More on the Innovation Taskforce

It is not surprising that economists raise a cynical eyebrow at corporate-speak-filled innovation reports.   Last week we had the IDA’s Horizon 2020; this week it was the turn of the Innovation Taskforce with its Innovation Ireland.   But it would be a mistake for Irish economists to disengage from the debate given the impressive body of literature on the economics of innovation we have to draw on.  

Market failures—part of our stock and trade—are pervasive in innovation-intensive industries.   The failures largely stem from externalities—both technological (e.g. knowledge spillovers) and market-mediated (e.g. the local availability of specialist input suppliers).   These externalities give rise to the system effects that are at the heart of the Taskforce’s report.     Shamelessly resorting to our own jargon, the elements of the innovation system are strategic complements: an increase in the level of one element (e.g. venture capital) increases the profitability and levels of other elements (e.g. private R&D) and vice versa.   This gives rise to positive feedback loops that can explain the clustering of innovation industries.    One unfortunate consequence it is very hard to do cost-benefit analysis of particular government policies, which goes a way to explaining our reticence and cynicism.  Just because it is hard does not mean these effects are unimportant, however.   And we may have to rely on theory and macro-based evidence in addition to more standard evaluations.   

Another reason that economists should not disengage from the debate is that government failures are pervasive in innovation policy.   While government policies can play a critical supporting role in building the innovation system, international evidence shows they get it wrong much more often than they get it right.   These failures are well documented by Josh Lerner in his recent Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed–and What to Do About It (Princeton University Press) [Economist article here]).  The evidence would suggest, for example, that government-directed angel funds are a bad idea.   On the other hand, policies that go with the grain of the market, such as government matches for international venture capital fund investments, stand a better chance of success.  Economics has a central role in indentifying policies that work.  

Paradoxically, the fear of government failure can sometimes lead to demands for self-defeating forms of accountability.    The provision of incentives for innovation often takes the form of a multi-task principal-agent problem.   Demands for accountability can lead to an excessive focus on the tasks most easily quantified.   Thus we get the innovation output of universities being measured by crazy indicators such as the number of patents, or the number of spin-outs, or even the number of PhDs.   Taking patents, we know that the distribution of value is fat-tailed—a large majority of patents are close to valueless.  A measure that simply counts is likely to be misleading and distorting.   In a different context, Declan Kieberd quotes Einstein in today’s Irish Times; the quote seems apt here also: “What counts can’t always be counted and what can be counted doesn’t always count”. 

Armed with our tools for studying both market and government failures, economists should be at the forefront of the innovation policy debate. 

76 thoughts on “More on the Innovation Taskforce”

  1. @ John
    Well said!
    I have a concern that what will flow from this is an office for innovation in every county in the land, with the usual leaflets, websites and application forms. Training courses teaching all the metrics and an army of clueless gobshites talking innovation speak.

    Co-equal with the advanced skills and training in the pursuit of innovation is a… carnal appetite that has the hunger etc.
    Govt ‘help’ can sometimes take away the hunger.

    Al

  2. @ John McHale,

    I remember hearing a story from a man who grew up in Ballyfermot not too long ago. He told me his father had finished an apprenticeship with CIE railway company in Dublin. Unfortunately, CIE then stopped making their own railway carriages. Presumably buying them from abroad. His father and his other pal were released from CIE with redundancy money. Within no time at all, this man’s father and many others released from CIE has flittered away the money and could not find work. What was interesting was, one of the 2 no. young apprentices, decided to take a different strategy and set up his own ironworks business. Small at first, and then gradually he re-invested his profits into his own business to expand the range of services he offered. This young apprentice ended up employing many of the folks who had worked for CIE initially. I worked quite a bit with the son of the man who started up the ironworks business. It is strange how these things happen. It is almost like a laboratory experiment. Without the structure provided by the CIE state company, many of the men ceased to continue. But one guy becomes the exception to prove the rule so to speak. There was a strong gambling culture embedded in the men in those days, which did not help. Pitch and Toss, was the name of the game. Yeah, it seems it was that basic a sport, pitch and toss. Except on certain tosses, some guys could lose a car. Another might lose a family house. BOH.

  3. @Al – “and an army of clueless gobshites talking innovation speak.”

    haha – you have clearly been watching Dragon’s Den – dire.

  4. 1987, IFSC development included in Fianna Fail’s election manifesto. Pat McArdle writes for the Irish Times,

    . . . the International Financial Services Centre (IFSC), usually attributed to Dermot Desmond and Charlie Haughey, had been proposed and rejected several times before either of them became involved.

    In the end, it was the need to have something positive in the 1987 Fianna Fáil manifesto that won the day.

    http://www.irishtimes.com/newspaper/finance/2010/0312/1224266107415.html

  5. John
    While the sight of unemployed economists may tug at my heart strings, what use would they be, exactly? (Being an ex inspector of taxes, I have reactivated my heart!)
    They appear to be lacking specific skills and not being experienced in business, genereal skills.
    So I suppose they could write grant applications?
    And prepare papers on the need for innovation.

    Economists are policy shapers, who design acceptance by business and trades unions into general government policies. They are mainly socialistic prior to the 1970s except in the USA where they were only allowed to read “capital friendly” texts. They always end up as public servants formally or informally. But they are well educated and generally very nice men and occasionally women. Boring dinner companions I expect?

  6. Necessity is the mother of……..

    Needs will reassert themselves soon enough! Perhaps innovators might be spared the walk of shame, to sign on and collect their dole?
    Perhaps state factory space might be rented for free to those who ask? On a monthly basis say?
    Perhaps a website be paid for by the government so innovators can actually talk to one another with a view to sharing experiences, tools, plans and labour? And that such not be held against them while on the dole?

  7. @Al
    “office for innovation in every county in the land…”
    Or else a boost for the mixture of
    1) County/City Development and Entreprise Boards,
    2) Integrated Local Development Companies and Urban Based Partnerships
    3) LEADER Local Action Groups
    4) Regional Assemblies/Authorities
    and all the other forms of government-supported bodies deemed necessary for our 4m+ people!

  8. It’s perfectly defensible to counsel economists not to disengage from this debate, but is there any evidence that engagement will have the slightest impact? The Government spin machine is in over-drive and the buzz-phrase generator is on at full blast – “innovation ecosystem”, etc.

    This has all the trappings of a typical teenager’s ambitions to conquer the world, before an appreciation of the hard grind involved impacts. Government policy can have some impact in this area, but it will only have an impact when the foundations are secure. These include macroeconomic and fiscal stability and sustainability, ensuring the provision of efficient infrastructure and utility services and securing a stable and competiitive banking and financial sector to support the expansion of existing firms and the establishment of new ones.

    It is easy to be cycnical and to conclude that this sudden frenzy about innovation is merely an attempt to distract attention from glaring policy dysfunction in these three key areas.

  9. Invoking “Dragon’s Den” (of which I endured 2 minutes at my neighbour’s house last night) and Enterprise Boards is frightening indeed – and sadly probably accurate.

    Nevertheless there does seem to have been some thoughtful work put in by the Innovation Task Force. And a good guide – easier and more coherent reading than the official report IMHO – was given by Chris Horn in a blog post this week, at http://chrisjhorn.wordpress.com/2010/03/13/a-guide-to-the-innovation-taskforce-report/

    As an aside, it’s interesting to contrast that post – both in content and tone – with Frank Gannon’s one (chair of SFI), at http://frankgannon.wordpress.com/

  10. @ Paul Hunt,

    I grew up during the Celtic Tiger, and what I noticed was a lack of really good companies in Ireland, prepared to set down roots here. I think the pervasive attitude amongst people like myself who grew up in the Celtic Tiger in Ireland, was this is still the same old Ireland it always was. It hasn’t changed. Most of what we were looking at day to day was sustainable. We inherently knew that. Our parents encouraged us and that resulted in many taking responsibility for themselves, by getting hitched, mortgage etc, etc. The government talked up the situation and tried to heap more fuel on the fire that was the Celtic Tiger. Basically, most of the young generation, of a type who might start things – those who were likely to become entrepreneurs, had an eye not on staying in Ireland, but getting out. Given that those conditions, of lack of confidence in Ireland, existed prior to the 2008 crash, it is difficult to see how this innovation effort can take root today. I mean, I purposefully worked for a company Zoe developments that had grown out of the recession times of the 1980s. Because I knew it was a company that could work its way through the recession in Ireland when that time came around. But not even weeds like Zoe managed to live on. (That is what was wrong about the Celtic Tiger too, it killed off everything I think, it was like Round-up) People have to realise that now, what a total bummer we are in, in Ireland. The discussion we are having today about innovation, should have happened in the middle of the Celtic Tiger. We aught to have asked ourselves the question, why aren’t more indigenous companies taking root? What are we doing wrong? I used to ask those kinds of questions back in 2004, 05, 06 and was made into a social outcast. Anyhow, most young people were under enormous pressure from their parents to buy into the car(s), the mortgage the holidays, the family etc. So even people who might have looked at the country’s problems, and contributed towards solutions were too busy trying to do the lifestyle that Bertie all told us, we should be doing. Like he liked to be seen to be doing – off on junkets with the Dunn-er and so on. That is what is wrong with Ireland. In 2004, 05, 06 we should have done the IDA report, the FAS report, the Innovation taskforce, the Farmleigh conference and so on. We didn’t. We are paying the price today. BOH.

  11. @ PH: ‘It is easy to be cycnical and to conclude that this sudden frenzy about innovation is merely an attempt to distract attention from glaring policy dysfunction in these three key areas.’

    You’re not being cynical. Just telling it as it is. The Emperor of Innovation is naked! His acolytes attempt, mostly successfully, to displace the discussion away from the actual issue toward a virtual sentiment. And sentiment always triumphs over reality.

    if I have any ‘beef’ with economists and such-like commentators, it is that they consistently refuse (for whatever bizzare reasons) to articulate their economic Models-in-Use. These model will, hopefully, explain WHY they are making the comments they make and will leave them exposed to real challenge.

    Since none of the aforementioned economists etc., have risen to this challenge, may I form the opinion that they are intellectually sub-prime and that their prescriptions formulated, ‘(from) the higher spheres of (their) elucubrated growth models …’*, are useless and should be ignored?

    * Georgescu-Roegen: The Entropy Law and the Economic Process, p292.

    B Peter

  12. @ All,

    If we got some innovation to finally take root in Ireland, the politicians would very certainly, proclaim in the chamber, we have green fingers, and are making green shoots possible. But that is unlikely to happen. Why? We have defined our current condition in Ireland incorrectly. We do not have zero innovation. We have a negative amount in my view. What we have is a financial and business infrastructure, which is dispensing Cholera to the population, like the water pumps did in the centre of London in the 1850s.

    http://designcomment.blogspot.com/2010/03/ghost-map.html

    We have to figure out how to get rid of the Cholera, that seems to be killing off everything, before we can even get to zero. Zero innovation in Ireland would be more an improvement on the sub-zero innovation. Because negative innovation is where we are at now. Journalist Neil Callanan told the story on an RTE radio debate program about the DDDA reports. Anglo had a client, who owned a public house. Anglo tried to turn the public house business into a property company. Callanan was trying to demonstrate the Anglo way. It was no surprise that Anglo turned the DDDA into a property company. In terms of figuring out what to do about the Cholera in our financial infrastructure, I suggest that prof. Niamh Brennan’s set of reports on the DDDA will make the most interesting reading of all. It will go to the heart of the matter regarding Ireland’s difficulties with innovation, in the last decade. (The decade of mistakes that government are now trying to brush underneath the carpet) The DDDA reports (the ones with the AG) are the ones, which will be more enlightening than any spewed out by IDA, Taoiseach’s innovation taskforce, FAS or Farmleigh conference. BOH

  13. Chris Horn said on his blog,

    Our enterprise policy has primarily been focussed on job creation, not wealth creation. Our enterprise focus has primarily been focussed on building companies to scale, rather than building companies to have them sold.

    Chris Horn’s made some similar points in his article in March 12th 2010, Irish Times, Positive priming can drive new jobs growth. I have wondered myself about the over emphasis in Ireland on building companies to scale. Clayton Christensen said in one of his books, a disruptive innovative company should be patient for growth but impatient for profit. Christensen in his book, explains many reasons why management over emphasizes the growth aspect of a young company’s business plan to the detriment of other aspects. In my own experience, in property related enterprises in Ireland, (that have collapsed in recent years) they were very impatient for growth. The ironic thing is, property related enterprises would be able to acquire opportunities now at a much cheaper levels. The best financial advice available during the Celtic Tiger, emphasised growth and scaling above all else. Bertie Ahern’s statement in 2006 for instance – those who talked down property didn’t know what they were on about. Dermot O’Leary of Goodbodys wrote an article for the Irish Times, February 19th 2010, in which he looked at the challenge of obtaining finance at attractive rates. We have a raft of these skills in Ireland. How to obtain the finance to fund the project, making the growth possible. But a deficit of skills in management of start ups. Of course, during the Celtic Tiger, the property related enterprises clung most of all, to the aspect of growth and scale-ing in their business plans. BOH.

    http://www.irishtimes.com/newspaper/finance/2010/0219/1224264787394.html

    P.S. The funny thing is, growth is sometimes the best strategy for a company – Michael O’Leary claimed that if he got control of AerLingus, he would work to grow the company much larger than it now is. To fund that growth of course, the kinds of skills that Dermot O’Leary at Goodbodys talks about, would be crucial.

  14. @Paul Hunt

    Yes. Institutional Foundations are where it is at … long way to go here: if we don’t we are history in the global game.

    @ Brian Woods
    Economists to “articulate their economic Models-in-Use” – Yes, this would be helpful – methinks a few are somewhat sensitive on this aspect of open and critically constructive dialogue at the mo (the superbly ‘trained’ fundamentalist free_mawrketeers in particular) – and more often than not – not acknowledged in many, if not most, academic articles. Economics is not a homogeneous revealed truth – there are many ‘economics’ and many do not even speak to each other, let alone acknowledge each other …. heterodoxy anyone? (-;

    @John McHale
    No need for apologies on using economics_spake around here; if not understood, we can simply request clairification – this is critically open constructive blog, after all (95% of time). Remember Mjoset … ? Did anyone bother?

  15. @John McHale

    “Armed with our tools for studying both market and government failures, economists should be at the forefront of the innovation policy debate.”

    UCC economists Declan Jordan and Eoin O’Leary, have published research in recent years, which has questioned the overreliance on university-led innovation. They understandably were omitted from the taskforce, which even had the head of the third level lobby group, the Irish Universities Association.

    This is Ireland after all and politicians do not like turbulent outsiders when they are in search of a marketing tool.

    Dr. Jordan knows something of the world beyond academia, having worked as a manager at a leading Irish treasury and financial consulting firm in the IFSC and as treasury manager with Intel Ireland.

  16. @Michael Hennigan
    As far as I can see, so too was TCD’s William Kingston, who published a book on in Innovation in 1977 and whose submission to an UK Advisory group on Innovation led to the introduction the Business Expansion Scheme (BES). The original aim was subverted here when property investments became eligible for BES funding.
    William Kingston is still writing about Intellectual Property see here
    http://people.tcd.ie/wkngston

    As regards universities as drivers of innovation, my understanding is that there also have to be informed users of the emerging innovations, in addition to highly skilled people (technical, managerial, financial) who develop processes to expand the markets for new and different ways of doing things.

    Having got no response to a previous query, I would appreciate it if anybody could update me (us in Ireland) on where now stands the 1966 Vernon Johnson theory of new product development and trade cycles (published in the Quarterly Journal of Economics). All I seek is a reference to some publication that I can read.

    That theory partailly explained IDA success in attracting FDI to invest here over the intervening decades.
    But it is not clear that it explains the innovative success of Ryanair(first-mover in Europe on an Texas-based low-cost model), Riverdance, Aldiscon – none of which were university-led, unlike Iona.

  17. @ Michael Hennigan said:

    Dr. Jordan knows something of the world beyond academia, having worked as a manager at a leading Irish treasury and financial consulting firm in the IFSC and as treasury manager with Intel Ireland.

    Interesting.

    I was reading Colm McCarthy’s SBP article, Taskforce plan is a flight of pure fantasy, this evening and one of the buzzwords (In the Innovation Taskforce report) that seems to stick in Mr. McCarthy’s craw is phrase, an inflection point. I find it strange to see these phrase merged into the mainstream reports for the Taoiseach’s office. I do wonder how many who use these phrases, or indeed comment about them, understand where it came from? The phrase was popularised by Andy Grove at Intel, when he developed his theories on business management. He compiled his thoughts into a book, Only the Paranoid Survive. It should be noted Andy Grove, was a serial consumer of management philosophy books. He would read one every weekend, if given the chance. He was a fan of highly confrontational debates and frank exchanges of views while chief executive at Intel. The idea of the inflection point as described by Andy Grove, is very different from its use in the Taoiseach’s Innovation Taskforce report. In Grove’s definition, it is a ’10X’ (times of magnitude) change. Recognised often, by a sneaking suspicion that some of the fundamentals of one’s business have changed. When an inflection point comes at you, it is really up to you to see it, seize the moment and act. Hence the phrase, only the paranoid survive. To be ‘paranoid enough’ to realise something has changed in business. A good example in the Irish context recently which does fit the definition of Grove’s an inflection point was described well by professor Niamh Brennan in the UCD business connections magazine. What Ms. Brennan describes is text book Andy Grove. Here is a quote from my blog. BOH.

    Slowness to act

    She admitted she was on the board of Ulster bank all through the period, prior to the crisis finale. She believes, people were slow to act following the Northern Rock news in September 2007. At the time, Ms. Brennan mentions, she didn’t look into it carefully enough.

    It wasn’t until March ‘08, when Bears Stearns went belly up too, that everyone began to see the pattern emerging. But by then it was getting too late to act according to Ms. Brennan. This would seem to tie in, with what Eugene Sheehy has being saying also. The trouble had really started in Ireland in 2007.

    http://designcomment.blogspot.com/2010/02/on-corporate-governance.html

  18. Economists such as Colm McCarthy appear to be threatened by the mere thought of an innovation forward looking movement. Most good innovative ideas and innovators come from a radical fringe and not from main stream thinking. It must be this apparent out of control aspect that scares economists most. It’s worth remembering that without the efforts of the numerous radical thinkers in the past, we’d be a very primitive lot indeed.
    University research may not of its self, produce an abundance of jobs through commercialisation, but it will produce an experimental culture that will find its way into the wider community and bear fruit, at some point down the line.

  19. Economist Stephen Kinsella’s blog entry in relation to the Innovation reports.

    http://www.stephenkinsella.net/2010/03/14/looking-twice-at-the-innovation-task-force-report/

    From July 1st 2005, State R&D funding ‘may not be value for money’, Una McCaffrey in the Irish Times wrote:

    Equally, the authors find that most companies in high-technology sectors such as pharmaceuticals and computers have little or no interaction with support agencies such as IDA Ireland.

    They do however have high levels of contact with other companies in their group, according to the study, which was funded by Enterprise Ireland.

    The authors find that much of this interaction with other group companies does not occur regionally or locally and may thus be international.

  20. All this talk of supporting innovation makes me sick. It’s little better than hoping a Novena will rescue the economy.
    Ireland does not have an inherent advantage in terms of innovation. We do have an inherent advantage when it comes to self delusion.
    And, what innovator would choose to stay in this stagnating, debt-servicing, gombeen governed mess of a country anyway! Innovators want quality of life too!
    The next generation of innovators will not be motivated by the desire to get rich, but by the desire to leave.

  21. @ All,

    I will leave a good reference to innovation and regionalism for some economics scholars here to delve into, at their own discretion. I think I recommended it to Iulia or Stephen Kinsella a while back, on this blog. Annalee Saxenian of the iSchool in Berkley, California has a paper available to download from her web page called Inside-Out: Regional Networks and Industrial Adaptation in Silicon Valley and Route 128. I have to say I always liked that paper. Because, at one stage in the 1950s and 60s, the Boston area was where it was at. The Silicon Valley whole thing hadn’t really happened. Saxenian, in her paper goes into some reasons why the Valley emerged in the later 20th C, as the Boston area declined. For those of you who are fans of Clayton Christensen, and wonder what happened to Digital Equipment Corporation etc, you will find Saxenian’s paper interesting. BOH.

    P.S. Constantin Gurdgiev has an entertaining dig at the innovation reports here:

    http://trueeconomics.blogspot.com/2010/03/economics-13032010-why-farmleigh-report.html

  22. @Al
    Thanks for the link.

    Exellent riposte from Mr. McCarthy. There is far too much light and not enough heat in the debate about innovation. You don’t make it happen; in particular you don’t make big companies that employ lots of people. At best you create an environment where people can create small companies. And you create an environment where people can expand small companies into medium sized companies and so on. And you create an environment where if those people fail they get to start again without being unduly penalised (without allowing every charlatan who bought a rental property with negative yield and called himself an entrepreneur to carry on peddling his pyramid schemes).

    At the moment, the space to create small companies doesn’t exists. Hiring and, particularly, getting rid of people is incredibly expensive. We run the risk of ending up like France, where young people just don’t get jobs. WPP is a disastrous alternative to making it easier (cheaper) to hire people and easier (cheaper) to get rid of who you want (not who was last in the door).

  23. @ Yoga

    Agreed, It seems to be part of the national character to want everything both ways.

    Can we create jobs easily without also allowing jobs to be ended too?
    It is quite hard to end employment and employment rights have an oppurtunity cost.
    Is the result of this cost a impediment to job creation?
    Yes or No?
    If yes, lets change around the balance of rights (to the unemployed too)

    Al

  24. The McCarthy article is excellent. Good to see standards at Mickey Morbh Poly have increased over the years. I liked the dig at the Romans too!

    Creative destruction. Politicians and public servants betray their ignorance by allowing this document to be published. Good! We can proceed to identify the enemy in detail. But no matter how stupid, they cannot evade the inevitable.

    We can therefore rejoice, in our agony, that innovation will arise naturally given all the destruction around. Surely the task force will be pleased! Every step like this reveals how weak the government is.

    Yet tell them and they will become arrogant and offensive. Eventually they will be merely defensive and take retirement. This depression will reach its own inflection point but not until all the dead wood is taken away. In WWII the US found that by the end of conflict they had Generals in their thirties. Nearly all the Generals they had started with were discarded. Useless in wartime. The taskforce should have recommended compulsory retirement. For all those that did not agree with that conclusion!

  25. I endorse Colm’s views.

    So Brian Cowen, the Minister for Finance during the high point of the property bubble, has got his fairytale marketing brochure and in years to come, we will read of public money being flushed down new sinkholes even more than was wasted during the boom on IT projects and overpriced construction projects.

    Anyone wonder why a real knowledge economy like Denmark could implement a broadband system with the best coverage in the world while despite truckloads of money, we could only limp?

    A start-up requiring finance wouldn’t have a chance by producing a business plan replete with just aspirations and pious hopes; no SWOT (strengths, weaknesses, opportunities, threats) analysis or detail on the markets for the products and competitors.

    However, the public policy document does not meet these minimum requirements.


    Ireland and leadership at a time of crisis

  26. Of course the money is not flushed down sinkholes; it ends up in peoples pockets. Some people anyway.

  27. That Colm McCarthy doesn’t mince his words! I am no mathematician – is this document trying to make out that an ‘inflection point’ is a bit like a ‘paradigm shift’? Dontcha just love buzzwords?

    @ Michael Hennigan – “we will read of public money being flushed down new sinkholes ”

    I was driving back to the M1 from Rush last night and was on a dual carriageway (at a place called Lissenhall I think) which is in such a bad state, you would have thought that you were in the bottom end of a third world country.

    I have no doubt that the whichever friend from the Galway tent constructed it as cheaply as possible and then overcharged for it by as much as possible is reading this document with glee and wondering how he can gouge some more public money out of the system and into his bank account.

    What hope has other infrastructure, such as broadband, got?

    Meanwhile, the download speeds in S. Korea go to even giddier heights.

    I will be doing some innovation myself soon (Q2/3) – developing a new approach, a new business model, for delivering journalism/news to the readership. A ‘paradigm shift’. I won’t be doing it in Ireland is all I can say. I won’t even be hiring the web developers here…… but at least the business plan will have basic things like a SWOT in it!

    The move will hopefully save my axle from being bent any further too.

  28. Full marks to Colm McCarthy for calling it as he sees it – and to the SBP for providing him with the platform. The following excerpt should be implanted in the brain of every minister and every senior official in the state, semi-state and quango sector:

    “The economy has lost competitiveness steadily over the last decade, and a relentless cost-reduction focus is already evident in the private economy. This needs to embrace utility charges, property costs, local authority taxes and charges and professional service fees, as well as payroll. Every item of public expenditure, including government spending on ‘innovation’, is ultimately manifested as a cost to the traded sector of the economy.”

  29. Now read the report, and largely agree with Colm McCarthy.

    I also agree with John McHale that economists have a lot to offer on what works and doesn’t in innovation. However, reading Appendix 3, I cannot help but notice that few economists actually offered anything.

    Page 31 is telling. According to the Innovation Taskforce, innovation is product innovation — never mind the evidence that Irish companies have had more success with process innovation. According to the Innovation Taskforce, Ireland needs more MScs and PhDs in the natural sciences — never mind the evidence that the higher educated in the social sciences command higher wages.

  30. @Richard
    Indeed and from personal experience, one of the business advantages that Irish people have is that we come with no baggage. We weren’t colonial oppressors, we aren’t engaged in any wars, we don’t have massive multi-national companies. Add to this a general gregariousness and there is a serious role available as english-speaking middleman betweeen two non-english speaking nations who are using english as a working language.

  31. @Michael
    “A start-up requiring finance wouldn’t have a chance by producing a business plan replete with just aspirations and pious hopes; no SWOT (strengths, weaknesses, opportunities, threats) analysis or detail on the markets for the products and competitors.”

    @Joseph
    “but at least the business plan will have basic things like a SWOT in it!”

    Agreed. Our “simple” online strategic planner can be used to generate an “honest” SWOT analysis to create a 2-3 page plan – build on Strengths, resolve Weaknesses, exploit Opportunities and avoid Threats. If you don’t SWOT up on the market you cannot create a realistic plan! More at http://www.planware.org/strategicplanner.htm

  32. @Richard Tol Paul Hunt

    I’ve already commented on both threads on this. Minor points:

    RT: product, process, and service. Institutional foundations and framework conditions are what really matter.

    PH: CMcC is correct in noting spin/superficiality/hubris: but like others, Unions/Empoyers Bodies, his focus on ‘cost’ is one sided as is the latters’ focus on pay. The Money Fetish – and they forget brains, adaptability, productivity, and real innovative processes and decisive decision making – the real intangibles that can create progress – but where neo-classicals ( who cannot meaure them) have little enough to say.

    RT: vast majority of Irish academics, few exceptions acknowledged, are as supine as the general citizenry at the mo ………. back bones as rare as hens’ teeth …………….

  33. @yoganmahew

    Berlin, Boston, … and Beijing. Don’t forget Mandarin (-; The globe is the globe.

  34. further to my previous comment, the Innovation Taskforce completely ignored my submission — so perhaps my fellow economists were wise not to submit anything

  35. I just wanted to give an example of where Government policy can make a real difference in innovation albeit in a different country.

    It is in the US called SBIR (www.sbir.gov), and was invented by a civil servant in the 70’s. The scheme, originally only due to run for several years, has clung onto existence and has even had its budget increased due to its incredible success.

    Of course it uses RD money from government department’s budgets way out of our league but an adaption of this scheme would be a “put your money where your mouth is” proposition for the government.

  36. @Richard
    “Completely ignored my submission”

    So what is new?
    Most government consultations are just that – consultation!
    No guarantee that anybody will pay a blind bit of attention to what you submit – whether it be “observations” on a planning application or comments on draft policies or submissions that are not quite what those originating the consultation had in mind!

    The key is to keep going. That is the only way to counteract the tendency for organisations (large and small, public and private) to say NO in the hope that you will go away!

    You do need some measure of conviction for this kind of thing.

    Any entrepreneur with a new product or process or service will recognise the truth of what is ascribed to Voltaire “God is on the side of the best shots, not the big battalions.”

  37. The last thing this country needs is more Quangos. So I dont want to hear about new Innovation Boards staffed by Civil Servants who never took a risk in their lives. We already have Enterprise Boards which are a mostly a waste of time but I am sure they can prove the opposite. This Government and Berties one thinks that more Public Sector workers amounts to Job Creation. The best laugh I had all day was Brian O’Hanlon’s comment that the Celtic Tiger was like “Roundup”………

  38. @ Richard Tol

    Having read your submission, I have to ask how you would see your submission incorporated into the final document?

    Al

  39. One of the submissions that I think that really stood out among all of the others that I read was the IOTI one.
    If you were to read one of them
    I would recommend this one.
    Al

  40. @Richard Tol
    “University staff who have an idea for a start-up company should be allowed to work part-time, with a guarantee for a full-time job in case the company fails. This takes away part of the downside risk for the entrepreneur, thus increasing the number of start-ups. ”

    If you limit the downside risk like this for university staff why
    1) not do it for all those paid – mainly – from public funds?
    2) discrimate in favour of public sector paid staff only?
    3) you do not suggest similar insurance to evceryone who sets up a new business regardless of sector?
    4) this idea will promote the drive to succeed that is needed in any new venture?

    How is this insurance different from the “moral hazard” often cited as the source of much short-term thinking/action in financial sectors, where Government bail-outs/guarantees are clearly seen as providing support for the reckless?

    Try thinking like this,
    http://www.tara.tcd.ie/bitstream/2262/29186/1/regulation%20article.pdf

  41. @ Donal and Richard.
    More specifically, such a scheme for encouraging University Staff to step out into a start up company would do so on the back of other taxpayers by increasing costs of employment in the University Sector…which is paid for by other taxpayers….while not permitting the same benefit to accrue to non University staff.

    Q: If such a scheme would have positive impact and could be managed in a sensible manner, why not do it everywhere?

  42. Colm McCarthy may be correct that we should not spend public money on speculative projects. However, this is no reason to dismiss the innovation task forces report out of hand or in its entirety. Certainly there are administrative and legal impediments to setting up businesses that could be reduced at no great cost. There is also much EU funding that could be accessed if people were brought together in the right way and on the right projects. Again this is not a big cost outlay.

    Not every call to action is a call to setting up a committee or a quango. Furthermore, the application of existing technological innovation within businesses could greatly enhance cost competitiveness, particularly for service industries which form a large part of our exports. By all means, Colm McCarthy should criticise those elements of the report with which he disagrees. However, I think it is a bit mean to dismiss the whole thing out of hand or to focus on malappropisms.

  43. @Zhou_EnLai

    Have not read this one. But Ireland (pre [& hopefully post] the dangerous ideological fools), S. Korea, Singapore, The Marshall Plan, Finland, … & CHINA spring to mind. The ideological fools continuously denigrate the role of the state (and oft times states deserve it) but small open economies need pragmatic forms of state intervention – but in the broader interest – as distinct from elite sectional interests which we have around here right now.

  44. @Donal / Hugh,
    We are spending so much on trying to get higher education institutions to spawn export-oriented start-ups that any additional costs from a reasonably restrictive scheme based on Richard’s proposal would most likely be trivial by comparison.

    The principle of having academics rotate in and out of entrepreneurial activity is well established in institutions like Stanford, which Irish policy is, in significant part, attempting to emulate. It’s seen as making an important contribution to economic activity. I don’t know whether on not Richard’s proposal is a practical way to achieve this in Ireland, but at worst it’s a reasonable stab at a workable policy.

    Why not make the same offer to others? One reason is that only a small minority of people in the wider labour force have the capabilities required to create the types of business that such a policy is designed to spawn. You put in place policies like this to generate businesses that fit the high-potential start-up mould, not to promote the creation of new retail businesses, construction companies or cookie-cutter professional services firms. Another is that it’s unlikely to be practical to insist on private sector employers taking an employee back after an extended break and perhaps an acrimonious parting.

    It’s not as if there’s a lack of support for people from the private sector starting export-oriented businesses, anyway. A credible start-up fitting the high potential start-up mould will get quite a lot of assistance from the State whatever its origins.

  45. @ zhou_enlai

    There are of course some good points in the report but the main recommendation is that more than 200,000 net jobs could be created if the State becomes the main funder of annual spending of about €4bn.
    There is no credible data to support this result and after 50 years, IDA Ireland will be supporting companies employing about 118,000 in Dec 2010.

    When experience elsewhere suggests that pioneering firms gain traction from about seven years and 1 in 4 only survive by then, in 2020, we will have tens of thousands of new firms – – where the markets will be is anybody’s guess – – and maybe 25,000 researchers on the public payroll.

    The average payroll of surviving companies in Silicon Valley is 60; in Europe less than 20.

    The argument about the mass of existing Irish-based multinationals and the potential for linkages with start-ups is also wishful thinking as many of them have not control of their destinies. There is some potential but why exaggerate it?

    The potential for waste of public money is massive.

    Of course there are insiders in the universities who know the game but keep silent.

    What happens also, is that every morsel of goods news is spun and few people question it. The tech journalists are among the cheerleaders.

    BTW what has been the record of the indigenous tech sector over the past two decades and why has it been so bad despite the presence of so many multinationals?

    Cognotec is the latest big hope of the 1990s to collapse or be sold off.

  46. @ Con,

    Forget the Stanford model. Forget it. It has caved into the vendors, and become a vocational education, according to Alan Kay’s criticism. Kay has been around the block a few times, and worked in practically every centre for excellence for innovation, one can imagine, since the 1970s.

    Recommending the Standford model of today, is like recommending Bertie Ahern to come and talk about the weed killing phenomenon that was the Celtic Tiger in Ireland.

    Check out the talk, Croquet: A Collaboration Architecture featuring Alan Kay, one of the members of the Xerox Parc team who had almost unlimited resources at one stage in the 70s/80s and roughly 30% of the best brains available to them, to sit around and have a bean bag dicussion. (Fast forward past the ‘demo’ of Croquet, to the 26 minute onwards to listen to the informal discussion about ‘mighty’ Stanford, and how to go forward)

    http://video.google.com/videoplay?docid=-3163738949450782327#

    For a good history book, I would recommend, Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age, by Michael A. Hiltzik. BOH.

  47. @ All,

    I am not attempting to pick out poor old Con to vent my anger, and no personal attack intended Con, but about this: The principle of having academics rotate in and out of entrepreneurial activity is well established in institutions like Stanford, which Irish policy is, in significant part, attempting to emulate. No, no, no, no. The best reference article I have read in modern times, from anywhere in the world, was by former Taoiseach John Bruton, in the Irish Times March 3rd 2010, Thinking outside box can do State some service. From Bruton’s article:

    Product and service design should be made academically respectable, and it should draw together engineering, sociology, psychology and many other disciplines. A new mindset is needed in our colleges. They have received very large sums of taxpayer funds through the Science Foundation and have used it to generate more PhDs.

    Alan Kay has spoken, the Science Foundation grants in the United States weren’t working either. Students are not building anything anymore. They are only accepting the tools as offered to them by industry. That is not what the original Stanford was about. I think former Taoiseach John Bruton is coming at the problem, from a similar way to that of Alan Kay. I have studied innovation culture and systems more widely and deeply than probably anyone else in Ireland. With roughly a decade of education clocked up in a central hub of innovative culture in Ireland, the college of architecture and urban planning at Bolton Street DIT. BOH.

    http://www.irishtimes.com/newspaper/opinion/2010/0303/1224265498576.html

  48. @MH

    I find the points made by Colm McCarthy and yourself to be convincing.

    On the other hand, I also see the huge transaction costs which start-ups, and indeed started-ups, face. I think there is huge room for improvement in these departments.

    Having a robust legal system is quoted by all western economies as an advantage. That is is no longer enough. Robust legal forms for new businesses (in terms of product offerings and liability, in terms of intellectual property rights, in terms of employment law, in terms of liability to third parties, in terms of leases and licences of third party property, in terms of liability to consumers and third parties, in terms of funding mechanisms and attractive company ownership structures) also need to be instituted so that businesses and “innovators” will see Ireland as a good place to set up and start up.

    I do find myself rolling my eyes at the “innovation” tag and cringe at the imagery of high-fiving, backslapping twits behind the use of “entrepreneurs”. However, there are certainly things that do encourage development and innovation and business people with hands on experience have a role in this debate even if they will inevitably come up with some stupid suggestions in the process.

    BTW, what is the point in producing maths graduates if they end up working in banks? It strikes me that the entry level jobs and long-temr rewards for graduates with the skills the country wants are crucial. Educating them is not enough. I have an A in honours maths in my back pocket and a shag lot of good it is doing the economy. Why? As you pointed out MH, the social sciences pay better (financially and socially) so that is where I went.

  49. Have to agree with Zhou.
    It is important to have a long term vision with direction, coordinates, bearing etc.
    This document provides that function.
    However if it ends up being used for any of the following:

    -Refusual to have a serious debate about education at all levels

    -Spending money on creating a population of PHD’s instead of creating a workforce that fixes the water and sewer system, drainage work, etc

    -Getting distracted by some PHD nirvana and missing the real problem at the moment which is the lack of jobs for the masses.

    -etc

    Al

  50. @zhou
    “Not every call to action is a call to setting up a committee or a quango. ”
    Unfortunately, that seems to be the result of every call to action… gaze down the list of the thousand quangos and justify them (not necessarily the function, just the existence of a separate body as opposed to a couple of people in a CS department somewhere with responsibility for and a celebrity spokesperson – it would be a great use for our minor celebrities, something the state excels in producing… it would at least stop them eating huge amounts of capital by opening failing clubs and restaurants).

  51. What proportion of the output of PhDs will meet multinational demand and how many can the State absorb?

    Amar Bhidé said in his book The Venturesome Economy, that the US venture capital-backed businesses he studied, use different people and procedures than the typical lab doing high-level research: they employ a much smaller proportion of PhDs in their technical staff, and their overall workforces contain a larger proportion of managers and sales and marketing staff – – people who are close to users.

    UCC economist Dr Declan Jordan wrote in The Irish Times last year that: “A census of post-doctoral researchers that left Science Foundation Ireland-funded projects in 2007 found that 9 per cent went to work in science and engineering businesses. A further 10 per cent went to work in industry in other sectors. The most common destination, at 38 per cent, for these post-doctoral researchers was another post-doctoral position on a different research project.”

    He added: “It is worrying, given the significant taxpayer investment, that there is so little movement of researchers from funded projects into business. The most effective method of knowledge transfer from universities to businesses is on two legs,” he added.

    As for the control of public funds, Science Foundation Ireland itself wasted €400K on a dud computer system.

    What R&D is can be very broad when there is public money to support it.

    With much of the funding separate from the general budgeting of the universities, this has the potential to make the FÁS support for the global travel industry and its space cadet program, look like Noddy’s playtime.

    …and who would dare question the value of it?

    Certainly not the cheerleading university presidents nor the politicians who would be afraid to challenge them.

    For example, guess what Fine Gael Enterprise Spokesman Leo Varadkar TD has had to say on this journey to an Irish Shangri-La?

  52. @ MH,

    With much of the funding separate from the general budgeting of the universities, this has the potential to make the FÁS support for the global travel industry and its space cadet program, look like Noddy’s playtime.

    …and who would dare question the value of it?

    The way I see it, you look at Xerox, you look at Digital Equipment Corporation, you look at any of them. It is one thing to invent the future. It is an entirely different matter to put ones invention into practical application. I think that is why the VC backed firms would incorporate such an input from sales and marketing. (See John Battelle’s book, Search for his discussion about Alta Vista search engine and DEC in its last days) There is one very funny story told about Steve Jobs on his return to Apple in the 90s. If you got into a lift with Steve Jobs, you always said you worked for engineering, not for marketing. Apparently, the story went around the Apple campus, a marketing employee had once gone into a lift with Steve Jobs with a job, and emerged again from the lift without one. BOH.

  53. On academic entrepreneurship, see for example: http://doku.iab.de/externe/2007/k070827n14.pdf

    “Among the 10,530 venture-backed firm founders in the VentureOne data, 903 had worked for academic institutions, which account for 8.6% of the total. These 903 individuals founded or co-founded 704 venture-backed firms, and 35 of them founded more than one firm.”

    “Ample anecdotal evidence suggests that professors usually retain their academic positions when they start firms; yet non-tenure track employees may have to quit if they choose to be entrepreneurs.”

  54. @Hugh
    @Con
    @Michael

    In citing the quotation from Richard Tol’s submission to the Innovation Taskforce, I want to support those who are saying that the kinds of inputs focused on R&D alone (eg. SFI, Entreprise Ireland, HEA, career breaks fo university staffs) need to be complemented by far greater emphasis on enbabling start-ups to become something else, eg sustainable businesses – some of which may be based on the kind of breakthroughs that some seem to expect from investment in R&D.

    Starting up is only one phase of growing a business. Getting it beyond that phase to something else is what US venture capitalists have got considerable experience of success, as Michael H points out.

    Fearghal O’Connor in Business&Finance (http://www.businessandfinance.ie/bf/2010/2/feb2010intsandfeats/knowledgeeconomy) points out that “These days the phrase “knowledge economy” is bandied about like a salve for all our ills. But are the challenges we face in building such a thing really understood by those who matter? Out in Dublin’s Park West business park one company defines the knowledge economy and all that it might or might not be for Ireland.”

    He then goes on to report on the challenges facing InTune (http://www.intunenetworks.com/).
    What support is there for what Intune’s Tom Fritzley terms the “Killing zone – that point where a company is out of the start-up phase but not yet into large revenues.”

    The never-ending tendency of Irish policy makers and investors to seek tax breaks for property pre-empts resources (people, money) that might otherwise go to growing internationally-oriented traded businesses.

    In so far as the Innovation Taskforce report addresses that issue, quickly (eg. a special Act?) and permanently, it may be useful. But that remains to be seen!

  55. http://english.caing.com/2010-03-15/100126807.html

    Andy Xie effectively says innovate or watch the developed economies decline for many decades, based on a fairly convincing look at Japan. Being a smaller economy, Ireland can perform better than a large one as we all know. Given his point about information flow, it must be based around Ireland’s natural resources and a more thorough survey of these is now vital.

    Electro-magnetism offers many more ways of searching the earth than heretofore. Given the rario of people to land, NIMBYism has to be outlawed. It all goes to land use and abuse. There is no way to avoid this crucial and neglected resource.

  56. @Michael H
    “BTW what has been the record of the indigenous tech sector over the past two decades and why has it been so bad despite the presence of so many multinationals?”

    You might be interested in a report – Stimulating Indigenous High Tech Manufacturing Industry – which I wrote back in 1983 for an Education, Innovation and Entrepeneurship Research Programme. It estimated that there were about 20-40 such firms employing 400-800 people. High tech was defined as covering microelectronics, biotech, materials and speciality chemicals, specialised mechanical products and software.

    The report concluded that (despite hype at the time) a high tech sector did not exist and would not develop without major changes. It indicated a need to create a national policy on high tech; to streamline state support to high tech firms; to pursue strategies based in identified niches; to establish centres of excellence and better HE/industry interaction; to encourage proven entrepreneurs and senior managers to locate to Ireland uising tax breaks; to introduce tax incentives to encourage investment; and to improve the general infrastructure, environment and competitveness.

    It just shows just how much (or how little) has changed over almost three decades. A scanned summary of the report is available at
    http://www.planware.org/briansblog/resources/sihtmi%20report%20summary.pdf

  57. May I predict, thereby establishing that I am not an economist, that at some stage the population will be asked to pay, tax, for the express purpose of innovation. And another for job creation funds….

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