ecosystem. They have focused, correctly, on how to deliver a step-change in the level of company start-ups and their growth to international scale in order drive job creation in innovative, export-focused sectors.

The Taskforce has made a wide range of recommendations including in the areas of investment in R&D, the higher education sector, access to Intellectual Property, public procurement, tax and other incentives, convergence and other opportunities for transforming existing companies, infrastructure and marketing.

The report contains many interesting ideas, as well as calling for reinforcement and better alignment of existing efforts and programmes. It also poses a challenge to industry to seize the opportunities arising. I look forward to working with my colleagues in Government to take forward the Taskforce's recommendations to make Ireland an International Innovation Hub.

I am very encouraged by the interest in the work of the Taskforce and it shows a level of energy which we need to capture as we move forward. I know that the Taskforce has, by itself, already been an important stimulus to thinking and action by many organisations and individuals.

Finally, I would like to express my sincere gratitude to the Taskforce members for their exceptional contribution of time and effort which has resulted in a comprehensive, timely and important report. I can assure them that their work is of central importance in delivering the Government's vision for Ireland's economic renewal.

 

 

 

Brian Cowen, T.D.
Taoiseach

Executive Summary

Despite the serious economic challenge currently facing Ireland in responding to the global economic crisis, stabilising the public finances and protecting jobs, we have an opportunity at the same time to lay the foundations for future economic growth.

Increasing our competitiveness by reducing costs, stabilising the public finances and preparing for a global recovery, while essential, will not be enough to ensure we return to sustainable economic growth. Increasing productivity, that is developing new ways to get a higher quality and quantity of output of goods and services from each unit of input, is the key driver of economic performance and sustainability. Innovation, in both the production and use of ideas, technology and processes, is important in this context because it is a key driver of productivity.

What is innovation?

" Innovation entails investment aimed at producing new knowledge and using it in various applications. It results from the interaction of a range of complementary assets which include research and development, but also software, human capital, design, marketing and new organisational structures – many of which are essential for reaping the productivity gains and efficiencies from new technologies". OECD1

What we need to do now is to place innovation at the heart of enterprise policy. Our future economic success depends on increasing levels of innovation across all aspects of Irish enterprise – from large Irish-owned multinationals to foreign multinationals located here to established Small and Medium Enterprises (SMEs) in services and manufacturing, as well as start-ups and existing companies with high growth potential.

Innovation is a broad concept and extends beyond the enterprise sector. The Innovation Taskforce endorses Building Ireland's Smart Economy, which provides a framework across five action areas for enhancing productivity and promoting sustainable growth in the Irish economy.

This report does not address all aspects of that Smart Economy agenda but it does address one vital aspect. In line with our terms of reference, our focus is on Action Area 2 in Building Ireland's Smart Economy, namely "building the innovation or 'ideas' component of the economy through the utilisation of human capital – the knowledge, skills and creativity of people – and the ability and effectiveness of that human capital to translate ideas into valuable processes, products and services."

We do not claim, or believe, therefore that this Report is a solution to all of Ireland's economic challenges. It does, however, contain a vision and recommendations that we believe can lead to a significant step-change in restructuring the economy towards export-led sectors, a revival of productivity growth and the creation of sustainable employment for future generations.

 

Ireland has many attributes which make it suited to becoming an Innovation Hub in Europe. Over 500 million people live within a three hour flight of Dublin. We have favourable demographics, a strong educational standard, a good tax and regulatory environment, a growing entrepreneurial culture and an international mindset. We have a reputation for cultural innovation and a large Diaspora who are talented in many fields. We have an excellent group of innovative multinational companies and have recently had significant success in attracting high-value Research & Development (R&D) activity into Ireland. Nevertheless, we need to do more.

Our aim is that by 2020 Ireland will have a significant number of large, world leading, innovation-intensive companies, each having a global footprint, many of which are Irish headquartered and owned. These companies will provide high-quality employment and generate exports and tax receipts. They will vary in scale, type of activity and pattern of company ownership. What will be distinctive about these companies is that they will be ambitious, export-focused and, above all innovative.

In order to achieve this vision and secure Ireland's economic future we need to significantly increase our current rate of job creation and new company start-ups.

This requires a concentrated and focused national effort. Policy and investment decisions must be centred on supporting and encouraging the entrepreneur and innovative enterprises through driving an economic and business model, which is both invigorating and self-renewing.

To make innovation work for us we have to develop an ecosystem in which each element, and each interaction, supports innovation across the economy and society. The key elements in such an ecosystem are:

a.   Entrepreneurs and enterprises (indigenous and foreign-owned);

b.   Investment in research and development;

c.   The education system, in particular, higher education institutions;

d.   Finance, in particular risk capital;

e.   The tax and regulatory environment;

f.   Public policy and institutions.

The Taskforce agreed six principles as fundamental to creating this ecosystem and transforming Ireland into an International Innovation Hub. These are:

1.   The entrepreneur and enterprise must be at the centre of our efforts.

2.   Establishing, attracting and growing and transforming enterprises must be the focus of a coherent national effort.

3.   Availability of smart capital is crucial for starting, growing and transforming enterprises.

4.   An education system which fosters independent thinking, creativity and innovation is vital to achieving the Smart Economy.

5.   The State should actively accelerate success by encouraging flagship projects and by prioritising the provision of excellent infrastructure.

6.   We must sharpen the focus of our national research system to target areas of potential strategic and economic advantage for Ireland.

Knowledge is the currency of the innovation economy and the education system is pivotal in making innovation happen. We have made significant investment in R&D in recent years and we must build on this investment to strengthen the base of knowledge which is an essential element of a successful innovation ecosystem.

That is why our first key recommendation is to deliver on the investment framework set out in the Strategy for Science, Technology and Innovation (SSTI) 2006-13 and achieve the goal in the renewed Programme for Government of investing 3% of GDP in R&D by committing to investment in an updated SSTI for the 2014-2020 period.

This requires greater and more co-ordinated public research investment, leveraging of more private sector investment and channelling this investment into agreed areas of national priority.

We believe that current economic difficulties should not be allowed to diminish the level of investment which we believe is necessary or inhibit the return on investments already made. A more efficient and effective approach to identifying and accessing Intellectual Property (IP) arising from public research investment is vital if we are to strengthen our commercialisation focus. We make a number of recommendations in relation to IP which we believe could make Ireland a centre of international best practice, creating significant employment and Foreign Direct Investment (FDI) opportunities.

A key recommendation is the development of a national IP protocol as a priority, so that entrepreneurs and companies have predictability about the terms on which they can access IP created at Higher Education Institutions (HEIs) in order to turn it into products and services that meet customer needs.

We also recommend that more meaningful metrics to measure performance of HEIs and Technology Transfer Offices (TTOs) should reflect this Protocol and that a portion of state funding for HEIs might be linked to these metrics.

The achievement of clarity and consistency in our national IP regime will set a standard for the consistent and speedy treatment of IP and give us a competitive advantage within the EU while the process of finding, accessing and bundling IP from the HEIs needs to be rationalised.

We recommend that we build on this advantage by developing and marketing Ireland as an International Innovation Services Centre offering global IP management, licensing and trading services.

If we are to start and grow innovative enterprises on an unprecedented scale, we also need to increase the availability of smart capital. A key goal must be a transformation in the scale and nature of the Irish Venture Capital environment by attracting top tier venture financing to Ireland so as to successfully scale innovative companies. This can best be achieved through the Innovation Fund - Ireland, as envisaged in Building Ireland's Smart Economy, implementation of which will be shaped by the market-testing exercise currently led by the National Treasury Management Agency (NTMA) supported by Enterprise Ireland (EI).

We must also realise the opportunity to redirect capital investment into innovative companies, including through "business angels" who also transfer knowledge and experience.

That is why we recommend that Ireland should nurture a national portfolio of Business Angel funds. Until this has been achieved, we suggest that temporary State intervention in the form of a new Seed Capital scheme is required. We also identify a set of tax initiatives to incentivise start-up and angel funding activity.

While Enterprise Ireland is very active in this space, it has a broad focus and we believe that it must increasingly focus on start-up and early stage activities if we are to achieve the job creation trajectory envisaged in this Report.

One of Ireland's most significant attributes and opportunities in driving innovation is its vibrant multi-national community. Despite increasing competition, there are new Foreign Direct Investment opportunities for Ireland to be exploited by the IDA, as well as scope to transform existing FDI enterprises. The attraction of blue chip companies to Ireland to carry out research, development, product design and other innovation activities here is an increasingly important strand within our inward investment portfolio and we recommend steps to strengthen the innovation ecosystem thereby helping to attract more new investment and embed existing FDI.

We also recommend measures to help increase R&D and innovation capabilities, including in the area of product design, within Irish industry.

As well as sustaining our strengths in particular sectors we must also grasp the significant opportunity offered by new developments in converging technologies. We must strengthen and scale indigenous companies including through incentivising collaborations. We believe that the State can leverage these existing attributes and resources in a variety of ways to drive our transformation to an Innovation Hub.

For example, we recommend that Ireland can brand itself as an Innovation Hub, in fact and in image, through attracting the European headquarters of private US companies via a specially devised European Accelerator Programme.

We believe that public procurement should be used to drive and stimulate the development of innovative solutions with export potential. We therefore recommend that a number of carefully selected Flagship projects should be set in train requiring the development of innovative new products and services, many of which will occur through cross-sectoral collaboration between companies both indigenous and Multinational Corporations (MNCs).

Furthermore, we propose that a team from the key agencies should be formed to ensure that we take full advantage of new opportunities in convergence by driving the necessary investment, regulatory and education actions.

Our future human capital is significantly shaped by our education system. We therefore believe that innovation and creativity must be promoted at all levels of the education system. In the HEI sector we support the delivery of scale and capacity through rationalisation, collaboration and alliances such as the Innovation Alliance between Trinity College Dublin and University College Dublin and the Strategic Alliance between the National University of Ireland, Galway and the University of Limerick. Looking to the future we must develop sufficient revenue streams to sustain excellence in our HEIs.

At second level we need to raise levels of competence and attainment in maths and sciences substantially such that they feed into Science, Technology, Engineering and Maths (STEM) disciplines at third and fourth levels and we need to develop and reinforce creativity and problem solving capacities across the workforce. We believe that mathematics attainment is crucial in this regard and suggest additional measures to improve this including incentives such as the awarding of CAO bonus points to those taking higher level mathematics for Leaving Certificate.

Similarly, entrepreneurial skills need to be fostered at second, third and fourth levels of our education system. We believe that a more concerted national effort at workforce up-skilling is also essential for a competitive and productive workforce to support development of a smart economy. We strongly support placement schemes in companies for both graduates and undergraduates to facilitate the transfer of high technology skills and expertise.

Given the scale of our ambitions, and the challenges Ireland faces, we recognise that we must also increase our current human capital stock by proactively attracting people to Ireland to start up innovative companies, to augment the indigenous base of potential entrepreneurs.

This requires effective marketing to ensure that potential investors, entrepreneurs and researchers are attracted here to help strengthen our innovation eco-system. All State agencies and HEIs need to jointly market and brand Ireland as a leading innovation location and destination of choice for European and other overseas investors. We need to fully utilise the willingness of the Diaspora to contribute, while strategically re-focusing efforts towards new and emerging markets.

Key to this effort is an organised programme of visits and other activities whereby Ministers, Departments and State agencies convey a consistent, positive message about Ireland as a centre of excellence for innovation.

We also need to find ways to enhance understanding across society of the role every person can play in building an innovation-intensive economy and making the Smart Economy a reality.

We need a sea change in attitudes – in public and private sectors - towards innovation and entrepreneurship, to recognise that they involve risk, and occasionally result in failure. Legal arrangements also need to avoid any sense of stigma from a failed business venture provided there has been a reasonable approach to business risk. That is why we recommend that personal bankruptcy legislation needs to be reformed.

High quality physical infrastructure is another important ingredient in building a successful and innovative economy and in attracting overseas entrepreneurs and FDI. Universal access to high quality broadband is one key infrastructure for the Smart Economy. While Ireland has seen increasing uptake of broadband, accelerated progress is required. We also identify wet laboratory space for life sciences as a deficit which must be addressed as a matter of priority.

Given the scale of the transformation necessary and the broad range of actions required we need clear targets against which progress can be measured, and mechanisms for doing so. We have provided an estimate of how many jobs might be created – 117,000 by 2020 is at the lower end of our projections (see Chapter 13) - and we believe that the recommendations set out in this report, if implemented in a coherent and determined fashion, can deliver the inflection point in performance which is required.

We believe that engagement between its members has already enabled the Taskforce to influence policy and programmes relevant to innovation over recent months. We have identified 24 Key Recommendations which we consider should be implemented as a matter of priority. Our recommendations are set out in the table on pages 94 – 106, along with indicative timelines and cost estimates and we propose the development of meaningful metrics by which to measure and evaluate progress.

We recognise the difficult economic context and that some of these recommendations have significant cost implications which would require re-prioritisation of limited resources at a time of serious budgetary pressure, while others require a re-alignment of efforts within Departments and Agencies. The measures we have recommended are designed to secure the outcomes we propose as necessary and feasible, and it is in that context that we put them forward for evaluation by the Government as it prioritises its use of scarce resources. In the same way, the suggested tax changes can be evaluated in the framework of analysis of tax reliefs which in line with public policy should underpin and justify all such provisions of the tax code.

While all recommendations in the Report are not necessarily supported by all members, and may not represent the position of each member's organisation, this report represents our collective view of the right overall pathway forward to create an innovative, high-value, export-led enterprise sector.

We recommend a new High-Level Implementation Committee reporting to the Taoiseach and the Cabinet Committee on Economic Renewal to ensure that the recommendations are implemented in a dynamic and responsive fashion reflecting the fast-changing global environment in which Ireland must compete.

A list of all the Recommendations along with associated timelines and responsibility for implementation is set out on pages 94 - 106.

 

1. Vision

Our Vision – Innovation Ireland

"The Ireland of the future will be a smart, high-value, export-led economy. It will have some of the world's leading research-intensive multinationals, a number of which will be Irish-owned. It will have thousands of innovative small and medium enterprises."

The Taoiseach, announcing the establishment of the Innovation Taskforce, in June 2009.

 

+    We agree. Our vision is that by 2020 Ireland will be an Innovation Hub with a significant number of large, world leading, innovation-intensive companies, each having a global footprint, many of which are Irish headquartered and owned.

+    These companies will provide high-quality employment and generate exports and tax receipts. They will have scale, and will recycle capital and experience while reinforcing a positive international image of Ireland as a place to invest risk capital and develop new innovative products and services.

+    Our vision also involves the creation of thousands of innovative companies, from very small start-ups through small, medium and larger companies, many of which aspire to scale themselves.

+    This requires a transformation in how we generate jobs and growth, and a shift in how we learn and how we work. It means making connections between ideas and people in ways which have not been tried before. It involves re-evaluating our attitudes to both success and failure in order to reap the rewards of innovation.

+    Our vision encompasses existing companies and sectors that are strong in Ireland today with the aspiration to grow and innovate, thereby creating further jobs and profits. It requires a transformation of existing Irish businesses, as well as continuing to support moves by MNCs here into higher value activities which provide high quality jobs.

+    It also encompasses new companies: spin-outs from university or started by people working in Irish or MNC industry today. Many of these will be in emerging industries or in converging sectors using cutting-edge technology and concentrating significant efforts in research and development (a number of examples of innovative companies are interspersed in Textboxes within this Report).

+    To be very clear, our vision is not just about start-ups or businesses run by "people wearing white coats" - it includes family-run businesses, SMEs and MNCs that have been in existence in Ireland for many years. And they are supported by an innovative and entrepreneurial public service.

What is distinctive about these companies is that they are ambitious, they are export-focused and above all they are innovative.

 A time to be Ambitious

It is sometimes assumed that by simply improving cost competitiveness we will return to the economic growth path that transformed this country during the 1990s.

We disagree. While we must be cost competitive, we need to find new sources of competitive advantage that will provide high-quality sustainable jobs and economic growth.

The economic challenge facing Ireland at this time is to secure a return to the highest sustainable rate of economic growth based on rising incomes per head for a population whose employment rate is high.

Success in meeting this objective will require a high level of productivity across the whole economy, that is the measure of the way in which resources – physical and human – are deployed to produce goods and services.

In the first instance, this requires that production – and the cost of inputs to production – are competitive in terms of international markets. The pressure on unit costs, including wages, is eased as productivity levels rise within and across firms.

Productivity can be increased by increasing the efficiency with which resources are used to produce existing goods and services. This is an immediate and continuing imperative for firms and the public service, in all sectors and at all levels of technological sophistication.

But a more challenging and ultimately more effective route to productivity growth is through the dynamic offering that flows from activities such as product and process development, product differentiation, market segmentation and changes in the competences and scale of firms. These are the central elements of innovation, and they provide the basis for a more sustainable and less volatile growth performance than strategies focused solely on low costs and operating efficiencies. Innovation therefore is everyone's business.

It is vital for the survival of existing businesses and their prospects for returning to growth. It is vital for the public service, if the growing demands for service delivery are to be met in the face of social and demographic change. It is vital for employers and entrepreneurs at all levels, if they are to have access to rewarding opportunities as the pace of technological and organisational change quickens.

Ireland needs a radical increase in job creation to provide opportunities for those who are currently unemployed and those entering the labour market from schools and colleges over the period ahead.

Most jobs in the economy, and most of the jobs associated with the rapid increase in employment over the decade up to 2005, are not in occupations with a high technology content. That is likely to be the case in the future. But job retention and creation will require that all sectors have the core skills and competencies to successfully change in the way they work as new technologies and processes are diffused and adopted across the economy.

Entrepreneurs will be needed and will need to be supported – to lead such change right across the economy, in the public and non-profit sectors as well as at all levels of the private sector.

Fortunately, there is evidence from the surveys of employers2 and employees carried out by the National Centre for Partnership and Performance (NCPP)3, and from the review of the leadership of change in different sectors by the National Economic and Social Development Office (NESDO)4, that there is a positive orientation towards change and innovation across the economy and a resilience in facing the prospect of continuing rapid and pervasive change in the world of work.

Given that our interest is in the economic impact of innovation – that is in the jobs and value added generated and retained in Ireland – we have focused our attention on how innovation in strategic aspects of Ireland's economic performance can be increased radically, to match the scale of the challenges we face.

Because innovation applied to economic activity is an interactive process, we have looked at the ecosystem which supports and promotes innovation in Ireland. The actors in this system and the way they currently interact are unique to Ireland, just as every country and region has its own innovation characteristics.

This ecosystem is often described in terms of the place of science and technology in the Irish economy, and this is indeed critically important. However, innovation extends beyond this to involve institutions concerned with education and the labour market, as well as the markets for knowledge (in terms of intellectual property) and financial markets.

The Need for an Inflection Point

While acknowledging the breadth of the innovation challenge, we have focused our attention on the aspects of Ireland's innovation ecosystem which have a particular impact on the development of dynamic, knowledge-based enterprises with the potential and ambition to grow to significant scale in products and services of global significance. Specifically, we have considered how to accelerate the establishment and growth of such firms, whether arising from the transformation of existing businesses, the diversification of the Irish economy, activities of FDI companies, start-ups associated with new knowledge generated in Irish research centres or the attraction to Ireland of entrepreneurs with global market ambitions.

Irish economic policymakers have taken brave steps at key points in our economic history to intervene and cause inflection points in our economic development. These interventions resulted in significant productivity increases and laid the foundations for prosperity – now is the time to do that again.

We know that productivity growth fell back significantly during the property boom but we also know the key role that innovation - in both the production and use of technology - plays in enhancing productivity and economic output. Thus, our objective is to position Ireland as an Innovation Hub in Europe.

It is important to make clear that this does not just involve high-tech innovation. It is about processes as well as technologies, domestic as well as internationally-traded sectors, multinational as well as indigenous enterprises, and public as well as private sectors. To illustrate this we have interspersed the Report with examples of innovative companies and examples of innovation which has resulted in significant job creation and benefits to society in terms of the development of new products, processes and services. The first such example is overleaf.

 

Box 1.1

Citi Citi has had a presence in Ireland for the past 45 years. It employs 2,000 people in Dublin and Waterford. Originally a branch of Citibank, N.A., it then invested in and developed a regional operations and service centre with support from the Irish Government. This centre quickly became a Regional Service Centre (RSC) of operational excellence. On the back of the success of the RSC, Citi migrated a number of major global and regional products to Ireland. These products include worldwide payment businesses, trade services, securities and fund services. The global and regional management of these products are now mostly located in Citi's principal vehicle in Ireland, Citibank Europe plc. The services, client delivery and product businesses have quickly been supplemented by comprehensive skilled project/implementation teams. As a result, Citi in Ireland has now become a major centre for global customers of Citi's Global Transaction Services (GTS) business. Citi was the first financial services company to set up a dedicated research and development facility. This global Research, Development, Innovation and Learning (RDIL) Centre was opened by the Taoiseach on Wednesday 30th September 2009. This centre has become a hub for developmental and fundamental research projects in the financial services business. Citi is continuing to develop its core capabilities to support the development of innovative products and services from Ireland. To date, Citi has invested over ƒ62 million in RD&I projects in Dublin and created a Centre of Excellence for the development of products and processes for Citi's Europe Middle East & Africa (EMEA) business. The RDIL Centre is currently working on new information technologies to transform the modes of interaction between clients and banks in the future. Examples of innovations being worked on include digital account management, portal and multi-channel technologies, media and collaboration, mobile technology and analytics.

 

We need to be ambitious. It is not an option merely to sustain the current trajectory of job creation in, and start-up of, innovative export-focused companies. That will not create enough jobs, it will not earn sufficient tax revenues, and it will not ensure an adequate standard of living for our people in the longer term. In order to secure Ireland's economic future we need to create an inflection point, a game changer. Achieving this inflection point is the focus of this Report.

We believe we can reinvent ourselves again. And we on the Taskforce are not alone in this. We were both astonished and genuinely gratified by the creativity of the ideas put forward in the large number of submissions received (see Box below). This gives us confidence that we can deliver on our vision of translating the ideas and creativity of our population into sustainable jobs for our people.

 

Box 1.2

Note on consultation The Taskforce conducted an extensive consultation process, both formal and informal. 117 responses were received to a public call for written submissions and each of these was considered by Taskforce members. A list of respondents is at Appendix 3. A summary of the submissions is available at www.innovationtaskforce.ie. Issues addressed in the submissions include: +    Definitions of innovation and metrics for success of innovation policy; +    The need to embed innovation more fully in all levels of the education system; +    The need for more research collaboration and alliances; +    How to improve rates of commercialisation of IP and Technology Transfer; +    Incentives and taxation policy; +    The need to use State procurement to leverage innovation; +    How to attract entrepreneurs to Ireland and leveraging the Irish Diaspora; +    Sectoral innovation opportunities and the need to pursue opportunities in converging technologies; +    The contribution which can be made by design, arts, the humanities and social sciences to innovation; +    Infrastructural deficits. As well as formal submissions, the Taskforce Working Groups met with a wide variety of stakeholders. Further details on the Working Groups are in Appendix 4. One of the Taskforce Working Groups also conducted a web-based survey to inform its deliberations. Over 200 responses were received and the findings of the survey are summarised in Appendix 5. The Taskforce would like to take this opportunity to thank all those who fed into its deliberations. Many of the proposals contained in this Report were directly influenced by submissions received. The Taskforce hopes that all respondents will have an opportunity to participate in a continuing dialogue and shared effort on Ireland's innovation policy as the vision in this Report is taken forward.

 

A National Effort is Required

One of Ireland's strengths has been the consistent support across political, administrative and other systems for the attraction of Foreign Direct Investment (FDI). We believe that the same strength and consistency of effort is required for our updated vision to transform ourselves into an Innovation Hub for Europe.

 

We realise that the Government faces severe budgetary pressures in restoring the public finances, and all our recommendations must be viewed in that context. Nonetheless, we believe that full economic recovery will only be achieved if we prioritise this agenda.

In this Report, we identify the essential components of the environment – or what we call the ecosystem – that we must put in place so that new ideas can be created, nurtured and put to work to create jobs and economic benefits for the country. We have also set ambitious goals for the number of jobs which we believe can be delivered.

While our vision is undoubtedly challenging, we also believe that it is realistic given our many strengths and the progress we have made in recent years in building our knowledge base and innovation capability. Our objectives can be delivered although this will not happen overnight.

What is required now is a sustained national effort to build a successful innovation ecosystem centred around innovative enterprises and the entrepreneur.

Our vision cannot be delivered by Government action alone. Our vision requires support and commitment from all stakeholders and involves cultural and behavioural changes across our population as a whole. We believe that Ireland's population is ready and able to meet this challenge.

 

2. Context

Evolution of enterprise policy

 

Ireland is now confronted with a serious economic challenge – responding to the recession and protecting employment, whilst at the same time ensuring that we lay the foundations for future economic growth. Ireland has faced and overcome such challenges in the past. Many of the strengths that helped us in the past still hold true today and can, if accompanied by the right infrastructure, be used to meet this latest challenge.

The seeds for the dramatic economic growth recorded in the 1990s and early part of this decade were sown in the 1960s as, for the first time, Ireland embraced the twin philosophies of investment in human capital (primarily the decision to provide free second level education to all) and encouraging FDI into Ireland. This was further underpinned by the growing appreciation amongst policymakers of the value of the then EEC and the opportunities offered by the nascent free trade area. As a small and ever more open economy, however, Ireland was at the mercy of the global economy. Cyclical global downturns and the oil crises of the 1970s combined with some poor domestic policy decisions stunted Irish economic growth and required a re-orientation of public policy.

By 1987 a new consensus emerged at the heart of Irish economic policymaking. Spurred on by record unemployment, mass emigration and a rapidly deteriorating fiscal situation, the Government and other key stakeholders reached agreement on a Social Partnership deal that provided for industrial peace in return for reduced levels of personal taxation. This deal, allied to continued low taxation on corporate profits contributed to the creation of a virtuous circle of increased labour participation, higher personal incomes, and expanding Government revenues.

The improved domestic economic climate, in conjunction with Ireland's traditional advantages of geographical location, English language fluency and a high quality workforce at competitive cost led to massive inflows of FDI, primarily from the United States. As an open, competitive and flexible economy, with a low corporate tax rate together with membership of the European Union, and more recently the Euro, Ireland was, and continues to be, an ideal base for global companies to support global and EU markets.

 

Box 2.1

Factors Underpinning Our Economic Success A number of factors contributed to Ireland's economic progress over the past 20 years: +    Joining the Common Market offered Ireland access to established European markets; the subsequent evolution of the Common market into the EU and Euro area ensured progressively greater economic unity within Europe. +    Global trade expanded at an unprecedented pace. In particular, advanced sectors such as Information and Communications Technology (ICT) and Life Sciences, which were targeted for inward investment by FDI policy, experienced significant growth through the mid and late 1990s. +    A well qualified workforce and consistent, long-term consensus-based policies which have delivered a favourable corporate tax, fiscal and wage setting environment. +    The ability to identify new and emerging opportunities across the manufacturing and internationally traded services sectors, target specific investments and establish Ireland as a leading location for FDI has been a key element in our success to date.

 

These factors helped drive exports and employment growth within Ireland. Employment almost doubled between 1988 and 20085, while exports increased from $22 billion to $211 billion6. This helped drive increases in Irish living standards, with Gross Domestic Product (GDP) per capita increasing from $10,455 in 1988 to $45,026 by 20087.

Over the past decade, it has become clear that Ireland's international competitiveness depends increasingly on goods and services which have high knowledge content. There has also been a recognition that Ireland needs to shift into more knowledge-based activities, transforming existing enterprises (both Irish and foreign-owned) and attracting a new wave of investment in areas such as information and communications technology, energy, medical devices and biotechnology.

As a consequence, since 2000 enterprise policy has placed increasing emphasis on innovation:

+    Science Foundation Ireland (SFI), legally established in 2003, is funding excellent scientists and engineers working at the frontiers of biotechnology, information and communications technology and, more recently, sustainable energy and energy-efficient technologies.

+    Higher Education Authority (HEA)/Programme for Research in Third Level Institutions (PRTLI) investments have been strengthened and aligned to co-ordinate infrastructure provision and the development of human capital.

+    The IDA reinforced its drive to attract R&D activities to both upgrade existing FDI client operations in Ireland and to seed new activity.

+    Enterprise Ireland has increased its focus on driving indigenous company innovation and commercialisation from increased R&D activity in HEIs.

This investment is beginning to have a significant impact including:

+    Total R&D spending has almost trebled to ƒ2.6 billion in 2008, which is equivalent to 1.66% of Gross National Product (GNP)8.

+    Business Expenditure on R&D has risen to an estimated ƒ1.68 billion in 2008 - double the level recorded in 2000. By 2007, 163 companies were spending over ƒ2 million on R&D9.

+    Higher Education R&D spending has almost quadrupled in current terms over 10 years and is now at the EU and OECD average levels 10. Ireland's research output and reputation has been dramatically enhanced. Two Irish universities are in the world top 100 – one in the top 5011.

+    Ireland's volume output of research articles rose by 33% between 1998 and 2007 12, while Ireland's share of world papers has risen by 20% 13 and its citation share has risen by 32% 14.

+    50% of IDA investments in 2009 were in Research Development & Innovation (RD&I) with over ƒ500 million of investment. There are now about 170 IDA supported companies with a significant R&D mandate with a spend of approximately, ƒ1.2 billion 15.

The Community Innovation16 survey published by the Central Statistics Office (CSO) estimates that total spend on innovation activities in 2008 was almost ƒ5.3 billion.

EU data also shows that this investment is bearing fruit. While Ireland remains an Innovation Follower rather than an Innovation leader, its innovation performance as measured by the EU Innovation Scorecard is now above the EU27 average. It is a growth leader within this group of countries with a rate of improvement above that of the EU27.

It is sometimes argued that Ireland should be clever copycats rather than developing its own R&D capacity, i.e. we should just do the 'D' in R&D. However, while it is often the case that companies make more money from adapting and utilising technology by process innovation than they do from inventing new technology, economic evidence suggests that R&D stimulates economic growth directly through innovation and also indirectly through technology transfer17. Thus, a country's ability to absorb foreign technology is enhanced by investment in education and by investment in own R&D18. Thus Ireland's ability to absorb and adapt innovation from elsewhere is crucially dependent on having a strong R&D culture and smart people.

The Government's Strategy for Science, Technology and Innovation (2006) signified a recognition of the importance of R&D and innovation for Ireland's economic development and was designed to bring Ireland into line with countries that create a significant proportion of their GDP from the creation and utilisation of knowledge – countries like Singapore, Australia, Germany, Denmark, Austria, and France.

We strongly believe that Government investment to date has brought Ireland up to a credible base from which to build a sustainable innovation ecosystem capable of competing globally. Ireland must remain committed to our ambitions in this area, as well as ensuring that we enhance our innovation performance across the enterprise sector. However, there is a need to more explicitly position the entrepreneur and innovative enterprises at the centre of all our efforts, and to move our creation of export-focused companies and jobs on to a new and more dynamic trajectory.

Many of the strengths which helped us in the past still hold true today19 and can, if accompanied by the right policy infrastructure, be used to meet this latest challenge:

+    We have a well established legal system and a stable democracy.  

+    Our economy is open to enterprise and innovation. Ireland is the third most globalised economy in the world20 with trade over 150% of GDP21.

+    We have a growing enterprise culture.

+    The proportion of 24-34 year olds with at least degree-level education is significantly higher than the OECD and EU average. The number of PhD graduates per thousand of the population and employed in industry has risen significantly.

+    We have the security of European Union membership, the benefits of the euro as our currency, and free movement of people, goods, services and capital, as well as over 500 million people living within a three hour flight of Dublin.

+    We are native speakers of the international business language.  A large number of MNCs are located here, many of which are involved in R&D activities already.

+    We are a relatively small market in global terms, which creates the opportunity for market trials and experimentation in Ireland before the expense of addressing global markets.  

+    We have a large and influential international Diaspora.

+    Through investments over the last decade we have established a capacity and reputation for leading international quality research in a number of fields.

+    We have a rich cultural and scientific heritage (see Box 2.2).

While acknowledging these considerable strengths and the significant progress made to date, the Taskforce believes that an inflection point or game changer (as occurred in both the 1960s and the 1980s) in the performance of Irish enterprise is required if we are to return to export-led growth and create the numbers of sustainable jobs required. This is a particular challenge in the context of a global enterprise economy which is changing significantly in favour of lower-cost emerging economies. The scale of what needs to be done should not be underestimated.

Box 2.2

Ireland's cultural and scientific heritage Emigrants from Ireland spread a belief in education, literature, poetry and art across Europe during the tenth and eleventh centuries.  The Irish contribution to the world literature has been valuable, based on our rich Celtic and early Christian heritages. The books of Kells, Durrow and Dimma are internationally well known.  More recently, James Joyce, Oscar Wilde, Oliver St. John Gogarty, William Butler Yeats, George Bernard Shaw, Samuel Beckett, John B Keane, Seamus Heaney, John Banville, John McGahern, Frank McCourt, Maeve Binchy, Sebastian Barry, William Trevor, Colm TÛibÌn, Anne Enright and Roddy Doyle are amongst our most internationally recognisable writers. We have also made striking contributions in the fields of music, theatre and film including through U2, Liam Neeson, Brendan Gleeson, Gabriel Byrne, Colin Farrell, Saoirse Ronan, Jim Sheridan, Neil Jordan and internationally renowned productions such as Riverdance. Concurrently with our literary and cultural tradition, Ireland has made some astonishing contributions to science and engineering from the 17th century until today. Robert Boyle contributed to the understanding of gases. Francis Beaufort derived the Beaufort wind scale.  George Boole discovered the algebra underlying computing logic.  William Rowan Hamilton evolved a new branch of mathematics.  Nicholas Callan invented the electrical induction coil.  William Parsons discovered the spiral nature of galaxies. John Tyndall contributing to the understanding of the nature of light. William Thomson investigated heat,  leading to the Kelvin scale.  George Francis Fitzgerald proposed that a moving body shrinks, thus influencing Einstein's relativity work.  Ernest Walton worked with John Cockroft to show that the atom was not in fact monolithic. George Johnson Stoney calculated the magnitude of a single unit of electricity,  which he then named the "electron".  Mary Ward wrote on the microscopic nature of plants.   Kathleen Lonsdale influenced X-ray crystallography,  and discovered the flat nature of the benzene ring.  JD Bernal similarly influenced X-ray crystallography for work on proteins, nucleic acids and viruses.  Denis Burkitt was an early pioneer in understanding cancer  and John Bell's theorem is key in quantum mechanics.

Scale of the Challenge

While Ireland needs to regain, and is in the process of regaining, our competitive edge by reducing the relative cost of doing business in Ireland, this alone will not be sufficient. The world has moved on and the model which worked in the 1990s no longer suffices.

While the United States will remain an important source of FDI, the role and significance of new economic leaders, particularly China, has greatly increased. China has a policy of active engagement with many governments world-wide to foster trade, economic development, and to acquire both raw materials and friendly export markets. Our policies must respond to this new reality.

 

Meanwhile, the relative cost of manufacturing and production has universally continued to fall. Market competition forces companies to source the most efficient production centres anywhere on the planet.  Within Europe, the accession of ten new member states in 2004, and a further two in 2007, has led to intense competition for FDI throughout the European Union and globally.

Education standards have risen dramatically in many jurisdictions, together with competence in English. Ireland is now only one of many alternative locations which can offer an English speaking, high-skilled and young workforce, coupled with a low (or in some countries zero) corporation tax regime, and extensive capital and development grant aid. Ireland needs to find new ways to compete successfully in this fast-changing world.

Smart Economy Framework, innovation and enterprise policy

Building Ireland's Smart Economy was published by the Government in December 2008 in response to the challenges facing the Irish economy in a changed world. It identifies five action areas for sustainable economic renewal, with the objective of increasing productivity across all sectors of the economy:

+    Securing the Enterprise Economy and Restoring Competitiveness;

+    Building the Ideas Economy – Creating the 'Innovation Island';

+    Enhancing the Environment and Securing Energy Supplies;

+    Investing in Critical Infrastructure;

+    Efficient and Effective Public Services and Smart Regulation.

As this Smart Economy Framework highlights, there are many aspects of a successful enterprise policy. These include cost competitiveness, labour market and skills policies, investment in physical and other infrastructure, trade promotion, tax and regulation etc. Each of these is of obvious concern to the enterprise sector during this difficult economic period.

The Taskforce has not been asked to examine all these issues which are being addressed in many other policy development processes, except where they impinge directly on our terms of reference.

Instead its focus is on progressing the second action area of the Smart Economy vision: "building the innovation or 'ideas' component of the economy through the utilisation of human capital – the knowledge, skills and creativity of people – and its ability and effectiveness in translating ideas into valuable processes, products and services." In the context of this objective, the Taskforce was asked:

+    To examine options to increase levels of innovation and the rates of commercialisation of research and development on a national basis with a view to accelerating the growth and scale-up of indigenous enterprise and to attract new knowledge-intensive direct investment;

+    To bring forward proposals for enhancing the linkages between institutions, agencies and organisations in the public and private sectors to ensure a cohesive innovation and commercialisation ecosystem;

+    To identify any specific policy measures which might be necessary to support the concept of Ireland as an International Innovation Development Hub including in the areas of legislation, educational policy, intellectual property arrangements, venture capital and immigration policy.

 

Our focus therefore is on the issue of innovation in the enterprise sector and, in particular, on driving and supporting entrepreneurship, which is increasingly recognised as a driver of increased productivity and economic growth.

It is important to note that (as already mentioned in Chapter 1 and as we explain in the next chapter) innovation is not just relevant to high-tech or start-up businesses. Ireland's future economic success depends on increasing levels of innovation across all aspects of Irish enterprise – from large Irish-owned multinationals to foreign multinationals located here to established SMEs in services and manufacturing, as well as start-ups and existing companies with high growth potential.

Innovation is therefore at the heart of enterprise policy and our recommendations seek to support increased innovation across all parts of the Irish economy.

In the following chapters we elaborate on our understanding of innovation and the principles which have informed our work. We recommend specific actions which will help to deliver an inflection point in the level of innovation in Irish enterprise and thereby drive an updated model of sustainable economic growth.

Economic and Budgetary Context

The past 12 months have been particularly difficult with Irish GNP estimated to have contracted by at least 10%22 in 2009 (or over 7.5%23 in GDP terms). A further contraction in the economy is forecast for 2010 (albeit at a much more modest rate). While growth is anticipated to return during 2010, both in terms of GNP and GDP, overall annual growth is forecast to fall again this year.

The most obvious impact of the recession, however, can be seen in the employment and unemployment figures. The number of people employed in Ireland fell from 2.1 million24 to just over 1.9 million25 over the 12 months to Quarter 3, 2009 (an annual decrease of 184,700 or 8.8%). Over the same period, unemployment increased by 120,400 (or 75.5%) to reach 279,800. This equates to a seasonally adjusted unemployment rate of 12.4%26 - by way of comparison the unemployment rate was just 4.6% at the end of 2007. Unemployment is forecast to peak this year and to ease thereafter as economic growth resumes27.

Although there are signs that the Irish economy is beginning to stabilise, serious challenges remain. The Taskforce acknowledges that the Government faces difficult choices in reconciling different legitimate policy goals and will have to weigh these considerations when considering our Report and recommendations.

Nonetheless, we strongly believe that it is only by investing financial resources in this agenda, in particular in human capital and the technology that supports it, that the Irish economy will recover to provide levels of growth and employment which will in turn sustain the level of public services desired by the Irish population. We do not see an alternative path to recovery other than one driven by innovation.

 

3. The Innovation
Ecosystem

 

Our Concept of Innovation has Broadened

 

"Innovation entails investment aimed at producing new knowledge and using it in various applications. It results from the interaction of a range of complementary assets which include research and development, but also software, human capital, design, marketing and new organisational structures – many of which are essential for reaping the productivity gains and efficiencies from new technologies28" - OECD.

Innovation – the introduction of a new or significantly improved product (good or service), process, or method - has long been acknowledged as central to economic performance.

Many of the submissions to the Taskforce highlighted the changing nature and understanding of innovation. In recent years attention has increasingly been focused on innovation in product design, business processes or organisational design. Services firms innovate through informal R&D, the purchasing and application of new technologies as well as the introduction of new business models.

In the internet age characterised by open systems, innovation is often facilitated by new forms of collaboration and interaction, for example where businesses engage with their customers and suppliers in an open-ended dialogue, which can sometimes lead to new business ideas and models.

International research has highlighted the importance of new experimental forms of work organisation, the way in which firms locally and internationally are networked and the shifting boundaries of the division of labour in design, development and production29. 'Soft skills' such as the ability to work in multi-disciplinary teams therefore become more important30.

Migratory flows of people and their relationships is another emerging theme in research on the innovation process, for example helping to transfer knowledge between regions and countries.

Innovation also takes place in a non-commercial context, for example in a public service, healthcare or community development setting.

Innovation Ecosystem

Growing and harnessing innovation has its challenges: innovation is not a simple journey from A to B, but one which loops around through time and space. To make innovation work for us we have to develop a system in which each element, and how it interacts with other elements, supports innovation across the economy and society. The elements that make up such an ecosystem include:

(i)     entrepreneurs and enterprises (indigenous and foreign-owned);

(ii)    investment in research and development;

(iii)   the education system, in particular higher education institutions;

(iv)   finance, in particular risk capital;

(v)   the tax and regulatory environment;

(vi)   public policy and institutions.

The diagram below sets out the main elements of the national innovation system.

Figure 3.1: Main elements of the national innovation system

A successful innovation policy requires all elements of the ecosystem to co-operate and collaborate together, and in international networks, to ensure that knowledge is developed, transferred and applied in productive ways.

Entrepreneurs and enterprises are at the heart of the ecosystem because the success or failure of our vision depends on our capacity to translate ideas into exportable goods, services and sustainable jobs.

Role of the Entrepreneur

While a strong innovation-intensive multinational sector is crucial to the future success of the Irish economy, there is a powerful link between innovation and new firms. The entrepreneur plays a key role in this regard.

Many innovations start with small companies, particularly in more recent years in biotechnology and the internet, for example. Entrepreneurs play a key role in driving innovation in start-ups and high-potential growth companies of small and medium size. Importantly, in an increasingly competitive world, entrepreneurial individuals have been shown to stimulate innovation and transformation in established firms.

While most enterprises are not venture-backed, venture capital has a particularly important role to play in high-growth enterprises. Innovative firms, particularly in high technology sectors, find it difficult to raise more traditional forms of finance (e.g. bank debt). Risk capital provided by the VC sector, and associated management experience therefore becomes crucial. The empirical evidence31 shows that venture-backed start-ups redefine the US economy through direct effects and spill-over effects. Essentially, while Silicon Valley-spawned companies employ only a minority of all Americans, it is likely that productivity in the US economy would be significantly lower without the companies it has spawned. Similarly, the Agency-backed sector in Ireland employs just 15.5%32 of the workforce yet we know that the presence of these companies has resulted in significant spillovers into the rest of the economy.

The evidence also suggests that governments can intervene to stimulate and support entrepreneurship and assist in providing supporting risk-capital. In Silicon Valley the government was the initial catalyst in the growth of the region and in particular sectors and firms. The presence of high-quality universities, a strong human capital base/good education, and a strong research base are crucial (although the minority of venture-backed firms are likely to be spin-outs from HEIs).

The venture capital environment is also crucial. However, venture capital and the entrepreneurs it funds are not a substitute for vibrant universities or corporate research labs – all elements are essential to a successful ecosystem.

The Taskforce's Approach – Placing the Entrepreneur/Enterprise at the Centre

While acknowledging the move towards a wider definition of innovation, the Taskforce's primary focus is, in accordance with our Terms of Reference, on innovation in an enterprise context.

In particular, we believe that the entrepreneur and innovative enterprises must be at the centre of our efforts to deliver the vision we have set out.

This focus on the entrepreneur and enterprise at the centre of the innovation ecosystem underpins the principles we have developed in the next chapter as the basis for our Report and our subsequent recommendations.

4: Principles for Success

 

The Taskforce has agreed six principles which we believe are fundamental to our goal of transforming Ireland into an International Innovation Hub.

 

1    Our first fundamental principle is that the entrepreneur and enterprise must be at the centre of our efforts. Our national policy framework must be shaped around encouraging entrepreneurs, retaining those who are here, and attracting others from abroad, by making it easier for them to succeed in Ireland than anywhere else in Europe. In particular, we must aim to attract serial entrepreneurs who have grown and exited businesses, and embarked on their next venture. Our legal, taxation and overall policy framework must be aligned and targeted towards achieving this end. Culturally, we must be supportive of and incentivise those high achievers who through their entrepreneurial and innovative efforts generate employment, increase tax receipts and thereby benefit the economy as a whole.

2    Our second principle is that establishing, attracting growing and transforming enterprises must be the focus of a coherent national effort. We must ensure that our national culture and policies are supportive of, and drive, ambition, innovation and transformation and accept that there will be some failures along the way. We have a number of advantages that we must exploit in this regard including our relatively small size and our thriving multinational community which offers significant potential for collaboration and the exploitation of converging technologies. Successful companies usually create a further positive feedback loop as entrepreneurial employees leave to create their start-ups as spin-outs from the parent company – in the case of IONA Technologies, more than 30 spin-outs emerged over a decade, usually with the full blessing of the senior IONA team. Individuals may therefore also need to demonstrate more flexibility and mobility in their career ambitions to achieve our Smart Economy vision.

3    Our third principle is that the availability of smart capital is crucial for starting, growing and transforming enterprises. Risk capital can be attracted to Ireland if we can create a culture of innovation, in which new ventures and companies grow rapidly and bring leading offerings to the global market. These offerings can be new products, new services, new processes and/or new designs, and any combination of these. Rapid growth not only creates jobs, but also creates business experience in global markets which can then be fed back into new cycles of start-ups and into exploiting further waves of new technology. Generally, where possible, the provision of capital should be left to the market but there may be circumstances where the state needs to intervene to ensure that innovators and businesses have access to start-up and growth capital. Entrepreneurs who successfully exit their businesses should be encouraged to re-cycle their wealth directly into new businesses, and share their experience by mentoring younger entrepreneurs.  

4    Our fourth principle is that an education system which fosters independent thinking, creativity and innovation is vital to achieving the Smart Economy. Education has a role both in developing the skills necessary for innovative export-led firms and more generally in engendering cultures and attitudes which are supportive to innovation more broadly. All levels of the education system must contribute to embedding these values in our population from the very young to the older members of our workforce. A particular focus must be on the development of creative, highly-skilled graduates as well as life-long learning, mentoring and continuous professional development.

5    Our fifth principle is that the State should actively accelerate success by encouraging flagship projects (see chapter 8) and by prioritising the provision of excellent shared infrastructure. The State can intervene by providing excellent infrastructure universally to all interested companies. Such shared infrastructure fairly obviously includes transport and logistics networks, broadband, and "wet" laboratories for life science companies.  But from time to time, it may emerge that an intelligent and far-sighted intervention by the State can provide a substantial, competitive and, ideally, unique advantage to companies operating in Ireland. Such interventions may change and disrupt an entire global industry because those companies using the new infrastructure gain considerable advantage over their international competitors allowing Irish companies develop a solution which can then be exported. This in turn can attract yet further foreign direct investment, as companies come to Ireland to use this highly innovative infrastructure. The State benefits by the additional employment resulting from companies using the infrastructure, and possibly also from revenues received by use of the infrastructure itself. This State investment must be undertaken with a holistic view of its return on investment.

6    Our final principle is that we must sharpen the focus of our national research system to ensure that it is targeted at areas of potential strategic and economic advantage for Ireland. In particular, our research system must be aligned with an effective technology transfer and commercialisation infrastructure to ensure that the significant investment being made yields increasing rewards to economy and society in terms of employment, revenue and solutions to societal challenges. This requires action from Public Research Funding Agencies, from Higher Education Institutions, and from enterprise and individual researchers. The inclusion by some HEIs of innovation as a third pillar of education alongside teaching and research is a welcome development. We believe that further transformation is necessary to maximise the relevance of our research system to the changing demands of an export-focussed Smart Economy.

In the chapters which follow we set out a series of recommendations informed by these principles which we believe will help to achieve our vision of a successful innovation ecosystem with the entrepreneur and enterprise as its central driver.

The order of the chapters reflects a logical flow through the elements of the ecosystem, rather than any ranking of importance.

5. Strengthening the Knowledge Base

 

Traditionally, economic growth has been seen as accumulating physical capital and putting it to work to make things which could be sold to the end user. Capital is still important, but knowledge is the new currency of the innovation economy and our long-term economic success is tied inextricably to human and knowledge capital.

The innovative enterprises we spoke about in the previous chapters need all three forms of capital to fuel their growth.

The education system is therefore pivotal in making innovation happen. It is the key to fostering the generic qualities of problem solving, creativity and other personal skills development that can have a far reaching impact on the innovation capacity of Irish society. Curriculum developments at primary and post-primary levels, aimed at developing these generic qualities from an early age need to be resourced and given impetus as part of our overall innovation strategy. Many of the building blocks to support the innovation transformation have been laid. The primary curriculum has been overhauled and is now much more learner centred. At second level, important recent elements of a continuing programme of curriculum reform have included a new Junior Certificate Science syllabus, a new subject of Leaving Certificate Technology and a revised programme in Design and Graphics Communication. Project Maths is rolling out with a strong problem-solving focus. In higher education the transformation has been profound as research and commercialisation have, alongside teaching, become a core part of the mission.

The most important recommendation we can make is to keep faith with this overall direction. This is no trivial task, however. Already, economic contraction has meant that the pace of investment has been slowed and catching up will require serious consideration or rebalancing investment priorities within the NDP. We recommend that this should be done.

Nor can we let the overall soundness of the current strategic direction blind us to areas at each level of the education system where there is significant room for improvement. Therefore, in this chapter, we focus both on the overarching investment priority and the specific areas where change is needed.

It is important to note that education was one of many significant and complex issues which the Taskforce had to consider over a relatively short period of time. We do not claim that our recommendations are comprehensive or cover all the elements of educational reform which need to be undertaken to transform Ireland into an International Innovation Hub. Instead we focus on areas of particular concern to our members and those who made submissions to us. Where relevant we acknowledge the work of other groups who are specifically focussing on aspects relevant to our remit, in particular the Higher Education Strategy Group which is considering reform within the sector.

State investment in R&D

Only fifteen years ago, Ireland had no significant research base to speak of. The level of research and development activity was low in both higher education and industry. Since then, Government has established a new agency, SFI, to increase the quality and quantity of research performed in Ireland, and PRTLI investments have delivered world class research infrastructures. These initiatives and other research investments have supported the development of higher education based research that is of world class standard (our world ranking of research quality has increased from 33rd in 2003 to 17th in 200933) and fits with wider supports for commercialisation and business R&D (see example in Box 5.1 below). This is an essential first step towards a fully functioning innovation ecosystem.

Box 5.1

The Centre for Research in Adaptive Nanostructures and Nanodevices (CRANN), TCD, UCC and Hewlett-Packard The Centre for Research in Adaptive Nanostructures and Nanodevices (CRANN) is an SFI-funded research centre at Trinity College Dublin and University College Cork. Over the last three years the investigators in the centre have collaborated with Hewlett-Packard (HP) in the joint development of flexible, transparent and highly conductive thin films. This project uses fundamental research that has been undertaken in the universities and is directly linked to a major strategic initiative within HP to develop flexible, transparent displays – "electronic paper" – utilising low-cost role-to-role manufacturing. The research programme is funded through the SFI CSET programme, with additional Industrial and Development Agency (IDA Ireland) funding supporting associated technology development within HP Ireland. The collaboration has produced outstanding results; the novel technologies developed have been used to manufacture prototypes across the HP organisation including HP Labs in Bristol and Palo Alto, and the Technology Development Organisation in Corvallis. A number of scientific papers have been published in high-impact-factor journals and the techniques developed have resulted in invention disclosures at both CRANN and HP leading to patent applications. Most importantly, the research has now resulted in the project outputs being identified on the global HP product development roadmap as a technology candidate for next-generation products, providing the opportunity for technology developed in Ireland to underpin a major new product initiative for a global multinational corporation. As a result of this SFI-sponsored programme HP Ireland is now recognised within HP as a provider of important technology solutions for the organisation – enabling the growth of the research mandate locally. CRANN is now well integrated into HP Corporation and has developed a new and more extensive research programme to continue into the future. Ireland is now associated with creative research and innovation, a recognition that is critical for Ireland as it demonstrates a capacity to deliver real value to industry, aiding in the attraction of new foreign direct investment and the further embedding of existing industry and their associated jobs.

 

However, there are two big dangers as we see it. Firstly, that investment in knowledge creation will not be maintained. And secondly, higher education institutions will fail to build the connections with industry to ensure that this research gets commercialised, an issue which we address specifically in the next chapter.

5.1     Key Recommendation Deliver on the investment framework set out in the Strategy for Science, Technology and Innovation (SSTI) 2006-13 and achieve the goal in the renewed Programme for Government of investing 3% of GDP in R&D by committing to investment in an updated SSTI for the 2014-2020 period.

 

The current family of agencies that fund or engage in research include SFI, EI, IDA, HRB, IRCSET, IRCHSS, EPA, SEI, TEAGASC, the Marine Institute, and the HEA which also has an overarching responsibility for allocation of funding across the higher education system. Whilst these structures have the strength of each agency delivering to the needs of their specific communities, the multiplicity of agencies places limitations on the capacity to ensure sufficient focus, as well as efficiency, coherence and value for money.

Improved co-ordination is required between all the Irish public agencies that manage research funding, to ensure optimum Value for Money of public research funding. We recognise that value for money is measured by tangible indicators such as IP, spin-out companies and jobs, as well as more intangible factors such as an increased knowledge base, a pool of skilled graduates and international reputation.

We recommend that steps be taken to improve this co-ordination as a matter of priority, building on the announcement in Budget 2010 of a move to a single funding stream, to ensure that all research funding is being used in the best way possible to help the entrepreneur/enterprise to succeed. An identified pathway to fund each research project would also remove barriers which arise when a project needs to switch between different funding agencies during the process, including appropriate commercialisation supports.

While we recognise that continued funding of a broad base of fundamental research is crucial to the future of the Smart Economy, we also believe that, as we build towards a goal of investing 3% of GDP in R&D, greater resources should be committed to funding applied research that is focused on the needs of industry in Ireland, while continuing to invest in the people, skills and reputation that comes from active world class researchers working in areas of importance to the Irish economy. This prioritisation and focus should be informed by detailed analysis and underpin the efforts of all relevant Departments and Agencies. Implementation of several recommendations in this report, such as proposed Flagship projects (Recommendation 8.1) should also be aligned with identified national priorities.

 

5.2     Key Recommendation Building on the announcement in Budget 2010, the current structures for delivery of research funding should be reformed with the goal of implementing the following changes: +    Consolidate funding streams and enhance co-ordination to deliver optimum value-for-money; +      Ensure that funded research has an identified funding pathway and single lead responsible agency, underpinned by commercialisation supports; +      As we build towards our goal of investing 3% of GDP in R&D, commit greater resources to funding applied research that is focused on identified priority opportunities for industry in Ireland.

Improving Human Capital: Primary & Second level education

We believe that Ireland needs to substantially raise national mathematical and pure science attainment, particularly at second level.

A diverse range of advisory groups (including the Expert Group on Future Skills Needs34 and the National Competitiveness Council35) and key enterprise and professional bodies (including ICT Ireland and Engineers Ireland) have recognised the need for Ireland to raise its level of mathematical achievement to ensure it will continue to successfully compete with other economies and to fulfil the Government's vision of the Smart Economy. Ireland's ability to reposition industry towards knowledge intensive high-technology sectors will depend critically on the supply of people with mathematics, science, engineering and technology skills.

Mathematics is important because it underpins many other disciplines such as science, technology, business and finance. Knowledge of mathematics is also a prerequisite for many occupations with which it may not normally be associated including nursing and social science related occupations. Higher-level mathematics will be a key determinant of Ireland's ability to create a cohort of top tier, world-class engineering and science graduates. It is also fundamental requirement for the development of a world-class research and innovation system in Ireland.

We strongly endorse the Project Maths programme which is a significant investment in promoting better understanding of mathematics at second level, enhancing attainment and increasing the proportion of students taking higher-level mathematics and must be commended. We also note that the Minister for Education and Science is establishing a group in partnership with industry, HEIs and the second level system to see how best positive attitudes to maths can be promoted, how participation in higher-level maths can be increased and to add value to the Project Maths initiative. We suggest that a panel of international experts in mathematics from outside the Irish system should be established by the National Council for Curriculum & Assessment (NCCA) to support the work of this Group and the ongoing implementation of Project Maths generally.

The Taskforce also calls for more experienced mathematicians, engineers and scientists to make themselves available to provide mentoring and support to teachers and to talented students.

 

 

 

5.3     Key Recommendation Introduce additional measures to promote the take-up of higher level maths, including possible incentives such as the awarding by HEIs of CAO bonus points on a pilot basis starting with Leaving Certificate 2012, so that this year's LC cohort can make informed subject choices on commencing Fifth Year.

 

5.4     Supporting Recommendation  + Increase investment in intensive training for mathematics teachers and the full rollout of Project Maths; + Implement the new syllabuses in Leaving Certificate Biology, Physics and Chemistry. Implement new approaches to assessment based on the experience of the current trial in schools; + Introduce a new mentoring programme for teachers and talented students, involving experienced mathematicians, engineers and scientists who we would encourage to make a wider contribution to advancing the quality of teaching and learning in their discipline.

Improving Human Capital: Higher Education

Higher Education is central to the innovation society. Higher Education advances the knowledge and skills of students and trains the next generation of researchers, policy makers and business leaders. HEIs have a specific responsibility to create new knowledge which underpins the evolution of new services and products. All of this happens through constant interaction between students, staff and society at large. We see four vital roles for HEIs, specifically.

1.   Undertake excellent research, scholarship and teaching across all disciplines, which is reflected in the quality of graduates emerging into the labour market;

2.   Develop strong research groups selected for funding in a competitive manner in identified areas of strategic priority which have the capacity to impact on the full research and innovation continuum;

3.   Strengthen the commercialisation function and increasingly generate economic value from the intellectual property generated (we will deal specifically with some of these issues in the next chapter on knowledge transfer);

4.   Collaborate with and support entrepreneurs and enterprises in research, innovation and commercialisation and provide associated skills through life-long learning.

As part of the drive for improved national competitiveness and the need to add maximum value through public investment, the number and roles of institutions within Higher Education is currently being considered by the Higher Education Review Group.

We very much welcome and strongly support the TCD-UCD Innovation Alliance announced in March 2009 (for further information on the TCD-UCD Alliance see Text box 5.2 below) and the recently announced strategic alliance between the University of Limerick and NUI Galway.

We believe that such inter-HEI alliances, including partnerships with top tier overseas HEIs, such as the NUIG/UL relationship with Georgia Tech, must be developed and strengthened, and strong performance incentivised, to ensure that our research and technology transfer ecosystem has the necessary scale and capacity to drive us towards our vision of the Innovation Island. We would also encourage cross-border co-operation with HEIs in Northern Ireland to help achieve critical mass in areas where the island can compete internationally.

Box 5.2

TCD-UCD Innovation Alliance The Innovation Alliance between Trinity College Dublin and University College Dublin established on 11 March 2009 combines the strengths of the two near-neighbour institutions to help develop a strong innovation ecosystem for Ireland. It will engage with enterprise and government on specific initiatives to transform graduate education and scale up enterprise development and has a number of components. The Innovation Academy The Innovation Academy builds on the respective strengths of the universities to create a robust and mutually beneficial continuum between teaching, research and innovation. The overarching goal of the Innovation Academy is to produce a new breed of graduate, expert in their disciplines, but imbued with the creativity, entrepreneurship, mentoring and supports to rapidly convert knowledge, ideas and inventions into commercial use and societal benefit. Conceptually, the Innovation Academy will broaden the student experience through formal entrepreneurship and innovation training, producing business aware and policy-adept graduates – adding value to the organisations they enter as employees and enabled, through their training, to engage in the creation of new ventures themselves. A Joint Venture in Enterprise Development A key objective of the Innovation Alliance is to enhance the commercialisation of ideas, discoveries and inventions generated within the institutions – arising from specific university-based research of our staff, or from the innate creativity of our students or our research partners. To drive the development of technology- and ideas-intensive enterprise, the Alliance is developing a new joint venture – built around true incubation and scaling – to facilitate: +    A joint approach to scale-up the capture, protection and commercialisation of intellectual property, with a major operational shift towards open innovation and increased deal flow; +    An embedded one-stop solution for business creation and dedicated incubation. It will maximize the pre-investment value of Irish-based intellectual property through inclusion of all the necessary supports for pre-money early-stage companies, including mentoring, legal expertise, market experts, accommodation, prototyping, and financial advice; +    Co-developed and co-marketed enterprise capabilities across the institutions, underpinning the future growth and scaling of new ventures post-investment. These facilities will house campus companies spinning-out of the two universities but equally the spinning-in of national and international companies, where proximity to the academic expertise and campus-based technologies of the Alliance partners will confer a competitive advantage. Joint research strategy The Innovation Alliance will build on existing expertise and investments to advance research programmes of scale which focus on important national needs, maintain established foreign direct investment, attract additional FDI, include indigenous enterprise, train graduates, and engage partners through an open innovation framework. A framework will be developed to incentivise participation by industry (building on existing research and training relationships with over 400 companies) through all available mechanisms, including public-private partnership with the State.

 

 

We believe that the new HE strategy must create a momentum for rationalisation of provision, stronger collaboration between providers and with enterprise and employers and continuous improvement in education outcomes. It will also need to address the requirement for an investment framework for the future which is based on a realistic assessment of needs, an acknowledgment of the limited capacity of public funding to fully address those needs and, as a corollary, the requirement for a diversity of revenue earning options for HEIs, including commercialisation and possibly tuition fees.

We are also recommending further collaboration with regard to developing standardised approaches to commercialising Intellectual Property which would involve all higher education institutions (see chapter 6).

 

5.5     Supporting Recommendation  Drawing on the example of the TCD-UCD Innovation Alliance and the more recent NUIG-UL Strategic Alliance, we support further collaboration, alliances and streamlining of provision between HEIs as well as new models of HEI-industry collaboration.

Contribution of Arts, Humanities and Social Sciences

The relationship between the science, engineering and technology disciplines and innovation is well articulated in several policy documents. Less developed and understood is the role that the arts, humanities and social sciences can play in supporting enterprise and employment. While fully endorsing the emphasis placed on science and technology in the SSTI, the Taskforce believes that in a well-functioning innovation ecosystem STEM disciplines are complemented by the arts, humanities and the social sciences (AHSS) and more needs to be done to enhance that complementarity. Innovation, increasingly, will occur at the margins of disciplines. There are great opportunities to be grasped by merging the potential of the AHSS with scientific possibilities. By sharing diverse ideas, insights and approaches we can make the greatest progress in meeting a range of social and economic challenges.

The AHSS contribute to innovation at a societal and individual level. For the individual, the AHSS disciplines develop a wide range of skills beyond specific qualifications. These skills, described as generic because they can be applied in a wide variety of non-discipline specific areas, include critical and analytical thinking, cultural awareness, communication and broader perspectives. They are skills much sought after by employers in innovative industries and businesses for their contribution to a more flexible and multi-skilled person. These skills are particularly relevant in the context of the trend towards convergence (see chapter 8).

The Arts and Humanities can help translate science to the wider public while visual art and design research can make complex information more understandable. Research in law underpins the efficiency of Intellectual Property in incentivising and rewarding innovation while modern languages play an obvious role in driving international trade and cross-cultural collaboration. These disciplines also have a unique contribution to make to certain sectors of the economy including services and what are broadly described as the creative and cultural industries.

 

Creative industries such as television, on-line education provision, web design, development of assistive technologies and digital content are good examples of areas of economic activity which effectively harness the synergies between AHSS disciplines and those of SET. They are leading to increasing economic returns from the creation of intellectual property as well as services in areas such as marketing and advertising.

5.6     Supporting Recommendation Promote the contribution of AHSS to the innovation ecosystem, and, in particular, seek to increase synergies between different disciplines within AHSS and SET disciplines.

 

 Cultivating Entrepreneurship in HEIs

There is scope to increase the focus on entrepreneurship within HEIs in Ireland, with a view to ensuring that both undergraduates and postgraduates are exposed to the concept and encouraged to develop the inter-disciplinary skills required to translate their academic learning into the enterprise arena (as is envisaged in our fourth principle). This applies across all degree programmes, including engineering, science, law, business studies and the creative arts. The TCD-UCD Innovation Alliance includes a number of specific measures to help achieve this objective and the Taskforce welcomes these and supports their implementation.

The Taskforce also suggests that HEIs, with support from relevant agencies, develop Business Plan Competitions with funded prizes which would provide seed capital for winning students to start new enterprises.

5.7     Supporting Recommendation All HEIs should introduce initiatives to cultivate innovation and entrepreneurship at both undergraduate and postgraduate level, drawing where appropriate on the model proposed by the TCD-UCD Alliance.  This could include Business Plan Competitions with funded prizes.

 

Build the Cohort of World Class Graduates working in Ireland

As well as building the base of skills across society in the areas of science, engineering and maths, and enhancing national interest in courses in engineering and science in our HEIs, there is a need to create a cohort of top tier, world-class engineering and science graduates who are versed in the very latest technology developments world-wide. The principal vehicle to achieve this is investment which supports world-class, peer reviewed research and PhD education in HEIs. Under the SSTI, graduate education has been improved by the move to structured PhDs and the consequent broadening of the skills base in graduate education. Our vision requires a more energetic flow of people between HEIs and industry and vice versa. It is important therefore to progress implementation of the research careers framework which has recently been developed.

One further way which could help to strengthen the base of highly-skilled graduates in Ireland, is to increase participation by Irish students in world-leading institutions abroad and create an incentive for these engineers and scientists to work in Ireland during their careers. This can be seen as complementing our recommendations in the section below about internationalisation of Irish education and two-way flows of students through the Irish system.

5.8     Supporting Recommendation  Introduce a Programme to incentivise participation in certain postgraduate courses in the world's top ten Engineering, Science and Business Schools by individuals who would then return to work in Ireland. One approach would be a limited tax relief 'futures' scheme which would allow successful graduates avail of a personal tax relief to offset their tax liabilities arising from employment within the State.  An alternative would be a two-way mobility programme between Ireland and international HEIs.

 

International students

International students can play an important role in national innovation systems. The Taskforce believes that Ireland should create the kind of virtuous circle observed in the US where an excellent research and innovation system attracts the best international students and faculty. This in turn enhances the quality and reputation of the system and its institutions which then support high levels of commercialisation and a well qualified pool of employees for industry.

A new co-ordinated approach to marketing Ireland to international students is now being implemented by the Government working with the HEIs. Attracting top tier students to Ireland also helps raise Ireland's international profile in general in the global research community. Top tier foreign alumni from Irish HEIs may in turn rise in their own societies to be advocates for Ireland. This could be particularly important in building linkages with new high growth markets.

Attracting PhD students from outside the EU plays an important part in our overall innovation eco-system by building the base of high quality students who will in turn facilitate knowledge transfer into enterprise and commercialisation of research. The contribution of these students needs to be adequately reflected in future funding and fees frameworks (for example through the HEA) and marketing efforts by the HEIs.

Considerable progress has been made in simplifying immigration and work permit requirements for overseas researchers in both HEIs and industry, most recently through the Hosting Agreement Initiative. However in order to remain attractive, we need to go further to ensure that PhD students and PhD graduates from overseas do not face difficulties in obtaining residency status.

In addition, it is important that we incentivise such highly-qualified students to remain in Ireland and facilitate them, either in seeking employment in Ireland, or in working towards establishment of their own company.

 

5.9     Supporting Recommendations + Ensure effective streamlined immigration arrangements for SSTI-related PhD students, postdoctoral researchers and their families re-locating to Ireland; + Introduce fast-track residency status for PhD graduates employed by Irish-based businesses; + Increase the current six month extension during which a PhD graduate can stay in Ireland to seek another job to 12 months.

 

Life-long learning

A more concerted national effort at workforce up-skilling is essential to building a competitive and productive workforce that can support innovation across the economy.

On the basis of international metrics, Ireland performs well in terms of overall higher education participation and attainment. Our participation rate is continually increasing and has grown from 55% in 2004 to 66% in 2007 and is now approaching 70%36. However, these figures conceal an important age profile differential in overall educational attainment. Ireland is in the top quartile of the OECD for tertiary education attainment among the 25-34 year age groups and is just 1% below the top quartile in the 35-44 year age groups. However, Ireland performs less well comparatively for the over 45s37. This reflects the fact that many of those currently working have not had the opportunity to participate in higher education.

It is essential that we continue to improve participation rates in higher education. However, we must also recognise many of those currently working have not had the opportunity to participate in higher education. This represents both a challenge in that we are under-skilled compared to many of our competitors, but also an opportunity. A positive change to this profile could lead to a significant improvement in national productivity and competitiveness.

 

5.10   Supporting Recommendation There should be a policy shift towards life-long learning within our Higher Education, Further Education and training system. HEIs, F¡S, and other public agencies, as well as employers, need to better align their respective roles in this regard.

 

6. Transferring Knowledge

Higher Education Institutions play a key role in developing research in identified areas of strategic priority and in strengthening the commercialisation function and generation of economic value from the intellectual property generated. We must optimise knowledge transfer between HEIs and Industry.

 

In this chapter, we suggest action in a number of different areas to improve the linkages between HEIs and other elements of the national innovation system, particularly industry and relevant Government Agencies. We focus on the need to further incentivise innovation within HEIs and on the need to improve the efficiency and effectiveness of our system for converting IP into commercialised products and services. The goal is to facilitate optimum knowledge transfer between HEIs and industry (for an example see Box 6.1 below), and to fast-track the access by entrepreneurs, existing companies and start-ups to HEI IP, enabling existing companies to scale, and supporting developments in areas such as converging technologies.

 

Box 6.1

Neonatal Brain Research Group, UCC Science Foundation Ireland Principal Investigators, Dr. Geraldine Boylan, Dr. Gordon Lightfoot and Dr. Liam Marnane conduct research in the Neonatal Brain Research Group in UCC. The group has developed innovative software to detect seizures in newborn babies. Seizures, which are often impossible to detect visually, may occur in up 20% of premature infants and require immediate evaluation and treatment to prevent long term brain injury. The primary detection tool used by the Neonatal Brain Research Group uses an EEG (electroencephalograph) device that measures the electrical activity of the brain. The group has developed an innovative technology using signal processing and machine learning techniques to automatically detect seizures from this electrical activity. The patented intellectual property developed has led to the acquisition of additional grants from other funding agencies including the Wellcome Trust, Enterprise Ireland and the European Union. In addition, the research team is collaborating with a global healthcare company, Cardinal Health, to bring their novel technologies to market. CareFusion is a medical-technology company that is a wholly owned subsidiary of Cardinal Health. CareFusion's Irish operation has been based in Gort, Co. Galway, for over three years. With over 100 employees, CareFusion manufactures a large range of medical device products, which are distributed to over 70 countries worldwide and provide clinical diagnosis and treatment for patients with serious illnesses.

 

 

Knowledge transfer from Higher education institutions into industry

There is an opportunity to strengthen the links between business and HEIs through the use of graduate and undergraduate placement programmes. Such placements will help businesses improve their competitiveness and productivity and ensure that graduates have relevant industry experience, which is particularly important in the current economic downturn.

A radical shift is now needed in the experience which our undergraduates and postgraduates undergo at our HEIs. Innovation and entrepreneurship needs to be fostered in young graduates and in society at large. Our HEIs can do much to nurture and foster an aspiration to start a company, by exposing their students to some of the issues involved but practical experience through placements could prove valuable in grounding theoretical learning in the reality of operating in industry.

Given the current depressed labour market, there is a risk that recent graduates in Engineering and Science, and other disciplines, may emigrate or have their skills decline, leaving a skills shortfall in the labour market in the medium term.

Graduate internships provide an opportunity for companies to benefit from the skills and knowledge acquired through the education system, while giving graduates an opportunity to gain initial experience in the workplace.

The Government introduced a range of new labour market activation measures during 2009 including a Work Placement Programme managed by F¡S, which facilitates graduates for a maximum placement of nine months, provided that they have been in receipt of social welfare for at least three months. The scheme is limited to 2,000 individuals nationwide and those placed continue to receive their social welfare entitlements.

The Taskforce believes that there is scope to supplement this with a targeted scheme for graduates with STEM degrees. This should allow for placement of up to 12 months and be structured through a bursary scheme involving payment of unemployment allowance as well as a top-up payment by the employer, while making clear that a company has no legal obligation at the end of the internship to confer employment.

To be successful this will require strong support and participation from industry. The relevant industry representative bodies should take a leading role in developing and promoting it to their members.

 

6.1     Supporting Recommendations  +    Introduce a scheme similar to the "Knowledge Transfer Partnership Programme" in the UK38  by placing recent graduates in companies to facilitate the transfer of high technology skills and expertise; +    As part of the current Work Placement Programme introduce a targeted strand for STEM graduates with the assistance of industry representative bodies; +    Establish a national undergraduate internship programme which builds on existing HEI initiatives but has a more concerted involvement of industry, especially as regards consistency in the availability of places. This may require an element of subsidisation for the participating firms.

Strengthen entrepreneurial culture in Higher education institutions

The Taskforce believes that we need to recognise and reward entrepreneurial culture in our HEIs in accordance with our sixth principle. Specifically, a clear career path is needed that develops people's talents and which fixes a remuneration framework which rewards people appropriately and encourages mobility.

HEIs can develop many initiatives to improve the current culture of innovation and IP management within their institutions. Career promotions should be linked to innovation activities. Specific outputs that are not covered by a publication list (e.g. licensed, rather than unlicensed dormant, patents; specific collaborations with business; consultancy work; product design and development collaborations; involvement in a spin-out etc.) should be criteria for appointments and promotion. Alumni who are innovators should be celebrated. "Innovation Champions" whose role is to identify commercialisation opportunities and advise and encourage colleagues on matters relating to innovation can be appointed within each HEI Department and School. There should be regular training and education on IP issues. Senior researchers could also be temporarily seconded to an entrepreneur who licenses IP.

 

6.2     Supporting Recommendation  +    Implement a new suite of HR and performance management policies in the HEIs to incentivise and reward innovation and commercialisation. These should include: -     Facilitation of staff who wish to provide their expertise to innovative companies,  through full-time or part-time secondments. The filling of any vacancies arising from such secondments should be exempt from any restrictions relating to the Employment Control Framework; -     Seek to ensure that academics who take leave of absence/sabbaticals to gain industry experience,  are not penalised in their academic career; -     Ensure that career advancement is based on valuing commercialisation work as well as research and teaching performance. +    Researchers who develop technology that is transferred to a company through a licence or other mechanism should be invited to apply for specific State research funding to further support the basic research programs being conducted in that researcher's laboratories (e.g. similar to the UK ROPA (Realising Our Potential Awards) Scheme).

 

further assisting commercialisation

The Business Partners Programme was established in 2009 as a pilot programme to give participating entrepreneurs access to EI's portfolio of potential start-up companies. EI works with individuals on a defined research project to produce a start-up ready company in six months.

The entrepreneurs who get involved have the experience of building start-up teams around new businesses. They also have management experience in technology-based companies and in developing technology concepts into commercial product or service offers. The programme has proven very successful in its pilot phase, and EI should continue to run the programme in 2010 and beyond.

Commercialisation of State sponsored R&D should be further catalysed by enabling both Irish resident and overseas entrepreneurs to be placed into HEI R&D centres and laboratories. Entrepreneur in residence schemes can also have fruitful impact on academic researchers by helping them understand key research challenges and opportunities faced by specific global industries, and the industry "state of practice". In turn this may make researchers more likely to produce research solutions to existing commercial problems. A scheme on these lines was introduced by SFI in 2009 and should be maintained and promoted.

Laboratory access programmes to HEIs are reasonably common in, for example, the USA. They provide an opportunity for SMEs, who with their own resources could not afford expensive research equipment, to undertake their own advanced development. In the Irish case, access on commercial terms may be attractive to both SMEs and the HEIs.

Product design and development teaching programs – conducted in close collaboration with industry partners around specific projects – are also in use at leading US HEI engineering departments as extensions of company in-house product development teams. Companies work with these engineering school programs to test drive new product concepts not on their critical path, or to gain access to out-of-the-box thinking by university graduate students and faculty.

6.3     Supporting Recommendations + Introduce a scheme to ensure greater access by industry to HEI specialist equipment and laboratories; + Significantly increase the placement of "entrepreneurs in residence" into relevant R&D laboratories and centres of the HEIs.

Intellectual Property arising from State sponsored R&D in Higher education institutions

The Intellectual Property created in the nation's HEIs is a critical building block of an innovative Smart Economy and is central to our first principle. Entrepreneurs and companies need a clear, consistent, speedy and predictable system to facilitate their engagement in research with HEIs, and to find and access IP created at HEIs, in order to turn it into products and services that meet customer needs.

Ideally, this system should enable an entrepreneur or company to:

+    go to a single location to find all research opportunities and all IP that has been generated across the entire HEI system;

+    immediately get referred to the key person who will negotiate an agreement, and only be required to negotiate with one key person, even if the activity/IP exists in multiple HEIs;

+    get the same, standard, predictable and professional service every time they access the system.

Such a system would give Ireland a competitive advantage over many other countries, as the place to go to innovate.

The Taskforce recognises that significant progress has been made in recent years towards achieving these goals - particularly with the strengthening of the Technology Transfer and Development offices of the HEIs, funded through Enterprise Ireland. We also recognise, however, that there is more work to be done in order to get to a system that is truly entrepreneur-friendly.

Our consultation process highlighted a view that there is currently a disparity of approaches to finding and accessing IP from the various HEIs which makes it time consuming, expensive and challenging to commercially exploit Irish State funded IP, particularly in cases where multiple HEIs may be involved in assembling technology for an innovative solution.

We are aware of the concurrent Forf·s Review of Current Supports to Encourage the Exploitation of Intellectual Property (IP) emanating from the Higher Level Research Sector and we look forward to the findings of that report.

We acknowledge that an efficient system for facilitating industry involvement in State-funded research with HEIs, and for commercialising IP from HEIs, involves input and participation from a number of stakeholders, including Government, R&D funding agencies, the HEIs, and the entrepreneurs and companies that use the IP. All links in the chain must operate efficiently in order for the system as a whole to function properly. As a starting point these stakeholders should agree that the key principle in commercialising IP from publicly-funded research should be the gross return to the economy, and not solely to the HEI(s) involved, while respecting the importance of maintaining the incentives to individual researchers. When evaluating the "gross return to the economy" here, we mean issues such as the creation of jobs and new companies, enabling existing companies to scale, and supporting developments in areas such as converging technologies.

With that in mind, we make the following recommendations with a view to building on past progress and achieving the system described above.

Position Ireland as one location in the EU where there is a clear and consistent national policy and rules for the ownership of and access to State supported IP.

There is currently confusion amongst both industry and HEIs around national policy in respect of the terms that apply to HEI-industry research and access rights to HEI IP. This is not an issue unique to Ireland, and other countries have taken initiatives to improve the situation.

Industry needs predictability around these issues. We know from international experience that predictability and consistency of approach in respect of industry-HEI interactions evolves over time (e.g. transaction rate; scale; long term partnerships). Consistency can also be created by way of legislation (e.g. Bayh Dole Act in USA).

Ireland has an opportunity to be one of the few locations in the world for which there is clear, fair and unambiguous operating procedures for State supported IP. We recommend a national IP Protocol be introduced, which establishes "ground rules" which must be followed when agreeing terms around ownership of and access to all State supported IP. It should deal with at least the following issues:

In research projects with industry:

+    the criteria for deciding ownership and access to IP (it is envisaged the criteria would set out: all the possible optional contributions which the entrepreneur could make to the project (both financial and in-kind); other possible returns to Ireland/EEA which could result from the project, and the rights re IP ownership and access which the entrepreneur would be entitled to in return for those contributions/returns);

+    the criteria for agreeing appropriate warranties and indemnities;

+    the mutual responsibilities, obligations and rights of collaborating parties;

+    the responsibilities, obligations and rights of parties to declare background IP;

+    the ability and limitations of an academic researcher to publish and use results for research purposes.

In licenses to industry:

+    the criteria for agreeing appropriate warranties and indemnities;

+    issues relating to payments and returns to be sought by the State for licenses and spin-outs: with the key principle being the gross return to the economy, and not solely to the HEI(s) involved being the prime outcome sought, while respecting the importance to maintain the incentives to individual researchers.

Once the IP Protocol has been developed, more meaningful metrics by which the HEIs and TTOs are measured, need to be adopted, to reflect this IP Protocol.

In order to incentivise innovation and commercialisation activities within HEIs, a proportion of State funding for the HEIs should be linked to national metrics on innovation and commercialisation.

 

6.4     Key Recommendation + Develop and publish a national IP Protocol, which establishes "ground rules" which must be followed, when agreeing terms around ownership of and access to all State supported IP; + Adopt more meaningful metrics by which HEIs and TTOs are measured, to reflect the IP Protocol; + Link a proportion of State funding for the HEIs to national metrics on innovation and commercialisation.

 

Clarify and standardise IP terms of State funding agencies

There have been mixed signals from various State funding agencies with respect to expectations around IP management. Funding agencies need to adopt a clear and standardised approach around this issue, to ensure HEI IP has optimum commercial value, and to "fast-track" the due diligence process for the entrepreneur.

There have also been mixed signals from various State funding agencies with respect to the expected returns/outputs from HEI-industry research collaborations. This has led to strained relations between HEIs and industry. This is not an issue unique to Ireland, and other countries have recognised this issue and have taken initiatives to improve the situation. Funding agencies need to develop a framework to enable speedy agreement between HEI and industry collaborators of research terms, and which are in line with the IP Protocol.

 

6.5     Supporting Recommendation +      Ensure all funding agencies adopt and publish standardised requirements for the management of IP within HEIs, in accordance with the IP Protocol; +      Develop a framework to ensure that, when funding collaborative projects, all terms are agreed between collaborators before the related funding is drawn down and that those terms are aligned with the IP Protocol.

 

Ensure that IP procedures, processes and contracts within HEIs are world class and standardised across HEIs as far as possible

HEI researchers need to properly manage their IP in order to ensure it has optimum commercial value, and to "fast-track" the due diligence process for the entrepreneur. As the employers of the researchers, HEIs play an important role in improving the culture of IP management by researchers.

HEIs could introduce a number of initiatives to enable industry to experience a predictable, consistent and speedy approach in all interactions in respect of HEI IP. The development of model contracts, and alignment of IP policies amongst all HEIs, would greatly assist industry in this respect.

 

6.6     Supporting Recommendations Ensure: +      The IP management policies and procedures within all HEIs are best in class, in particular to avoid inadvertent IP leakage or inadvertent exposure to commercial liability, and that these policies and procedures are standardised across all HEIs, as far as possible; +      That, with the assistance of funding agencies, researchers within HEIs are appropriately incentivised to properly manage their IP; +      Agreements between HEIs are in place to enable speedy licensing of IP from multiple HEIs in accordance with the IP Protocol, with a single commercial lead; +      An expert group of representatives from the HEIs and the private sector is appointed to develop model contracts, in line with the IP Protocol, for all activities at the HEI/Industry interface, to be used by all HEIs at the option of the entrepreneur/company (i.e. non-disclosure agreements, material transfer agreements, licence agreements, etc.) (internationally accepted model contracts to be used as a starting point).

 

Rationalise the process of finding, accessing and bundling IP from the HEIs

The Taskforce recognises that significant progress has been achieved in recent years in establishing the TTOs and that the initial priority should be to establish and implement a National IP Protocol and deliver the related recommendations above (6.4-6.6). In tandem with this, we believe steps are required to enable speedy access to HEI IP and in particular IP bundling which take account of our principle that the entrepreneur and enterprise must be at the centre of our efforts.

 

6.7     Key Recommendation Convene an expert group of representatives from Industry, the VC sector, the HEIs, the legal profession, and the public sector, who are informed by TT structures internationally, to recommend, by September 2010, the most appropriate structure that would achieve the following: +      A national office that has knowledge about current research projects and access to all IP created throughout the HEI system as well as the mandate to bundle, market and facilitate speedy commercialisation of IP from all HEIs in accordance with the IP Protocol; +      In that office, a single point of access, and point of contact, for the entrepreneur, to all IP that has been generated across the entire HEI system; +      Mechanisms put in place to ensure full support of the activities of this office by the HEIs/TTOs.

 

 

7. Scaling Irish Companies

A core challenge identified by the Taskforce is to help more Irish companies grow quickly to significant scale.

Growth Capital

Given our ambitions for the "Smart Economy", and the need to create an inflection point in the creation and growth of innovative companies we need a transformation in the scale and nature of the Irish Venture Capital (VC) industry. This could be achieved by attracting top tier venture financing to Ireland so as to successfully scale innovative companies.

At present, in Ireland, there is capacity to make only a relatively small number of new investments above ƒ2 million a year. Further, the usual investments by the indigenous VC community are relatively small by international standards.

Due to the limited number of indigenous VCs there is also insufficient domain expertise to cover the wide variety of markets which our companies are targeting. Further, without the operational experience of running and growing global innovation companies in these or related markets, there can be a tendency to risk relatively (compared to top tier VCs) small amounts of investment, rather than larger bets on new innovations which may change global industries.

An entrepreneur is at risk of spending too much time fund raising in Ireland for what will be, by top tier standards, a small amount obtained relative to top tier standards.

Enterprise Ireland has made considerable efforts to develop the domestic Irish VC industry with significant investment from the NPRF. The challenges facing the Irish VC industry are similar to those faced in most European countries particularly those with a small domestic market and without significant sources of domestic risk capital.

To date, EI has committed ƒ139.5 million through the most recent Seed and Venture Capital Scheme, which has leveraged a further ƒ386.5 million of investment in the Irish VC market39. In addition, a further two commitments have been made to Fund managers who are currently fundraising. Central to the strategy underpinning the Scheme was the long-term viability and scale of the Irish Venture Capital industry.

 

One critical challenge facing Ireland is to continue to support the development of the Irish VC industry, which will remain an important part of the overall VC ecosystem, particularly in the current economic environment, as VCs commence a new fundraising cycle in the coming years. A well-functioning domestic VC sector can complement (including investing alongside) the international venture capital that will be attracted under the Innovation Fund Ireland proposal. The Taskforce therefore supports continued investment to sustain and build further the domestic VC sector.

However, the Taskforce believes that we need to transform the industry to match the existing potential for good innovative deals given the existing base of experienced entrepreneurs in Ireland, as well as the increase which can flow from successful implementation of this report.

Acquisition is also an important strategy pursued by many scaling companies requiring access to risk capital. One possible short-term opportunity that might be created by access to top tier risk financing (venture capital and/or private equity) would be to 'roll-up' some of the technology clusters of relatively small (by global standards) Irish companies into global companies of scale which could then each provide enhanced solutions to customers worldwide. 

The Innovation Fund, as envisaged in the Government's Smart Economy Framework, is a creative and intelligent way to fix this as fast as possible. Central to the approach is to attract smart capital and top tier venture financiers to come to Ireland, ideally with active partners physically relocating to Ireland, and networked into a global top tier venture financing firm.

At the time of publication of Building Ireland's Smart Economy, a number of international top tier VC firms expressed strong interest in the concept. Subsequent developments in international financial markets mandated the necessity for revised consideration of the timing of the introduction of the Fund. The Government also used this as an opportunity, prior to proceeding, to obtain the views and recommendations of this Taskforce as to how the Innovation Fund can best support the development of Ireland as an Innovation Hub. We believe the Innovation Fund, as envisaged, is more important than ever. We are aware that the NTMA, working with EI, is currently tasked with the groundwork for establishing the Fund.

While we strongly support the establishment of the Fund as soon as is possible, it is vital that this is done in an informed way. Balancing the taxpayers' financial interest and the fact that each tier 1 VC fund has its own individual perspectives and needs means that a 'one size fits all' approach would be naÔve. Furthermore, depending on the fund-raising stage of each potential VC partner, there will be a need to phase the introduction of funds. We are aware that many other countries and regional economies have endeavoured to introduce innovation funds and many have been ineffective in delivering economic benefits. For this to work we would be of the view that a market assessment gauges carefully the appropriate timing and structure of the funds. Based on its experience, skills and reputation we are confident that the NTMA, with the assistance of Enterprise Ireland, is the appropriate authority to complete this process.

A related initiative to encourage top tier venture financing to locate partners in Ireland is to leverage their portfolio companies with a European base in Ireland, as we discuss in Recommendation 8.3.

Another approach would be the development of "entrepreneur in residence" schemes in our HEIs, open to top tier VC funds, as proposed in Recommendation 6.3.

 

7.1     Key Recommendation           Attracting top-tier venture partners from abroad to Ireland is a priority and can best be achieved through implementation as soon as possible of the Innovation Fund - Ireland, envisaged in Building Ireland's Smart Economy.

 

There are a number of other opportunities which we believe should be explored to help uniquely position Ireland as a location for top tier venture financing:

+    the MNCs operating in Ireland: Many of these have sophisticated treasury management activities that know Ireland well.  A formal link, including equity participation, to a MNC can help a young company grow in partnership with the MNC and can provide the MNC with access to new technology and innovation initially proven in the global market;

+    the Diaspora: As evidenced by the Global Irish Economic Forum hosted by the Government in September 2009 in Farmleigh, there is potential to draw on the willingness of members of the Diaspora to help, many of whom have relevant expertise as well as resources;

+    the NPRF: We are fortunate that we have in Ireland an experienced, proven, professional, commercial, sophisticated manager of funds in the NPRF. This organization has credibility with top tier global investment houses, talks their language and has commercial acumen;

+    the IFSC ecosystem of professionals: The work of managing capital is a core competency that we have built in the IFSC. Skills available from individuals and firms within the IFSC can be deployed to assist in strengthening the VC industry operating in Ireland;

+    the ISEQ:  We have an internationally networked and professional stock exchange which can help companies to prepare themselves for IPO, including floating on other international exchanges including the NASDAQ.

7.2     Supporting Recommendations In addition to implementing Innovation Fund – Ireland, mechanisms should be explored which would utilise the following opportunities to enhance the availability of Venture Capital in Ireland: +      Existing MNCs located in Ireland should be invited to suggest means by which they would be willing to assign some of their treasury funds into Irish based innovative companies or venture capitalists; +      Facilitating the Irish Diaspora who wish to invest in risk capital for Irish based innovative companies; +      Creating a programme to access venture debt (a commercial instrument, particularly from international private equity firms) for later stage companies based in Ireland. Investment should also continue in developing a sustainable, forward-looking and high quality Irish Venture Capital Industry, complementing the Innovation Fund-Ireland.

Incentives

Sometimes entrepreneurs are tempted to sell out "too soon" because they are personally financially constrained. Given our level of ambition for the economy, we need to incentivise our entrepreneurs to remain ambitious to build companies to sufficiently large scale.

It is also important that if a company eventually is sold to an MNC, the Irish operation is of such a scale and importance that it has a good chance of remaining in Ireland.

The best way to counter a tendency to exit prematurely is the availability of growth capital from investment firms that will buy into the company, allowing the entrepreneur to partially exit, while also enabling and incentivising them to build the business further. Investment firms of this nature exist in UK and US and cover Ireland, but often not at the lower size range of available companies. It might be possible to use Innovation Fund – Ireland to help attract one or more of these growth or venture/growth firms to better serve the Irish market.

In the meantime however, we propose a remedy to assist entrepreneurs in maintaining their ambition to grow and scale companies. We suggest the introduction of a Scaling Incentive Scheme (SIS). This would provide for periodic "SIS dividends" which, on the recommendation of the company's Board of Directors, could be paid to the founding entrepreneur(s) at the critical growth stage in a company's lifecycle, i.e. during the scaling period. The scheme might work as follows:

+    The entrepreneur(s) should have more than a threshold ownership interest in the (export led innovative growth) company of 10% (each);

+    SIS dividends could only be paid once every three years;

+    Such dividends would be capped at the lower of either 10% of the increase in value of the company or group in the previous three years (or since the last such SIS dividend), or the level of the company's distributable reserves on that date;

+    The relief might be clawed back in the event of a sale of 50% of the entrepreneur's shareholding within a six month period.

We appreciate concerns about introduction of a new tax incentive scheme. However, if implemented appropriately it could assist in incentivising entrepreneurs to have ambition to scale their companies.

7.3     Supporting Recommendation  In order to support and incentivise the scaling of innovative indigenous companies: +      introduce a Scaling Incentive Scheme (SIS) to acknowledge successful scaling, whilst continuing to grow a company; +      in implementing the Innovation Fund – Ireland (see above) endeavour to ensure the programme includes managers which specialise in investing in fast growing existing companies.

Executive Skills

As acknowledged in our first and second principles, Ireland needs to develop a cohort of experienced smart economy entrepreneurs and business executives who have the necessary skills to develop global innovative companies.

Ambitious entrepreneurs and rising young executives can learn considerably from practical executive development which places an emphasis on coaching, mentoring and especially meeting successful peers.

Enterprise Ireland's Leadership for Growth (L4G) programme, operated in conjunction with Stanford Graduate Business School and other providers, has been particularly successful in enabling CEOs of Irish based innovative companies to meet CEOs, business executives, and venture capitalists in Silicon Valley. EI also have a range of existing supports in the area of sales/marketing including dedicated management development programmes.

While L4G has been highly beneficial, it has focussed to date on the development of the capacity and capabilities of CEOs. There is now an urgent need to further develop the competence of indigenous executives in two key areas which will be crucial in building Irish companies that can compete globally, namely (i) raising international finance to scale their companies and (ii) positioning and selling products in the global marketplace. In particular, we should draw on the experience of those Irish CFOs, CEOs and senior sales executives who already have practical experience and success in this regard to give seminars and even coaching.

A further challenge is to strengthen the sales compatibilities of SMEs who need to market and sell in overseas markets at a relatively early stage in their development.

7.4     Supporting Recommendation Build on the success to date of the Leadership For Growth (L4G) programme by: +      Continuing the existing L4G programme and developing additional programmes which expose senior executives within existing Irish enterprises to best practice, case studies and personal face to face contact with the executives and founders of successful innovative companies; +      Placing an immediate focus on developing the skill sets and experience of CFOs, and CEOs, in the area of raising international finance from Ireland to scale companies; +      Strengthening training and development provision in the areas of international marketing and sales.

 

 

 

8. Transforming Irish Enterprise

 

Innovation has a central role to play in transforming existing Irish enterprises, both in the FDI and indigenous sectors. In this chapter we identify a number of ways to achieve this, including some initiatives which can support greater linkages between MNCs and the SME sector, thereby building a stronger overall enterprise component of the ecosystem.

 

Flagship Projects

The first customer win and success is an important milestone for the entrepreneur with an innovation, as acknowledged in our fifth principle. The State can provide the initial customer endorsement while also acting as a reference for other potential customers. The very first deployment with a customer is also a learning opportunity, demonstrating what works, what does not work, how a customer deploys the innovation, what other needs the customer has beyond the innovation itself and so on.

Importantly, the role of other companies supplying the same customer is also clarified with respect to the innovation, and it facilitates development and refinement of joint solutions, for example between multinationals located in Ireland, indigenous companies and new start-ups.

Public procurement can be used to purchase innovative new services for the State, which in turn foster co-operation between companies operating in Ireland in the development of products and services for sale on international markets.

We recognise that innovation involves risk and that concerns about perceived waste of public funds can incentivise the public service to be risk adverse, including in its procurement policy. We nevertheless believe that the risk of innovation can be reconciled with the necessary caution required in public procurement.

In 2009 the Government published Buying Innovation: The Ten Step Guide for Smart Public Procurement and SME Access to Public Contracts40 and the Taskforce welcomes this initiative and supports its implementation.

We understand that the enterprise agencies are already working to identify major procurement projects across the public service in order to ensure that any spin-off benefits of this nature are captured.

However, the Taskforce believes that in addition it is desirable to take a more strategic and ambitious approach to leveraging public procurement to promote innovation which can then be exported. State procurement to meet an identified public need would drive collaboration between MNCs, SMEs and HEI research to meet a tangible goal.

We suggest that a number of pilot areas be identified first to test this approach. While the criteria in selecting projects would need to be agreed by Government, we suggest that they might include that the project:

+    Meets a specific defined public need;

+    Is sufficiently novel that it will lead to a global market opportunity – other locations would benefit from the same solution;

+    Should result in an exportable solution, with clear channels to the global market;

+    Ideally includes a combination of indigenous companies and MNCs operating in Ireland and might possibly attract further MNCs to establish in Ireland;

+    Is based on an open and transparent call for proposals;

+    Ensures that other companies that can later add further value to the core flagship can participate if they so wish without having legal or financial obstacles, thus enabling start-ups and smaller companies to cluster around the core providers of the flagship.

The approach will only be successful if it has an IP model which maximises the potential to foster a cluster of co-operating companies in Ireland around the solution.

It would not be appropriate for the Taskforce to recommend any specific projects for use in a pilot phase, but some examples for illustrative purposes could be:

+    Remote health care monitoring and early diagnosis: which could include home monitoring of patients, including post-operative and the elderly, providing early diagnosis and assisting prevention. An opportunity arising might be for assessment and diagnosis to be provided via call centres from Ireland to many markets. Ireland already has expertise too in distributed wireless monitors and sensors, and biodiagnostic devices.

+    Intelligent high-efficiency street lighting, combining wireless displays and asset tracking: street lighting is an opportunity for smart energy management. Because of the height of street lighting, display technologies could be included; wireless based sensors could also be used to track assets, including stolen goods and property tagged with low cost and secure RFID tags.

A variation on this approach would be for Ireland to anticipate an EU or other international obligation, for example implementation of an EU Directive. In this case, there may be a possibility to initiate a flagship project which would have consequential export opportunities across the rest of the EU and maybe further afield.

Clearly such projects would need to be identified on foot of rigorous analysis. The initiative should be overseen by a Committee chaired at Ministerial level which includes the enterprise agencies and the National Public Procurement Operations Unit.

 

8.1     Key Recommendation The Government should identify a suitable procurement model and then pilot a number of Flagship projects where public procurement to meet specific public needs would stimulate the development of innovative solutions with export potential through collaboration between MNCs, SMEs and HEIs.

 

Convergence and Inter-firm collaboration

Market and technology convergence is an opportunity to transform the established industrial base in Ireland while also providing entirely new business opportunities. Our experience suggests that collaboration between enterprises already operating in Ireland but in different sectors is currently only modest.

With our strong base of companies and research capabilities across a number of sectors, Ireland has a perhaps unique opportunity to take advantage of the increasing convergence of technologies. This convergence is leading to new opportunities, new types of business, new products and services, an increased blurring between formerly discrete sectors and new customer markets for many of the more traditional sectors (see Box 8.1 for a relevant example).

Box 8.1

Creganna-Tactx Medical Creganna was established in 1980 to provide engineering services to the Irish micro-computer and electronics industries. While the company grew successfully serving this sector, the company founders were searching for alternative markets to increase the value added of its products and gain international growth potential. In the mid-90s Creganna entered the rapidly growing medical device sector, making the strategic move to focus exclusively on this area in 1999. The company expanded its customer base through offering a growing portfolio of innovative medical component technologies and manufacturing services. In 2004 the company expanded its service offering to include contract design, development and prototyping, enabling Creganna to support clients at the earliest stages of the product lifecycle. Creganna also launched its Innovation Centre – a dedicated unit committed to developing innovative solutions for its customers. Creganna is now recognised within the medical device industry as an expert contract design and manufacturing partner and is a supplier to all leading companies within the sector. Innovation and commitment to R&D remains central to the company's business plan and is a key driver of growth resulting in a doubling of sales over the three years to 2008. Creganna is currently actively researching opportunities such as convergent medical technologies. In 2009 Creganna acquired Tactx Medical, firmly placing Creganna–Tactx Medical in the top ten global providers of technologies and services to minimally invasive medical device companies. Creganna–Tactx Medical has more than 800 staff worldwide and employs over 550 people at its Galway headquarters, including over 170 in R&D and engineering development. In 2009 Creganna–Tactx Medical had combined revenue of $110 million.

 

For example, advances in the food sector towards functional foods bring the clinical trial and production processes closer to those in the biopharma sector. Electronics, micro- and nano-technologies will play a stronger role in the Life Sciences sector as new drug delivery mechanisms are developed. The use of sensors embedded in construction materials and wireless communications creates a very different environment for new buildings, energy efficiencies and facilities management.

The Taskforce believes that convergence offers opportunities for both the transformation of existing MNC investment in Ireland and to develop synergies between the indigenous sector and MNCs (according to our second principle). Leading HEI researchers who are networked into the international research community should be part of these engagements between convergent industries.

 

8.2     Key Recommendation +      Establish a team drawn from the relevant agencies with responsibility for ensuring collaborations between firms, and with the HEI sector, to take advantage of convergence opportunities. It should bring forward and, as appropriate, implement actions in the following areas: -     support for prioritised areas of convergence opportunity through existing or new public funding schemes; -     public funding schemes which incentivise inter-firm collaborations in respect of converging technologies; -     ensure that the regulatory environment (and how it is applied or interpreted) is supportive of convergence e.g. combination medical products; -     education and training programmes that provide the multi-disciplinary capabilities required to support cross technology and cross sectoral convergence; -     establishment of an industry-led convergent technologies network to facilitate collaboration between companies, academics and medical practitioners across the formerly discrete sectors of pharma, bio, med tech, ICT and engineering; -     marketing Ireland's advantages as a location for convergence focused activities. +      Industry, including MNCs located in Ireland, should also be asked to identify specific areas of opportunity where they would be interested in participating in convergence-related activities.

 

Leverage non-European Innovation: European Accelerator Programme

One way to help position Ireland as an International Innovation Hub is to attract the European headquarters of successful private US companies. This would complement efforts to increase the level of start-up companies in Ireland.

The objective would be to target companies backed by top tier VC funds that already have established business models and innovative offerings in their home market. Ireland should provide a highly attractive location to expand their international operations into the European market (and possibly further afield).

Rapidly growing innovative companies, backed by top tier VC funds, are highly likely to exit either by IPO or trade sale after a few years. Their expansion into the European market is likely to significantly increase the value of that exit, but the company may not have the cashflow to fund a European expansion.

In accordance with our second and fourth principles, the Taskforce believes there is an opportunity to target companies at that stage of development through a European Accelerator Programme. As well as IDA marketing efforts, this could involve building relationships with top tier VC funds (see Recommendation 7.1) and offering the possibility of an equity investment in the European expansion.

If successful, such a Programme would offer a number of advantages:

+    it would deliver jobs in Ireland in a relatively short timescale through companies which are already operating innovative business models in their own markets;

+    it would help increase top tier venture finance interest in Ireland;

+