The Knowledge Economy Post author By Philip Lane Post date October 17, 2012 Michael Hennigan spoke at last weekend’s DEW conference in Galway: Paper Presentation Categories In Uncategorized 28 Comments on The Knowledge Economy ← The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2012: Alvin E. Roth, Lloyd S. Shapley → Michael O’Sullivan: Jobs and credit crises call for clear policy response 28 replies on “The Knowledge Economy” How could anyone read that, references, quotes and numbers thrown everywhere. Acronyms repeatedly spelt out throughout. Nothing worse that a potentially good paper spoiled by poor structure and technique. An eyesore Very interesting thesis. The more I learn about the Irish state the more I see every time I watch RTE. Funny thing! A troll that calls itself ‘Paul’ made the following comment on a John McHale thread last August. What is with the Michael Hennigan love in these days. No doubt we will get to here about his wrong export employment in 1999 number he keeps coming out with. Assuming a troll could be coherent, whatever it was trying to convey, “here” or hear; while I don’t know what “export employment” means but no alternative figures were presented. DOCM and others raised the issue of anonymous abusive pests on the Blanchflower thread. What is interesting is that when these people make a non-abusive contribution, they rarely manage to coherently string together the 140 Twitter character limit. @ seafóid Thanks. There are of course some positive things besides the weather but spin has a toxic impact on enterprise policy. It would be a shock if policy makers presented the challenges unvarnished, even though it would serve them better rather than the common short-term bragging. Certainly, a very interesting article. For me it spells things out clearly. The world is full of problems, that creates a opportunity to create and deliver a product which meets the needs of those problems. The market is already there. For example water availability is becoming a serious problem in some areas of the world. By redesigning something which is already designed, could create employment, i.e. a new washing machine which uses only 1/2 the water as present washing machines. A new tumble dryer, using only 1/2 the energy of conventional tumble dryers. As Richard Tol mentioned previously, Wind power should generate royalties for the state, instead Mr Rabbit has given it away for free, (perhaps he was advised that way). Or at least Royalties should be applicable after the capital loans have been re payed. With the high taxes taking effect, and no shortage of voices advocating higher taxes for anybody who gets out of bed I don’t see much reason for innovators to hang around these shores. I would not be surprised if after a wealth tax is introduced, an intellectual tax is proposed. @Michael Hennigan Well done on presentation. While I would agree with your basic premise: “Ireland’s doomed goal to become a world-class knowledge economy” That of itself should not discourage the country from attempting to leverage whatever skills are available. The very phrase “world-class knowledge economy” is nonsensical rubbish. One cannot be an expert in every area. The Swiss stuck to clocks etc!! Page 11 of the slide does show that there are ~130,000 High Tech / Life Science working in the country. The fact that this figure has seen only a marginal reduction from 2002 to 2011 is a vindication of sorts of the strategy of producing such graduates. Despite all the issues surrounding FDI etc, imagine where we would be now without it! Notwithstanding that, one of our better known entrepreneurs is a humble accountant by training. [In his case not so humble] One of the possible reasons for lack of success is the possibility that R&D is grossly overestimated in company returns because of the tax advantages. You would be amazed how creative companies can be when classifying expenditure, depending on the financial incentive involved. One factor that has greatly inhibited the development of the FDI sector beyond Eoin O’Driscoll’s dismal description, is the lack of languages. Better language ability would enable many of the technical/ sales/managerial staff in those companies to make more of the companies within Ireland, through better familiarization with the market places they serve. Such familiarization requires good language skills. The issue of successful companies ‘selling -out’ once they have it made should be easily countered by activating deferred shares of development agencies in the event of sale. I do know from my own experience that UL attempted to interest a number of indigenous companies in R&D type projects but regrettably many of these companies were too busy ‘enriching’ themselves during the bubble era to even consider innovation of either ideas or technology. I note that in the slides you did not make proposals for the ‘way forward’. (or did you?). This is needed. Well done on presentation. @ MH A very good paper and a major contribution, IMHO, to the ongoing effort to getting a change in the approach to governance in this country, apart from better outcomes in the science area. On the other issue, it is a real pity that time has to be wasted on it. It is a conundrum, as I pointed out on the thread in question, to which, despite the best efforts of some, there is no immediate answer. @ MH Tip of the hat! Pity I missed the workshop. In summary we are building massive cathedrals to the pagan gods of waste and uselessness. And for your attempts at conversion to a true’r’ faith you have been rewarded with being ignored rather than martyrdom! In darker times…. @Michael Hennigan Well done on getting into the bear pit of the Dublin Economics Workshop! Hope the hair is not singed too much …. but we have had more than enough of the delusion of the ‘smart’ or ‘knowledge’ economy. Not to be negative, Kerry qualifies on the big FDI sector and there are many excellent small indigenous IT firms etc and some excellent small service firms. One must take in the overall institutional historical context and the interlinkages to get at the ‘irish production system’ which probably continues to exhibit more of the local ‘possessive’ than a global ‘achievement’ nature to borrow Joe Lee’s simplifications …. …. look at Denmark and the interlinkages between industrial production, local vocational schools and engineering universities, bank involvement in business strategy, ireal world case study PhD research that demands in house in real firms on real problems, nternational marketing and linkages, taxation and suberb welfare system ….. this is the SME model that has impressed me most ….. no equivalent culture exists in Hibernia MH’s paper is not a polished polemic but is very rich in relevant data for anyone interested in understanding the story of enterprise development in Ireland since the late 90’s and the role of public science. I sense that the hubristic assumptions of 2006’s SSTI (which were rooted in the weak understanding by its contributors of how technology business is built) are finally being questioned. The lack of any significant commercial return to the state for its co-investment with Feeney in SSTI and PRTLI is awkward. It is encouraging to see the growth of the software business in recent years as showcased by the Web Summit this week, given the lower barrier such business experience in marketing outside Ireland and generating exports. If we can somehow redirect more state science spending from the generation of narcissistic “world-class science” into technology development instead, the chances of seeing a return to the state (as distinct from the universities) will increase dramatically, as should the production of patent-grade invention capable of being commercialised by Irish indigenous firms. Irish academic and private participation in EU collaborative R&D programs that focus on technology rather than science e.g. FP7, InterReg and ESA is not particularly good, but is moving in the right direction. Tony I dont think PRTLI was designed for commercial return. It provided basic infrastructure in some cases. The reality is that just as irish social science was beginning to make a big impact on the world stage it has had its future thrown into doubt. And yes, social science (even economics) is useful to the economy as well as the society. Witness the sorry state of the IIIS and the Geary now compared to say three years ago – where will worldclass research quality analysis of ireland as an economic and social entity in a global environment come from if not from local academics at the top of their game? And we need that analysis – unlike science where there is the hope of a commercial return and so the invovlement of commercial minded bodies is a sine qua non, in socio-political-economic analysis we need mani puri, with academics and researchers clean of partisanship. @ Brain Lucey Sufficient human ability/capacity exists within the Irish research/intellectual community to conduct the ‘social scientific analysis’ – inter-disciplinary socio-political-psycho-economic – suggested by the Guv’nor a few yrs ago ….. The only unknown is whether said community has the ability to actually selves-organize this radical project independently …. rather than waiting for Godot. Brian – if PRTLI was designed without any thought whatever towards commercial return – which I have no idea about BTW – then I’d consider that damning. I know it contributed to the operating costs of some of the CSET’s and similar research groups as well as paid for much of the basic infrastructure required, and that without PRTLI Irish universities would still teach science but generate little research output. I have no quarrel with social science research. It is an essential part of evidence-based policy-making but only if evidence influences policy-making and not the reverse, which has been so often the case in recent years. Given the potential impact of economic research on public and private sector endeavour, it is obviously essential that it be unimpeachable. This implies properly-resourced; interdisciplinary; imbued with real insight about the subject matter (i.e. meaningful expert consultation) and immune to any discomfort it may cause to related or unrelated professions. I suspect I am not alone in feeling that all of these aspects are routinely compromised by publicly-funded research, whether university-led or by private research companies including my own who tender to the Irish Government. DO’D: There is a huge problem of fragmentation in Irish research, perhaps unavoidable given the tiny market and competitive rivalries. The sort of collaborative research you refer to, greatly beneficial as it is, will simply not happen IMO unless the main funding models make this a requirement. However this is beside the point I tried to make. Engineering and technology receives less than 10% of state science budget and much of the research budget is reserved to universities and CSET’s. Much as it pains me to disagree with the sentiments of Peter Gallagher and Emma Teeling about the shifting of SFI funding from ‘pure’ towards ‘applied’ science (IT Letters, July 3rd), I think the continuation of SSTI is both unaffordable and has zero chance of enabling a ‘knowledge economy’ unless reformed to make it market-led and less liable to deposit early-career researchers high and dry in an R&D wasteland at the end of their contracts, with no commercial relevance to anyone. What is needed is discussion about science and enterprise policy reform. It is clear that task forces dominated by civil servants, senior academics with covert/overt business development functions, and senior fellows from US MNC’s are unrepresentative of Irish enterprise, which has always been dominated by microbusiness and SME’s. This has to change. Part of driving that change is to commission evidence-based research about the successes and failures of SSTI, its predecessor, related policies for RDI spend in enterprise agencies, science teaching and promotion etc. Ignoring the fact that this drives a coach and horses through many departmental boundaries, actual outcomes in aggregate for academic and commercial impact can be dispassionately seen in combined patenting and publication landscaping and analytics studies. Benchmarking against Israel, Finland, the Netherlands, Scotland, NZ etc is straightforward. No work of this sort has ever been commissioned in Ireland so far as I know. My company undertook a quick and dirty private study of the patent side of this recently and the insights were profound. Given the apparent disinclination of the state over many years to commission quality independent research into the impact of science, technology and enterprise policy, I would like to invite independent public and private sector researchers interested in contributing to such a study pro bono to contact me. @Brian L “in socio-political-economic analysis we need mani puri, with academics and researchers clean of partisanship” Is that realistic? If they are employed by the private sector they are quite reasonably suspected of having an agenda. if they are employed by the public sector, they are quite reasonably suspected of having a turf to defend. If they work for a union, they are assumed to be pursuing an agenda. If they work for a charity then what does the charity usually push for, who runs it? Good job Michael, A lot of food for thought in your paper; Well done for putting the effort into collating it. So much harder to write a paper/article than firing off anonymous sniping comments …. eh guilty m’lord ;-). @seafoid “The more I learn about the Irish state the more I see every time I watch RTE.” Indeed, very well put. For those who of us who haven’t spent all their lives here or interested or connected, it is a constant education. Well done to Mr. Hennighan, never easy to present on subjects dear to your heart while avoiding polemic! (Which I think you do). As a high-tech dinosaur working in legacy systems, I am surprised that, despite their persistence, there is no attempt to teach IT beyond the smart calculator with screen level. Big iron may be unfashionable, but it is not going away. India appears to be the only place consistently teaching it, hence India either gets all the work or supplies all the workers… Would US (and other) companies like an english-speaking EMEA development/support centre close to their EMEA clients? You betcha… Interesting article here from Mr David O’Brien Irish Times. http://www.irishtimes.com/newspaper/opinion/2012/1018/1224325412755.html I like the sentence… “When everyone is responsible, then no one is” Is it any wonder this country is so messed up? The Brewery is full of beer, but nobody knows how to get drunk. Thank you Fitch. Sorry about the errant ‘h’… @Gene Kerrigan Well done sir! I attended Michael’s presentation last week and I liked it. The term ‘knowledge economy’ and Ireland is thrown around so much these days that I found it refreshing to have someone challenge it in the context of knowledge economy sits with the Irish economy. Michael made some good points in his paper. But I am a little less skeptical than Michael. Knowledge has usually been considered as more relevant to high tech sectors of the economy, and to science-based activities, especially in respect of ICT and biotechnology. Less attention has been paid to how knowledge and technologies are an increasingly important resource for Low and Medium -Tech sectors ie. Food and Drinks. Researchers have argued that the most basic mistake in high tech models is the tendency to identify R&D activities with technology-based industries, and hence to see high-level R&D activities as the sole standard bearers of the knowledge economy. Howvever, there is significant reliance on R&D, Technologies and intellectual capabilities for our Food and Beverage sectors for example. Our indigenous food/drinks exports are flourishing. Ok, Ireland may not have met yet its goals of being a ‘full blown knowledge economy’ as we know it, but I think policy (incl. agencies), industry and Third-level have been on the right track in their efforts in trying to make this happen in certain sectors – reflected in export figures particulary in recent years. How? I think Ireland could be considered to have a number of Internationally leading knowledge-driven sectors with a world class reputation ie. Medical technologies (ok pure hi-tech), and in others sectors it is ‘on the way’ to establishing world-class recognition ie. food and drinks. Not to mention the Pharma and bio pharma sector development here… So I think rather than struggling with the idea that Ireland is already or can be ‘A World Class Smart economy as a whole’ (which Michael has made some key points as to why its not), I think policy and industry should continue to align our ‘smart growth model’ more towards making a number of ‘World Class Smart Sectors’. And these may not be necessarily ‘hi-tech’ as we know it, but need Knowledge! @Natasha You raise a number of points. There are questions that arise about the economic return of present policies for investing taxpayers money into science and technology RDI and associated awareness-raising and training. MH’s presentation adduces evidence that present policies have not served Ireland well. I do not know or care whether or not MH is skeptical about Irelands knowledge economy. I personally care very much about whether government science and enterprise policy is economically relevant or not to indigenous business. I entirely agree with you that R&D is fundamentally important for all types of technology business. The fact that ireland has either stood still or gone backwards in recent decades in the proportion of its indigenous tech-based business that would be considered ‘high-tech’ does not change the importance of competitive R&D and design capability. Where I disagree is that you imply that “policy (incl. agencies), industry and Third-level have been on the right track…”. My sense is that they have been on quite separate tracks. Policy (SSTI etc) has until very recently emphasised investment in four thematic areas, three of which had minimal relevance to indigenous businesses, and most of the spend has been led by academic researchers rather than by ‘industry’. Considering the employment and entrepreneurship and tax harvesting expectations tied to SSTI, the policy needs review to say the least. You are right to pick out the Irish FDI medical device community as special. This is a very important slice of FDI because it actually undertakes significant RDI in Ireland, with some academic R&D input. This is true to an extent of the food industry also, while agency programmes such as Bord Bia’s international marketing Fellowships address a lot of issues at relatively low cost to the state. I am uninterested about whether Ireland is regarded as “world-class” in any form of enterprise. I am very interested in whether Irish companies, universities and other forms of business are helped or hindered in their ongoing efforts to build value, create proprietary knowledge (IP) and internationalise their earnings by state science and enterprise policies. Tony there is of course a question : why does industry not spend on R&D ? I mean, if its so important why leave it to academics? BL – the evidence from Forfas 2011 is that 40% of Irish small firms (aka indigenous firms of up to 50 staff) spend on R&D&I vs >60% of larger ones. At least 6% of SME’s also claim R&D tax credits which implies sufficient R&D management infrastructure to formulate a coherent claim. Given the dominance of brokerage/retail/wholesaling/FIRE type businesses among the indigenous community I’d say there is plenty of evidence that industry does spend on R&D&I. However the focus of R&D in state science policy for granting is thematic – there is still an emphasis on nanotech, biotech, ICT and renewables (at least to an extent). This government policy may reflect the needs of third level education businesses more than those of indigenous businesses, very few of whom are positioned to commercialise nanotech and biotech R&D outputs, and who have never been well represented in the formulation of this ‘big science’ policy. Looking at EU funding, both Framework Programme and Interreg funding emphasise the importance of industry leadership (not followership), the importance of technology development rather than ‘big science’, the importance of credible plans for dissemination, consumption and commercialisation as part of any proposal which is funded, and they favour collaborative syndicates with a track record. Irish science and technology funding models are still dominated in certain cases by the quest for citations and prestigious publication, i.e. converting money into knowledge rather than the reverse. There is no reason the two models (science promotion and technology promotion) cant coexist but even a cursory study of Irish academic patent output and forward citations and inventive collaboration since 1990 or so reveals an overwhelming bioscience dominance and a lack of industrial collaboration. @Tony O. Brian L How is the spend on R&D being captured for this analysis in the case of large and small businessed respectively? For example if a firm’s own employees spend part of their time engaging in R&D for the firm it is just a cost (mainly of employand is written off straight away. If they contract out or purchase R&D from another company the accounting is different. Let me give you an example of a very small business I know of. It’s a one man band, so it’s at the extreme to illustrate. It is high tech, highly skilled. Evcery day as products are being made (by the guy that does all the design) R&D is hapenning as the build process is analysed and ideas for increasing quality or productivity emerge. Ad hoc experimentation is carried out. Design work is carried out seperately also. The business works only because all this R&D activity takes place and competitors are kept lagging behind. This R&D appears absolutely nowhere – not in accounts, surveys or anywhere else. Is part of the reason the stats are as they are, that R&D gets measured in large companies? Bro. Colm O’Connell Well done. Fully deserved for achievement. I believe Forfas who have surveyed Irish R&D tax credit use relied on self-stated value of R&D performed (I remember completing a mandatory survey from them around six months ago). No doubt the authors of “Analysis of Ireland’s Innovation Performance” could comment in detail on the assessment protocol used. They do note in their conclusions that much innovation activity including non-technological R&D and innovation by microbusinesses and non R&D Tax Credit claimants is not captured. In my experience your example is not untypical. This is unfortunate in that a significant slice of your one-man-band guys cost is in principle recoverable as a tax credit and if he has high tech training and is methodical and rational, then compliance with the record-keeping and admin requirements should not be onerous. We know that some product and process innovation, almost all service innovation and most other kinds like business model and branding innovation are excluded by common EU and national definitions of R&D and innovation, despite the fact that all of these are relevant to the growth prospects of any enterprise, and all are best undertaken using systematic research and empirical methods analogous to those used (ideally anyway) in technology R&D. @MH, Great research that has contributed to interesting discussion here and, I guess, at the Conference as well. What’s clear about the ‘knowledge economy’ or ‘smart economy’ trope is that neither the politicians nor the media, who slavishly report the contents of government press releases, ever critique its application within the Irish economy or seek to address what it’s supposed to mean in social development terms. The 500m euro investment in 14 areas annoucnement is one example, the Minister for ET&E’s recent statement re an Irish Microsoft another cringeworthy one. Any chance of your paper, in a condensed version, appearing as an op-ed in the IT or the Sunday Times some time soon? Ireland faces high long-term unemployment and it’s misguided to have most of the focus of enterprise policy on one sector – – that can only have a limited impact on job creation. However it is promoted by powerful interests who have the ears of gullible politicians who are providing lavish levels of public funds at a time of desperation elsewhere. Most of the journalists covering the sector are cheerleaders while the Oireachtas is not competent to query the spending (just this week, the Committee on Jobs, Social Protection and Education, heard from the US Chamber of Commerce on their recently published promotional brochure on FDI). Some of the public support is welfare. The term ‘innovation’ has become a bullshit one. “Most companies say they’re innovative in the hope they can somehow con investors into thinking there is growth when there isn’t,” Clayton Christensen, a professor at Harvard Business School and the author of the celebrated 1997 book, ‘The Innovator’s Dilemma,’ told The Wall Street Journal last May. The Journal said that a search of annual and quarterly reports filed with the Securities and Exchange Commission showed companies mentioned some form of the word ‘innovation’ 33,528 times last year, which was a 64% increase from five years before that. Among the common misconceptions about high tech are that US tech companies are founded mainly by 20-somethings. Research shows that the average age of US-born tech founders when they started their companies was 39. In fact, twice as many were older than 50 as were younger than 25. So Mark Zuckerberg, the CEO of Facebook, is not a typical entrepreneur. The highest rate of entrepreneurial activity across all sectors was in the the 55–64 age group over the decade to 2009. The 20–34 age bracket had the lowest. @ veronica Thanks. I’ve a 12-hour flight over the weekend. So I might distill a few points into soundbites! Comments are closed.