Innovation Taskforce Appointed

The Irish Times reports that

TAOISEACH BRIAN Cowen has announced the appointment of an innovation taskforce to advise the Government on its strategy for positioning Ireland as an international innovation hub and to assist in making the “smart economy” a reality.

The taskforce to assist in making the Smart Economy a reality doesn’t contain an economist of any sort, smart or otherwise.  This seems to me to be a pity.  Economists tend to think about the effect of policies on the economy in a somewhat different ways to scientists, civil servants and CEOs and could have had a useful influence on such a taskforce.  (Hey, if we’re not for ourselves, who else is going to be?)

In particular, economists tend to think about government interventions in a more systematic way (What’s the market failure that these policies are addressing? Externalities? Natural monopoly?) and to better see the linkages between new initiatives and past industrial policies.  Since there won’t be any economists advising the government on this taskforce, I would encourage participants in this blog to come forward a bit more to discuss these issues here.

One aspect of the current Smart Economy strategy for which, in my opinion, the likely economic impact is being exaggerated is the link from university innovation to start-up firms and jobs.  Policies to encourage university R&D and its commercialisation may change the type of jobs in Ireland but they are unlikely to have much effect on the number of jobs.  Similarly, the statistics on start-ups show that failure rates are very high, so as much it’s nice to talk about starting up a Nokia here in Ireland, the truth is that this process is highly random.

More generally, given the heavy emphasis in recent policy statements on university innovation and spinoffs, it is important be realistic about the role of such activity in other advanced economies.   Engineer Richard K. Lester from MIT is an international expert in the interactions between science and the economy.  Here is an interesting presentation titled “A Framework for Understanding How Higher Education Affects Regional Growth” in which he discusses some common “myths” with regard to university innovation.

Finally, here’s a link to an edition of the journal Capitalism and Society, which has a paper on the Oxford model of commercialisation as well as interesting comments from Lester. 

The papers are behind a pay firewall which many of you won’t have access to, so here’s a brief excerpt from Lester’s comments:

the aggregate economic contribution of the university technology transfer model, as well as its economic potential in individual cases, has sometimes been exaggerated. The number of university-related startups is only a tiny fraction of the overall rate of new business formation. In the United States more than half a million new businesses are formed each year, while the number of startups directly licensing intellectual property from American universities,though growing, was still only about 600 in 2005, the latest year for which data are available.

Similarly, university-held patents are only a minor contributor to the overall stock of patented knowledge. In the U.S. the rate of patenting by universities is less than 3% of the overall patenting rate, and even the most prolific university campuses are awarded patents at a rate that is modest by corporate standards. If the two leading patenting universities, MIT and Caltech, were companies, neither would be ranked among the top 100 corporate patenters in the United States. And the entire institutional membership of AUTM was granted fewer patents in 2005 than the single largest corporate patenter (IBM).

This is not to dismiss the role of university-related patenting and new business formation. In specific regions, as well as in certain sectors such as life sciences, the impact is considerable. But it is helpful to keep these contributions in perspective relative to the growth and job-creating capacity of the economy as a whole.

It is also important not to hold unrealistic expectations about the economic benefits of technology transfer activities to individual universities themselves. The probability that any given institution will derive significant financial benefits from its technology transfer activities is fairly low. The total royalty income received annually by all American universities from their patent portfolios is growing, but even today amounts to only a few percentage points of the total flow of research revenues to these institutions. Moreover, most of this royalty income is generated by a handful of highly remunerative licenses. It has been estimated that only about 1 in 200 U.S. university patents generates annual royalty income of a million dollars or more, and the vast majority of them will never generate any income at all. The distribution of income is thus highly skewed, and although most technology licensing offices do not report their net financial performance, it is probable that many of them do not break even.

14 thoughts on “Innovation Taskforce Appointed”

  1. This 28-strong group is dominated by insiders including the hired gun of the universities lobby group.

    Who of the insiders is going to object to the gravy train?

    Enterprise Ireland claims a survival rate for Irish university spinouts over the past 10 years is 90%.

    The claim is ludicrous when compared with US data.

    I understand the UCD/TCD alliance was stitched together without Professor Mark Keane, the Vice President for Innovation at UCD being consulted.

  2. Sure what advice could a macroeconomist provide that Mary Coughlan couldn’t?

    The failure of this government to look at TFP in any meaningful way is disheartening. €1240m on agriculture and €6m on competition policy.

  3. The second I saw this list alarm bells started to ring. I agree completely with Michael, nobody will go against the grain here and if they do we wont know about it. To many connections.

    The team should be more academic and research based. No need for corporate (well at least not as many) heads on this board.

  4. The one promise made in the Smart economy document which alone (if followed through) would make the document worthwhile is:

    “We will publish a whole-of-Government response to recommendations contained in reports of the Competition Authority within nine months of their publication;”

    Or put another way:

    “We won’t just put competition authority recommendations on the shelf as we have in the past, and we will actively consider them, and give considered reasons for any recommendation we chose not to implement.”

  5. @Antoin Didn’t you know that ‘the green economy is the smart economy’? If he says that on the radio once more…

  6. @ Brian Lucy. Yes!

    This idea about a ‘smart’ economy is harebrained. Not because of the basic principle, but the dopey assumptions about the manner in which it will operate. A ‘smart’ economy needs few ‘workers’ – so what happens to the residuals?

    Anyway, there are so many A-list persons on the group that it will be unworkable. Now if Cowen had chosen only five – you might just have got a result.

    Brian P


    More trees – thousands of hectares of them (broadleaf and fruit bearing)
    More clean fresh water – clean up the pollution – inland fisheries
    Electrified rail transport – re-lay track on some of the old permanent ways – circumnavigate the island with a heavy-rail track – tire, not spokes!
    Update the major internal waterways for commercial traffic
    Farming without commercial inorganic fertilizers – different crop varieties – phase out grazing and switch to tillage – horses!
    Clustering of habitations – re-locate 50% of population from eastern corridor to a southern corridor

    Add you idea! – rule out nothing until you run it through your head for a while – you never know what might pop-up!


  7. Karl, I agree. The make-up of the Taskforce does indeed cause concern that an understanding of what business innovation is really about has not yet been grasped, viz. it decidedly is NOT primarily about research or science or technology. It is well proven that the quantity of business innovation stemming directly from public S&T research is “vanisingly small” (Erik Arnold, Technopolis, UK). This is well supported by others, e.g. Nathan Rosenberg, Amar Bhide, etc.
    It is a shame that these plain facts are enduringly ignored, despite having an inexorable logic as well as supporting data from many economists (e.g. Jordan & O’Leary, UCC).
    DCU’s president’s blog, referred to above by Mark Dowling, discusses a meeting of the Joint Oireachtas Committee on Education and Science of last Thursday week (18th June). Unfortunately, that blog comment refers only to SFI’s contribution. It doesn’t refer to the contribution of myself or Sean McNulty, where we argued (cogently and convincingly, I think) that S&T research is far less than half of what contributes to business innovation in practice and our innovation policy, being thus incomplete, is therefore wasteful.
    You can see the full transcript here (5 pages):
    and presentations here:

  8. I agree that the utopia of the smart economy is a bit of a joke. However, often the opposite argument seems to be a rather Luddite one that says ‘let’s not waste money on this learning lark, only a few of us are fit for it, better to be realistic get back to 1970 participation rates and know our place ‘. Even if it were desirable to freeze learning I have little doubts that with or without Ireland’s participation much of what employs our people will be done cheaper better faster and with fewer people in 10 years time, so we’ll be left with the ‘residual’ part of the workforce in any case. The smart economy talk at least the virtue of vision for what might be done with what today is left as a ‘residual’ section of the labour force.

    In my view Karl Whelan’s link to Lester’s thoughts on some of the myths and realities of a university role in the economy is well-worth reading. So thanks @Karl Whelan.

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