Here are some details of an upcoming SSISI seminar.
Justin Doran, Declan Jordan and Eoin O’Leary of the UCC School of Economics are to present a paper to the Statistical and Social Inquiry Society of Ireland at the Royal Irish Academy on Dawson Street on Thursday November 1st at 6pm. The paper is called Effects of R&D spending on Innovation by Irish and Foreign-owned Businesses. Details and a draft of the paper are here.
The paper finds that Irish owned businesses are significantly more likely than foreign-owned to introduce new products as a result of creative R&D work undertaken. Foreign-owned businesses, which spend nearly six times more per worker on R&D than Irish-owned, enjoy very high returns mostly from the purchase or licence of patents. According to the authors this points to a dichotomous Irish innovation system.
4 replies on “SSISI Seminar”
The MNCs by their nature would not generally produce new products in Ireland.
The new Microsoft Windows 8 operating system was mainly developed in Washington State and the European localisation work was done in Dublin.
That is not of course research but would be low-level development.
I’m skeptical about company survey information as I am about a self-assessment R&D tax claims – – such spending can cover a multitude of things.
As for checking claims on new products, the proof of the pudding is in checking resultant sales and that information can only be credibly cross-checked by say Enterprise Ireland in for example related grant applications.
It’s more reliable than a a busy manager ticking through survey forms between meetings.
As regards R&D credit claim data, the numbers have jumped five-fold since 2004 but the Revenue could not say if there were any rejections as it would only arise in a tax audit.
Its an interesting paper in a field almost bereft of study. Many interesting insights. Pity the draft paper seems to have been scrambled a bit during upload.
It notes: “It is immediately apparent that foreign-owned businesses are considerably more R&D intensive. On average they spend nearly 4 times more per worker than Irish-owned businesses on intramural R&D, 5 times more on the acquisition of capital for innovation, 9 times more on extramural R&D and 33 times more on the acquisition of external knowledge. The large standard deviation on spending by foreign-owned
firms on the acquisition of external knowledge is of interest and suggests very large spending by a small number of large firms.”
I would suggest that The “33 times more spending on acquiring external knowledge” by FDI’s likely relates to a tax structuring arrangement whereby patents are acquired by the Irish subsidiary from the parent in order to generate capital allowances which (under ideal conditions) can reduce Irish corporation tax from 12.5% to 2.5%. These bought-in patents or licences are used to generate substantial royalty income through the Irish subsidiary.
There has been a visible acceleration of patent assignment to FDI operations in Ireland since the introduction of the Intangible Assets scheme in the 2009 Finance Act. Ireland is one of several jurisdictions competing to attract IP management and exploitation through similar measures. It should be noted that these patents typically have no significant relationship with the host country in terms of the background R&D or inventive activity.
@Tony
Thanks for your comments. I’d be happy to send on the paper without scrambling if you’re interested. Just drop me a line – my email address at http://www.ucc.ie/economics. I think you are right that a lot of the MNC activity in this space is about tax. It must be simply by realising that you don’t put a cost centre (R&D) in a low-tax jurisdiction. There must be something else going on. And the IP tax breaks apply to any work done in the EEA – not just Ireland.
@Michael
Thanks for the comments. The MNCs do produce new products but IMO its questionable the extent to which they are developed in Ireland or the Irish branch is instructed what to produce. I’m not as sceptical about survey data (I would say that). It is really the only reliable data in this space – the concerns I would have are around definitions and whether all firms have the same interpretation of variables such as R&D and innovation itself. The CIS is IMO overly focused on technological innovation – this is likely to understate the true levels of innovation. I think Irish businesses are more innovative than official data would suggest – especially when we take a business or broad definition of innovation and not just a technology-based one. I think we agree on the over-emphasis on science and technology as ‘real’ innovation.
The FT has a video report here on the Silicon Roundabout cluster in London’s East End.
The focus is on manufacturing startups that are utilising the modern technologies to have bigger market reach.
It has an interview with an Irish woman founder of one of the startups:
http://youtu.be/LY2Fl9pQaBs
There is a scene in an episode of the American TV series ‘The Sopranos’ where two of the Italian-American characters end up in a coffee shop.
“Espresso! cappuccino!” one of them exclaims. “We invented this shIt!”
They happened to have been in a Starbucks.