VTT TECHNOLOGY STUDIES

From Technology Acquisition and Absorption to

International R&D–based Strategies

– the Ireland Case –  

     

  

 D. O'DohertyJune 2004

•Context

•Strengths & Weaknesses

•Implications for Policies/Players

Ireland’s place in the global economy

0102030405060708090

100

FDI inflows Exports Goods &Services

US

Eurozone

Ireland

% of GDP

International FDI Flows

- 2000, 2001 & 2002

0

200

400

600

800

1000

INFLOWS OUTFLOWS

EU

IRELAND

US

ASIA

World trade in highly R&D-intensive industries, 1990 and 2000 (% of GDP)

0

5

10

15

20

25

30

35

40

45

Finland Ireland OECD

19902000

Investment in knowledge as % of GDP, 1991 and 1998 (R & D, Software, Higher Education)

0

1

2

3

4

5

6

Ireland Finland

19911998

Technology balance of payments, 1998

Sweden, 4.3Finland, 3.4

Denmark, 2.2

Netherlands, 1.9

United Kingdom, 1.9 Singapore, 1.9

Ireland (GNP), 1.4

Portugal, 0.83

0

1

2

3

4

5

GE

RD

as

% G

DP

/GN

P

GERD as % GDP/GNP for Ireland and selected countries, 2001

Strengths of the Irish model

Ireland has been able to transfer and absorb ‘state of the art’ technology and its exports take up a disproportionate share of world markets, especially in ICT and pharmaceuticals

Ireland’s flexible, English-speaking workforce continues to be a major attraction for US companies in particular

Ireland has embraced global change and made good use of its own and EU resources

Weaknesses of the Irish model

Ireland’s ICT, pharmaceuticals and medical devices exports in particular embody technology largely generated overseas by FDI

Investment in research and education lags existing and potential competitors

Ireland’s expenditure on ICT as a % of GDP (‘ICT intensity’) also lags other OECD countries

Implications for Ireland

Risks – Lack of ‘new’ FDI, particularly in the medium-long-term ; lack of innovation capability; lack of integration

Requirements – More R&D/Innovation; indigenous capabilities; focus on overall Knowledge Economy/Systems of Innovation approach

“There is a strong link between investment in the research and innovation base of the economy and sustained economic growth… The accumulation of ‘knowledge capital’ will facilitate the evolution of the ‘knowledge-based’ economy.”National Development Plan 2000-2006

Policy Response

Productive Sector OP - Expenditure by Sector

RTDI (EUR 2.47bn)

Industry (EUR 2.41bn)

Marketing (EUR 0.43bn)

Fisheries (EUR 0.06bn)

The NDP has meant a major increase in Research, Technological Development and

Innovation (RTDI) investment:

to strengthen the capacity of Irish third level institutions and other research establishments to conduct research relevant to the needs of

the Irish economy

to strengthen the capacity of Irish firms to assimilate the results of R&D into their products and processes

to provide support for sectoral research in agriculture, food, marine and the environment

National Development Plan 2002-2006 - RTDI

Industry R&D: IDA/Enterprise Ireland(EI)

Industry-University: Science Foundation Ireland (SFI)/EI

University Research: Higher Education Authority/PRTLI

Government Research

TOTAL EXPENDITURE: €2.47 billion

Industry R&D – FDI Approach

‘Ireland's competitiveness is based not on tax benefits and costs alone, but on knowledge, innovation, flexibility, and connectedness - how everything works together’ – IDA Statement “IBM to invest €22 million in its Dublin R&D Software Laboratory” – Tánaiste             11-May-2004 “Development in line with policy for R&D growth” - Harney

Other recent international R&D-related decisionsGGoogle, Ebay/Paypal and Overture decided to establish new European centres, joining organisations such as MIT’s Media Lab Europe in the digital media sector AABB established a new R&D, marketing and manufacturing operation, serving the paper and pulp industry worldwide

RR&D announcements were made by Olympus Diagnostica, GlaxoSmithKline and Intel

WyethMedica is constructing one of the world’s largest biopharma plants - a $1.5 billion investment - while Intel is completing its most advanced microchip facility in Europe

Over 50% of the 1,000 + overseas companies have added some element of R&D

Industry R&D – Enterprise Ireland-Budget 2003-

•CCompetitive Research, Technology Development & Innovation (RTDI) Scheme - €33.5 million

•RR&D Capability Scheme - €22.4 million

Also Innovation Management & R & D Awareness

20% Tax Credit from 2004

Industry-University: Science Foundation Ireland (SFI) – Budget 2000-’06: €646 million

Vision 2003-2007: People, Ideas and Partnerships for a Globally-Competitive Irish Research System

‘By making the largest investment in scientific research in its history through SFI, Ireland joins the growing number of countries that recognise that this investment is required to keep modern economies competitive’ ‘SFI and its strategic orientation are central to….Ireland’s goal of becoming a leader in the global knowledge-based economy’ ‘SFI will focus on fields that underpin biotechnology and information and communications technology. Ireland’s affiliation with leading industries in related fields gives it strategic advantages in these areas’

SFI & R&D Commercialisation

Centres for Science, Technology & Engineering (CSET) Partners include international companies such as Hewlett Packard & Medtronic

SFI also works with Enterprise Ireland & Columbia University's International Innovation Initiative (i-cube) - a world leader in technology transfer – on commercialisation issues

Creating and Sustaining the Innovation Society - The Higher Education Authority –

‘Ireland needs to move from a situation where our economic growth relies, to a very considerable extent, on foreign direct investment and imported technology (an 'Investment-Driven' economy), to one where the basis for growth arises, to a much greater extent, from indigenous innovation (an 'Innovation-Driven‘ economy) In order to reach this goal a paradigm shift in public policy is required which puts innovation at the centre of the policy agenda’‘Higher education and research will be central to achieving the paradigm shift’

HEA Programme for Research in Third Level Institutions

Cycle 3: 2001 – 2006

Involves NDP funding of €205m & €115 capital. Objectives are:

•To enable a strategic and planned approach to the long-term development of research capabilities

•To provide support for outstandingly talented individual researchers and teams within institutions and the encouragement of co-operation between researchers both within the institutions and between institutions, nationally and internationally

  

Government Intramural Expenditure on R&D -- Ireland 1993 to 2001

0

20

40

60

80

100

120

140

1993 1995 1997 1999 2001

GO

VE

RD

€m

  1993 1995 1997 1999 2001

GOVERD €m Current Prices 51.5 60.2 65.4 63.9 127.7

GOVERD €m Constant Prices 64.3 71.6 75.4 70.8 127.7

 Source: Derived from State Expenditure on Science & Technology, 2001 (Forfás);

Public Funding of R&D 

   

  Finland 2003 Ireland 2002

Total Public Funding of R&D

€1446m €391m 

% GDP/GNP 1.00% 0.38%

Challenges

Will the scale, quality & institutional aspects of Irish-based R&D activities allow them to be internationally competitive? Will Ireland have the indigenous and sufficiently ‘rooted’ foreign companies & clusters to identify and take up the commercial opportunities arising from an R&D-led strategy? Will the Irish political and administrative system have the patience to wait for long-term dividends from current & future investments?