UCC College of Science, Engineering and Food Science Annual Lecture Series. February 2012. Re-imagining Irish Innovation Policy: Reclaiming Innovation for Business
Workshop - Best of Both Worlds_ Combine KG and Vector search for enhanced R...
Irish Innovation Policy UCC Lecture
1. 1
College of Science, Engineering and Food Science
Public Lecture Series 2012
Re-Imagining Irish Innovation Policy:
Re-Claiming Innovation for Business
Dr Declan Jordan
School of Economics
College of Business and Law
UCC
2. 2
Structure
• Policy context
• Why how we speak about innovation is
important
▫ The Smart Economy Agenda and why it doesn‟t
help
▫ Implications for HEIs
• Innovation from an economic perspective
▫ What is innovation?
▫ How do we usefully help businesses?
3. 3
Policy Context
• Consensus: Innovation the key to Irish growth and competitiveness
post-‟Celtic Tiger‟
• Government continues to focus on investment in science and
technology
• Minister for Enterprise, Trade and Employment states
that, “Science, Technology and Innovation are vital to our
economic and social progress. In an increasingly globalised
world, it is recognised that high levels of investment in research
and innovation are essential…..Growing research capability is a
core component of the European Union’s drive to become the most
competitive and dynamic, knowledge-driven economy. Ireland
has fully embraced that challenge and this strategy represents our
comprehensive plan to guide us towards that goal”.
(Strategy for Science, Technology and Innovation 2006-13, 2006)
4. 4
Policy Context
• NDP 2007-2013 committed €20bn under
Enterprise, Science and Innovation priority
• Strategy for Science, Technology and Innovation:2006-
2013
▫ €1.88bn to fund research
▫ 81% targeted at HEIs
• Science Foundation Ireland (SFI) founded in 2001 to
support strategic research of world class status in key
areas.
• SFI has approved approximately 1,700 awards
representing an investment outlay of over €1bn at
current prices
• PRTLI aimed at transforming Irish research
environment
• HEA evaluation – research base is improving but
„remains narrow‟
5. 5
Policy Context
• IDA Ireland aims to make Ireland “one of the
global centres of science-based R&D”
• Enterprise Ireland‟s goal is to strengthen
indigenous research and technology base.
• Continued strong policy emphasis on high-
technology sectors
• So government playing leading role in increasing
R&D
12. 12
Structure
• Policy context
• Why how we speak about innovation is
important
▫ The Smart Economy Agenda and why it doesn‟t
help
▫ Implications for HEIs
• Innovation from an economic perspective
▫ What is innovation?
▫ How do we usefully help businesses?
13. 13
How we speak about innovation
“Innovation Island”
“Innovation Eco-system”
“Smart Economy”
“Knowledge Economy”
“i-conomy”
“Ideas Economy”
14. 14
Europe does it too
• European Commission has developed a strategy
on Science, Technology and Innovation,
• UK government has issued a Science and
Innovation Investment Framework,
• Danish government has a Minster for
Science, Technology and Innovation
• Ireland has Strategy for Science Technology and
Innovation and Minister for Jobs, Enterprise
and Innovation
15. 15
What is the Smart Economy?
“The Smart Economy combines the successful
elements of the enterprise economy and the
innovation or „ideas‟ economy while promoting a
high-quality environment, improving energy
security and promoting social cohesion.”
Building Ireland‟s Smart Economy, 2008
16. 16
How we see the Smart Economy
“The rationale behind the work of the OSTI is
acceptance at national and international levels that
research, technological development and
innovation (RTDI) is of critical importance to
competitiveness, employment and the
enhancement of society, and that public
investment in RTDI must be a national priority.”
Department of Jobs, Enterprise and Innovation
17. 17
How we see the Smart Economy
“Ireland must not squander the progress it has made in recent
years. While Ireland had originally signed up to meeting the
ambitious European target of total R&D expenditure to be 3% of
GDP by 2020, our present economic circumstance has made
this difficult to achieve. Instead, the National Reform
Programme submitted to the European Commission included a
revised R&D investment target of 2.5% GNP (equal to 2.0%
GDP) for 2020. To achieve this, R&D activity needs to increase
throughout the economy. This target will be achieved by both
public and industry direct contributions, it also assumes that
industry‟s total investment will represent approximately two-
thirds of total expenditure.”
IBEC
18. 18
How we see the Smart Economy
“Innovation will flourish when the worlds of
science and Industry work in close proximity”
Minister Sean Sherlock, 10/11/11 (SFI website)
“Science, therefore, forms and informs our path to
economic recovery.”
Commissioner Geoghegan-Quinn, 9/2/12
20. 20
The 3%-ish Target
“As part of his key note address, Barrett also claimed that a
3pc investment of Ireland‟s GDP into research and
development “is no longer a reasonable target" and that we
“have now to compete with the rest of the world to get paid”.
Pointing to the example of Microsoft, Barrett said: “They have
a research budget of approximately US$8bn per year. That is
huge, and is more than all of Ireland spends in R&D.”
Craig Barrett, Former CEO Intel, Silicon Republic 16/11/11
21. 21
Drawing Conclusions from Faulty Premises
“One issue that I know arouses a lot of interest is the 3% R&D
target. I know that this is controversial. But I believe that it
should stay. ”
"Research Ministers have told me in clear terms that its existence
has strengthened their hand in their dealings with their Finance
Ministers.”
"Now is exactly the wrong moment to remove this discipline.
With budgets under pressure, governments may view research
and development as an easy area for cutbacks. But we know,
from the experiences of countries like Finland, that raising R&D
budgets is the route to recovery.”
Commissioner Geoghegan-Quinn, Irish Examiner, 5/3/10
22. 22
R&D and GDP
• In Q4 2007 Irish GDP was
€45bn (at constant market
prices).
• In Q4 2010 Irish GDP was
€39.5bn – a drop of over 12%
• With no change in R&D
spending we would have just
become more innovative
23. 23
We pass it onto the kids…
“Fewer students are taking science courses in college this
year, despite a massive campaign by the Government to
increase enrolments in the area to help build the 'smart
economy'.
After a massive 25pc rise in science numbers last year, new
figures show a decline this year.
The figures -- coming in the middle of National Science
Week -- are a blow to the Government's hopes for a future
smart economy.”
Irish Independent , 10/11/10
24. Assumptions underlying the Smart
Economy Policy
• Innovation is science-push
• High-technology sectors have greatest potential
• Government can pick winners
• Other countries doing it so the approach must be
right
• We can‟t stop investing or we will lose gains
already made (TOGIT)
25. Science-push
• Four steps to prosperity
1.Attract top researchers
2.Increase research output
3.More licences, patents, spin-offs
4.Increased national prosperity
• For example, UCD-TCD Innovation Alliance
▫ €650m over 10 years, 300 businesses, 30,000 jobs
• The policy ignores the users of new technologies
– where most productivity gains may materialise
(Bhide‟s (2010) venturesome consumption)
26. The next ‘big’ idea will be technological
• Most successful innovations are either not
technologically based or rely on non-proprietary
technologies.
• Kline and Rosenberg (1986:282) - Technological
breakthroughs are not necessarily commercial
breakthroughs
• Process, organisational and marketing
innovations not sexy – but critical for businesses
27. Government can pick winners
• SFI focused on 3 “broad” sectors
▫ Biotechnology
▫ ICT
▫ Sustainable Energy and Energy-efficient technologies
• Drucker (1985:120) - “even when it is based on
meticulous analysis, endowed with clear focus,
and conscientiously managed, knowledge-based
innovation still suffers from unique risks, and
worse, an innate unpredictability”
28. Everyone else is doing it….
• Mid-term review of Lisbon Agenda –
disappointing results! [http://www.euractiv.com]
• Can governments „engineer‟ innovation?
• Scale of inputs is not necessarily correlated with
quality of the outputs
• Productivity of R&D is more important than
spend on R&D
• BBSRC (UK) budget of £450m for biotechnology
• A strategic approach would suggest
differentiation based on competitive advantage
29. We must keep going…
• Decisions must be made at the margin
• Opportunity cost of investment has increased
over last 3 years
• Is the timing important?
▫ “We may make some short-term (and wrong)
decisions because the benefits of investments are not
always direct, or immediate” Sean
Dorgan, IT, 14/07/2009
▫ How long will it take?
▫ Will Ireland capture the benefits?
▫ To what extent will spin-offs and licences add to Irish
prosperity?
▫ An expensive risky gamble.
30. 30
Implications for HEIs
• Strategy for Science, Technology and Innovation
2006-13.
“Science, Technology and Innovation are vital to our
economic and social progress” (p 3).
“Ensure that Higher Education Institutes encompass IP
management and commercialisation as a central part
of mission, equal to teaching and research” (p 15).
31. 31
Implications for HEIs
• Historically, HEIs have rarely been the main source of
business innovation in any country.
• Despite US examples, such as Silicon Valley, Route 128
and the Research Triangle Park, there is a lack of
systematic evidence that university research drives
business innovation and competitiveness.
• It is arguable that even these examples suggest academic
institutes are enablers rather than drivers of business
innovation.
• Despite this lack of systematic evidence, universities are
increasingly seen by policymakers as driving business
innovation, perhaps jeopardising their traditional
economic roles of educating the workforce and
publishing research.
32. Policy Implications for HEIs
• What are HEI‟s being asked to do?
▫ Policy is focused on sourcing innovation in HEIs
▫ Technology Transfer Offices focus on Spin-offs and Licences
• Spin-offs
▫ For Ireland: How many? Costs and benefits?
▫ Academics take account of research funding and promotion when
considering pay-offs
▫ In US history/tradition and industry funding matter (O‟Shea et
al, 2005).
• Licences
▫ Delicate balance between benefits to society and HEI collecting
revenues.
▫ For exclusive licences, in addition there are problems in choosing
the „right‟ licencee ex ante (Rosenberg et al, 2002).
▫ Evidence suggests that 2nd adopter most important – Rosenberg
et al
33. 33
So does government fund research?
• Argument based on public good nature of knowledge
• Non-rival and non-excludable
• The social benefit to knowledge creation is less than
the private benefit
• Private efforts will under-supply knowledge and
research
• We grant patents for this reason
• Though these are also imperfect
• But questions arise then for correct strategy for a
small island.
34. 34
Structure
• Policy context
• Why how we speak about innovation is
important
▫ The Smart Economy Agenda and why it doesn‟t
help
▫ Implications for HEIs
• Innovation from an economic perspective
▫ What is innovation?
▫ How do we usefully help businesses?
35. 35
Schumpeter’s Trilogy
Schumpeter identifies three elements:
• Invention
• Innovation
• Diffusion
He says economics can only be concerned with the
latter two, since he says the first cannot be
observed or measured.
36. 36
What is innovation?
Defining Innovation – Schumpeter‟s „five‟:
“(1) the introduction of a new good – that is one with which consumers are
not yet familiar – or of a new quality of good. (2) The introduction of a new
method of production, that is one not yet tested by experience in the branch
of manufacture concerned, which need by no means be founded upon a
discovery scientifically new, and can also exist in a new way of handling a
commodity commercially. (3) The opening of a new market. (4) The
conquest of a new source of supply of raw materials or half-manufactured
goods (5) The carrying out of a new organisation of any industry”
Schumpeter (1934: 66) Theory of Economic Development
Innovation is introduction of product or process that is new to the business.
37. 37
An economic perspective on the Smart Economy
• Amar Bhidé (2008) in Venturesome Economy
▫ mindset that sees competitiveness and economic growth as a
function of investment in leading-edge science and technology as
„techno-fetishism‟.
• Peter Drucker (1985:30) in Entrepreneurship and
Innovation
▫ “entrepreneurs innovate…It is the act that endows resources with
a new capacity to create wealth” The reliance on „high-technology‟
or scientific breakthroughs as the basis of innovation ignores that
many successful innovations (from a commercial perspective)
were either not technologically based or relied on non-proprietary
technologies.
38. 38
An economic perspective on the Smart Economy
• Kline and Rosenberg (1986:282)
▫ extremely difficult to judge the commercial impact of an
innovation prior to its introduction. Many radical technological
breakthroughs have not been commercial successes, while
incremental changes to existing products or services, or even the
introduction of existing products or services to new markets have
proved to be significant commercial successes.
• Countries (regions) don‟t innovate
▫ When we speak of innovative countries and regions and national
or regional competitiveness, we mean that the businesses in those
countries or regions are innovative and/or competitive.
▫ This is an important distinction as it ensures that the focus of
policy interventions must be firmly set on how businesses
operate.
41. 41
What is to be done?
• Government role is to help provide environment conducive to
innovation/entrepreneurship.
• Focus on needs of all business, not just „knowledge-intensive‟
sectors
• Are we overlooking traditional role of HEIs?
▫ Educating graduates.
▫ Disseminating research.
• Well-trained graduates open to new technologies and ideas
(generated anywhere) may be more useful for Irish prosperity.
• As noted by Carter and Williams (1964) “it is easy to impede growth
by excessive research, by having too high a percentage of scientific
manpower engaged in adding to the stock of knowledge and too
small a percentage engaged in using it.”
• Based on cost-benefit analysis, government funding may be
rebalanced to support businesses using new technologies to boost
productivity
42. 42
I hope I‟ve left time for discussion
Mail: d.jordan@ucc.ie
Web: www.declanjordan.net
Twitter: @decjordan
