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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?