A Guide to the Innovation Taskforce Report

I was asked to write a 900 word piece for the Irish Times on the Innovation Taskforce report,  and my article was duly published yesterday.   It was difficult to distil the thinking and analysis of 7 months of intensive work into just 900 words,  so I’ve taken the liberty here of writing a more expanded posting,  including cross-referencing the recommendations in the report as appropriate:  thus I make an apology before you go any further that this is likely to be a lengthy blog post…go get yourself a coffee or a pint or sparking lime water or something first..

The report itself is available online here directly from the Taoiseach’s office in all its glory as a .pdf file.   Unfortunately they didn’t prepare a .html version,  so I did one myself thanks to Kevin Noonan’s suggestion to use zamzar,  which worked fairly well (and much better than Google docs!) and then put the html file here.   I went in and manually editted the html to insert <a NAME=”…”>…</a> tags for each of the recommendations,  so that I can link to them directly below: e.g. recommendation 8.2 is now directly online here.

As I’ve written in my previous posts,  the report went through several revisions before its final form.   One of the drafting debates was in what order to lay out the recommendations and chapters – entrepreneurs and start-ups first ?  Or multinationals first ?  Or current indigenous companies first ?  In the end,  as you will see if you read the report,  it actually now leads with the recommendations on the academic and education sector.   I’m going to take a different perspective in this blog post though 🙂

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Let’s start with Motivation & Background

The unemployment rate in Ireland has now reached the crisis level of 430,000.  What can we do to make an immediate improvement,  while at the same time how do we build sustainable long term growth ?

In my view, re-building our economy around our own ingenuity,  creativity and innovation is the key to our sustainable long term growth.  This is the “smart economy”.

A classically trained economist – and there seem to be a few of them lurking around,   I think – might reason that the primary objective of the smart economy is higher productivity.  The thinking goes along the lines that Productivity – that is,  developing new ways to get more output from each unit of input – should be the key driver of economic performance and sustainability.   The mantra is that if Ireland can become be more productive,  competitive and reduce its costs,   then we will produce more efficiently,  earn greater profits which can then be taxed as corporate and personal income,  and so support our Exchequer spending.

Well,  is more output for each unit of input the way to go ?   Should we roll our economy back to the pre-bubble times at the start of the last decade ?  Will restoring productivity and greater competitiveness significantly reduce our unemployment ?  Do we want to compete with low cost,  manufacturing based economies elsewhere and produce even more output than they do for each unit of input ?

Over the last decade,  while we had our bubble,  the global economy continued to significantly change in favour of the emerging nations. While the United States had its distraction of its “war on terror” and subsequently entered recession in December 2007, China focused on interventions to stimulate its own domestic demand, and to quietly gain control of sources of raw materials including bauxite,  fluorspar, silicon metal, coke, magnesium and zinc across the world.   These materials are now available more cheaply to Chinese manufacturers than their US and European competitors.   China has simultaneously had a policy of active engagement with many governments world-wide to foster trade and to acquire both raw materials and friendly export markets for China.   Meanwhile,  as Craig Barrett noted at his recent public presentation at the RIA,  some 3 billion new consumers have entered the global market – in south east asia,  south america,  latin america,  South Africa, China and India.   Ireland no longer has a global monopoly on low costs and a low corporate tax rate,  nor on a technology skilled and English language competent labour pool.

It seems obvious that the world has changed.  It seems clear that restoring our national competitiveness to pre-bubble levels is insufficient.   It seems apparent that getting more output from each unit of input is deficient.  Rather we need to create value rather than volume.  If we can create high value services and goods for the international markets,   then we will create wealth for our economy and also sustainable employment freed from the vagaries of an international race to the bottom.

It is about value.  Not volume.

How do we do this ?   How are we going to accelerate our smart economy,   make an immediate improvement in employment and also at the same time build sustainable growth ?

I honestly and sincerely believe that Ireland has a great foundation. We have many multinational companies present in the country,  and are thus jealously viewed by competing jurisdictions such as Israel,  Singapore and even indeed Silicon Valley.  We have the security of European Union membership, and the benefits of the euro as our currency.  We have our natural resources, including agri-food, marine and – uniquely – our relatively under-used electromagnetic spectrum.  We are native speakers of the international business language.    We have an international diaspora,  several times larger than the combined Israeli and Indian diasporas.  We are a relatively small market,  which creates the opportunity for market trials before the expense of addressing global markets.    Our glass is thus half full.  How do we fill the rest of it ?

Our work in the Innovation Taskforce since last July has been focussed on these challenges.  The smart economy of course cannot provide all the answers,  but we believe it can be one major component of a solution to our jobs crisis and to our faltering economy.   The smart economy can create jobs directly in the economy,   but can also indirectly sustain jobs in ancillary services (such as accountancy and law) and in consumer purchasing (retail and recreation).   Innovation is applicable across our economy,  including the public sector.   Nevertheless,  innovation which creates new offerings – services,  products,  and business processes – for the global export market best stimulates our national income.

Despite the chapter order of the report,  let me start with a focus on the Multinationals

Multinational companies intensely compete on the world stage.  Thus they must continually innovate,  using the very best people they can find on the planet,  regardless of location,  and ensure that their offerings – products,  services,  business processes and designs – are highly attractive and offer significantly more value for money than their competitors.  If a multinational does not do this,  it will lose to its own competitors.  Investing in some location,  or moving out of one country to another,  is not “personal” or a grá for a particular country over another:  its just simply a matter of sheer survival.

It is thus a considerable complement that so many multinationals have actually chosen to locate here in Ireland.   Some may argue that the primary reason many are here is our corporate taxation advantage.   While that may have been so in the past,  today many other jurisdictions offer low (or even zero) corporate tax environments – as well as English speaking and a talented well trained labour pool.   Ireland is competing with alternative locations for foreign direct investment,  and has done well.

Other jurisdictions are extremely envious of the breadth and quality of multinationals that we have been able to attract to Ireland,  and would do almost anything to wrestle them away from us into their own country.  Our multinational footprint is a considerable competitive advantage for Ireland,   that creates opportunity for collaboration – in its widest sense – with many of the best companies in the world,  and also with younger international companies emerging on the global stage.

We naturally cannot be at all complacent:  in fact we should never forget that only the paranoid survive.  We have already lost some manufacturing and assembly operations to other countries:  we may lose more,  driven by pressures to build products as cheaply as possible.   Faced by this,  what will continue to attract multinationals to Ireland ?

A part of the answer is transforming multinational operations here towards “research,  development and innovation” (RD&I).  The IDA now sees this as its primary objective.  This in turn requires world class engineering and science from our universities and institutes of technology.  However it reasonably apparent that the employment opportunities for RD&I are less than those for manufacturing operations:  the days when the IDA could announce a single investment project with over a 1,000 (manufacturing oriented..) jobs are probably long gone.    Furthermore,  successful innovation within the Irish operation of a multinational are in most cases unlikely to lead to commercial exploitation within that Irish operation:  international sales,  marketing,  product management, business development and channel management,  in particular including the jobs that are produced by these activities,  are frequently held close to global corporate headquarters – outside of Ireland.

A part of the answer of how we attract and retain multinationals here is what we have called “convergence” in the Taskforce report (c.f. recommendation 8.2).  As a colleague on the Taskforce put it:  “in Ireland,  we can collaborate;  in the US,  the only time we see each other is in the courts..”  Ireland is in a prime position to create a suitable (primarily legislative, relating to intellectual property) environment for cross-multinational,  cross-discipline commercially driven research.

Another part of the answer is what we have called “Flagships” in our report (see 8.1).   Our debate revolved around how can public procurement be used to stimulate the smart economy ?   Our procurement policies are – arguably rightfully – conservative,  and the Dail Public Accounts Committee usually strikes absolute terror in most of our civil servants merely at the mention of its name.  We also have EU State Aid rules to abide by.  We have had our fiascos and visible failures.

But at the same time,  is it appropriate to use public procurement in a way to stimulate innovation?  I have previously posted about the courageous public investment by the Government of Taiwan to disrupt a global industry and create an unnatural global advantage for Taiwanese semiconductor design companies.    Our “flagship” projects are an open invitation to industry at large to propose innovative projects which (i) will benefit Irish society at large;  (ii) have no prior solution worldwide,  and thus are novel – Ireland can be the first deployment;  (iii) have immense export potential,  because most other countries face exactly the same challenge;  (iv) are open and collaborative,  so that companies operating in Ireland – whether multinational or indigenous – can add further value to the core solution,  without commercial restrictions.

Another part of the solution (to attracting and embedding multinationals in Ireland) is that in general,  corporate strategists within (the global headquarters of a) multinational prefer to acquire innovative businesses which have already shown that there is a significant market for a new innovative technology,  rather than a raw technology itself straight out of the academic community.   Our enterprise agencies (IDA, SFI and Enterprise Ireland),  perhaps in turn encouraged by the machinations at our Department of Finance,  have been recently placing considerable emphasis on catalysing the transfer of technology and intellectual property from our own academic sector into commercial exploitation.   But my observation is that,  unfortunately, raw technology and commercially unproven intellectual property in most cases is much more likely to have considerable value only once proven in the market via a successful business.

So,  if we are going to continue to embed the multinationals in our economy in the future,  we are more likely to be successful if we give them a dynamic pool of exciting young innovative Irish companies,  each of which is bringing innovation to the global market,   rather than just presenting them raw technology out of the academic sector.   As an analogy,  processed agrifood products are usually of higher value than the raw material itself….

These young companies of course may very well take raw technology from our academic sector and commercialise it in exciting ways.   I am not asserting that our academic technology transfer offices should ignore the multinational sector and solely focus on indigenous start-ups:   but I am asserting that we are more likely to have greater success in embedding multinationals here,  and creating more jobs (including in particular those related to commercial exploitation activities as I noted above),  if we can offer the multinationals many opportunities to acquire exciting young companies.

Wow:  I can imagine some people passionately arguing against this point – why do we want to let the multinationals cherry pick good Irish start-ups ?!!   Don’t we want to build our own cohort of Irish multinationals !!?  Aren’t established multinationals a safer bet to successfully commercialise our academic research results than some Irish start-up !?!

Let me take each of these objections in turn.  If a young Irish company is acquired by a multinational,  it reduces the risk of commercial failure for that company and its staff,  and arguably may provide more job security.  It also simultaneously releases capital,  returned to its risk investors who can then re-cycle finance into further start-ups.  It provides further career development for management, senior executives and founders which in turn may lead them to initiate further start-ups in the future.

On the second objection,  we absolutely do want to build our own cohort of Irish multinationals – more than that,  we want to sustain them once they have successfully scaled.  At a macro-economic level,  we do not want all of our interesting start-ups to be acquired by multinationals.   But if we are really to embed the multinationals in Ireland,  then creating a large pool of acquisition possibilities is probably the best way.   I discuss scaling,  and sustaining,  our own indigenous companies later below.

On the third objection,  are established multinationals a “safer bet” to whom to license academic intellectual property,  than indigenous start-ups ?   Personally,  I do not believe there is a compelling argument or supporting data either way.  Commercial exploitation and global roll-out of intellectual property in a multinational tends to be a slow and complex process.   Start-ups are usually much faster and aggressive,   but naturally carry more risk.

So,  let me summarise my thoughts on protecting our multinationals,  embedding them in our economy,  and creating as many jobs as possible within them (and not just “white coats” doing R&D):   the key is convergent collaboration;  flagship collaboration;  and to continually stimulate a portfolio of interesting young companies which are proving the commercial viability and global market excitement of Irish based innovations.

What about our established indigenous companies ?

The scaling of our most promising indigenous companies has been amongst the highest priorities of Enterprise Ireland in recent years.  Growing companies to global Fortune 1000 requires capital.  Engagement with top tier and world class risk capital is now one of the critical changes needed in our enterprise policy.   The Taoiseach’s “Innovation Fund”,  announced last year,  is a key catalyst (c.f. 7.1).    In the Taskforce report,  we highlight that there is an opportunity for the treasury funds of the multinationals operating here and also encouraging high net worth diaspora to invest risk capital in Ireland (c.f. 7.2).   We also recommend a “European Accelerator” (c.f. 8.3) to provide further motivation for tier one risk capital to engage with Ireland.  This would encourage the portfolio (high growth..) companies of these tier one funds,  to open their European operations from Ireland having already proved a compelling business model elsewhere (eg the USA),  thus adding value to these companies,  and to the tier one funds which have funded them.  Such an accelerator will also further increase Irish based skills in international marketing,  sales and channel management.  In turn,   this overcomes a structural weakness in the economy if we solely rely,  as I discussed above,  on foreign multinationals to exploit Irish innovation.  Even more critically,  it has the potential to immediately create further jobs in Ireland (this year..).

Equally however we need ambition,  confidence,  experience and competence in our senior executives.   One issue is for founders and entrepreneurs to prematurely exit a company,  as it grows:   in our report,  we recommended a compensating scaling incentives (c.f. 7.3 and 9.6).

Over the last number of years,  Enterprise Ireland has run a highly successful development programme,  Leadership for Growth,  for about a hundred of our leading indigenous CEOs.   Disclosure:  I have been a coach and mentor on this programme.   However,  in accessing global financial markets for risk capital in order to scale our companies,  we also need a cohort of world class,  competent and confident CFOs:  – corporate financial officers who together with their CEO can assertively pitch to the best that Wall Street,  the cities of London, Frankfurt, Tokyo and San Francisco can offer,   raising and then managing international money put to work to scale their companies.  We have a surprising few such individuals available to us in the Irish enterprise sector:  we should use them to coach and mentor rising young bulls,   and we may well need to put in an urgent programme for CFOs to complement the Leadership for Growth programme for CEOs (c.f 7.4).

Our proposal for Flagship projects,  which I discussed above in the Multinational section,  is clearly also applicable to our indigenous companies.

It is one thing to successfully scale a number of indigenous companies.   It will be another to sustain them as global champions.    While they will of course have their own internal development teams working on new innovative offerings,  global industries are intensely competitive.  Multinationals successfully sustain themselves for the long term by acquiring exciting and dynamic younger companies which are building new markets based on innovative offerings.  Thus,  if we are to sustain our own scaled, indigenous multinational companies,    then creating a large pool of acquisition possibilities in Ireland from which they can acquire is highly important – exactly the same strategy if we wish to embed foreign owned multinationals operating in Ireland….

So:  Start-ups are really key.

We need start-ups as a pool from which candidate indigenous multinationals can emerge.  We need them to help sustain our own indigenous multinationals for the long term.   We need them to help embed foreign owned multinationals in Ireland.

The more start-ups we nurture,  the more serial entrepreneurship we create;   the more spin-outs from indigenous companies we create;  the more successes we will have;  and the more that others will be strongly tempted to try their own luck.

We need to build a positive feedback loop to drive our smart economy:  by priming the engine appropriately,  it can gain its own self-sustaining momentum and lead to an exponential growth of jobs.  I believe that engineering a positive feedback loop is the critical insight and most critical objective for the smart economy:  if there is a positive feedback loop,  then we will create sustainable growth and a rapidly increasing number of direct and indirect jobs.   In one of the draft versions of the Taskforce report,  I wrote a supporting appendix and analytic model using calculus,  for fun but also to make the point that the model can work to drive significant jobs growth- perhaps mathematics skills are as important for enterprise strategists as for engineers like me.  The text got dropped in subsequent versions,   so I used some of instead in a fun post on this topic recently.

Start-ups can take raw academic intellectual property and convert it into commercially viable offerings.

Successful start-ups inspire others to try their own luck,  so enlarging our pool of entrepreneurs and innovators.

Successful start-ups release founders and senior management to re-cycle and form their next start-up.  Serial entrepreneurs like Joe Moore,   Dylan Collins and Paddy Holohan – just as examples,  and there are others – create a steady stream of innovation.

Not all start-ups succeed.  If you have not failed,  perhaps you are not trying hard enough.  Both failure and success breed experience.   The greatest failure is when a bona fide entrepreneur who fails does not pick themselves up and try again.  We should expect failures in a successful innovation economy,  and we should encourage bona fide failures to absolutely start again.  One major obstacle to risk taking in Ireland is our obsolete bankruptcy legislation and we accordingly asked that that be urgently reviewed (c.f. 10.7)

The largest challenge facing start-ups is access to risk capital.

We recommend that Enterprise Ireland re-focus to place its highest priority on start-ups (c.f. 9.1).  Our view is that providing support and finance to scale indigenous companies should – in due course –  instead (ie rather than Enterprise Ireland…) largely come from the market at large,  and in particular top tier risk capital as I discussed above.

We recommend,  for an initial five year period,  seed stage investment from Enterprise Ireland without the need for co-investment of private funds (c.f. 9.2).   We also recommend formal approval and priming of appropriate Business Angel funds from the private sector (c.f. 9.3).   If the State successfully pump-primes the smart economy,  then a positive feedback loop will develop which will led to a self-sustaining growth of companies and jobs…

We suggest “project investigation” repayable loans,  to verify market opportunities (c.f. 9.10) prior to company formation.

Entrepreneurs

We need entrepreneurs.  Many of them.  We need them to create many start-ups,  which in turn spin out more starts-ups and which also in turn inspires yet others to try.   It should become a chain reaction,  like nuclear fission.  Or the “viral” loop beloved of Web 2.0 protagonists:  each new event (eg Facebook member) creates several more such events (eg as further friends are invited to the party).

Our highest priority principle which we assert in our report is:  “entrepreneurs are key:  what can we do to make it even easier for an entrepreneur to succeed ?…”

As we considered the role of the State Agencies,  and the Technology Transfer Offices of our higher education institutes,  we want to drive a cultural change:  be customer focused – in this case the customer is the entrepreneur.   We urge streamlining and consistency nationwide of intellectual property licensing (c.f. 6.4 and 6.6);  economical professional advice and services (c.f. 10.5);  and upto-date one stop shop for all agency supports and programmes nationwide (c.f. 10.6).  We suggest that our research laboratories could have “entrepreneurs in residence” to accelerate technology transfer into new start-ups (c.f. 6.3).

Serial entrepreneurship should be encouraged.  Upon a successful exit,  financial capital is released,  and ideally should rolled-over into the next generation of start-ups:  we suggested how the taxation system could encourage this (c.f. 9.4).  Successful start-ups also release experienced founders and senior managers,   with a global network of business contacts,  to become mentors,  coaches and business angels for the next generation of entrepreneurs [Footnote:  In Liam McGarry’s comment on my post,  later below,  he notes a Business Week article asserting 50 Google employees are now acting as angels for over 400 start-ups…].  In our report,  we noted that the taxation system could be used to encourage and reward mentorship (c.f. 9.7).

We need to foster entrepreneurship and an interest in innovation in our education system (c.f. 5.7 and 5.10).  At one stage we did also have a recommendation on the stimulation of entrepreneurship and innovation within our secondary schools,  especially transition year,  but this seems to have been omitted in the final report.

We need to enable our academics to try entrepreneurship,  without damaging their career vis a vis their colleagues who remain in pure research and publish prolifically (c.f. 6.2).

We need to encourage overseas entrepreneurs to seriously consider Ireland as the location where they are most likely to succeed – because of the culture,  the environment,  fiscal and legislative support,  the access to multinationals,  and simply the “buzz” (c.f. 9.8 and 9.9).   And yes,  having a competent and professional Health Service might be a part of the package…

The environment

In summary,   there are three main and interrelated themes to our smart economy:  enhance and embed the multinationals;  grow but also then sustain our own cohort of Irish founded multinationals,  and thirdly develop a large dynamic pool of exciting young companies.

We need to build a positive feedback loop to drive our smart economy:  by priming the engine appropriately,  it can gain its own self-sustaining momentum and lead to an exponential growth of jobs.

The environment for these themes must be supportive and catalytic.

We make several further recommendations for national research investment (c.f. 5.1 and 5.2).

We believe there is a strong role for product design to play across the economy (c.f. 8.5).

We make further recommendations for our education and training system,  including mathematics skills (c.f. 5.3) and other pure sciences (c.f 5.4).   I have strong views on mathematics education which I have previously posted.

We encourage academic alliances (c.f. 5.5).   However we also strongly recommend that our very top engineering,  science and business students should be encouraged to attend one of the top ten schools in the world,  and return to Ireland (c.f. 5.8)  — of course,  ideally they should not have to leave Ireland to attend a top ten school but until our own schools actually achieve true world class status,  we should encourage them overseas and bring them back.

We should have a graduate placement programme for the smart economy (c.f 6.1).

The arts,  humanities and social sciences have a role to play (c.f. 5.6).   I believe initiatives like the Science Gallery have played,  and can continue to influence,  an insightful confluence of creativity in the sciences and the arts.  Disclosure:  I am the Chair of the Science Gallery.

Our legislative system has to be world leading,  and in particular for intellectual property (c.f. 12.2).  We should educate awareness of the importance of intellectual property (c.f. 10.4).  There is an interesting opportunity to position Ireland as an international centre for the management of intellectual property,  given our European location and strong relations with US multinationals (c.f. 12.1).

Our broadband infrastructure continues to need attention (c.f. 11.1 and 11.2).

We need to provide commercial access to publicly funded laboratories (c.f. 6.3) and build “wet labs” for start-ups to access (c.f. 11.3)

We suggest appropriate civil servants could do much to enhance their career by being placed directly into the smart economy for a period (c.f. 10.2).

We believe that RTE could do very considerably more to promote the enterprise economy and a cultural change in Ireland to innovation:  increasingly mostly funded by the taxpayer,  it should serve the national strategic agenda (c.f. 10.3).

Conclusions

Many of us on the Taskforce believed that each metric resulting from a specific activity or State intervention should be measurable and assessable completely independently of those implementing that particular activity or intervention (c.f. 13.1 and 13.2). We abhor and reject self-measurement – that is where an agency or department charged with delivering a particular initiative or programme asserts its own outputs.

We strongly recommend a follow through which will monitor the implementation of our report but – as importantly – invite and consider further suggestions and inputs as our smart economy develops (c.f. 14.1).

The process we have followed has been reasonably open.  We solicited public submissions,  and received many.  For myself, I – and I believe many of my colleagues on the Taskforce – read each and everyone.  We held an open consultation meeting,   and there were well over a hundred further meetings,  and phone calls,  with individuals and organisations.   Part of our work was also a questionnaire (see appendix 5 of our report).  I personally blogged after each of the five plenary meetings,  and several of us wrote media articles and took part in media interviews as the work progressed.

Having said all of that,  our report ultimately is in the public domain.   Which means it is easily readable by those policy makers in other jurisdictions,  which frankly compete with us.   We debated our disclosure and publishing policy,  and some of the more strategically sensitive recommendations have instead only been discussed verbally.

I personally believe that the exercise has been extremely valuable to Ireland.  I note that some of the thinking within the Taskforce has already led to re-focussing and revised emphasis within some of our State agencies – indeed,  even before the report itself was published next week.

All of us will watch,  and no doubt continue to comment and discuss,  with interest.

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38 Responses to A Guide to the Innovation Taskforce Report

  1. Padraig McKeon says:

    Chris, Thanks for that insight to the knitting together of the report. Can I ask
    – is a suggested ‘implementation’ process or is there a framework by which it is intended one will be established.
    – I note from the reports along the way and again here, the commitment of the key Government Departments in getting the Task Force to this stage. Do you have a sense as to how central the recommendations of the Task Force will be to the next tranche of government decision making (i.e. for Budget 2011) and finally
    – is there any sense of the attitude of the non government parties given that the response to the Task Force will stretch past the lifetime of this government.

    • chrisjhorn says:

      Hi Padraig,

      Re implementation, we felt that it was inappropriate for us to tell the Government how to structure itself and the public service. Instead we are more focused on outcomes and results, rather than the structures which lead to these. Thus chapter 14 “Implementing the Report” suggests a framework and metrics – and in particular a high level implementation committee which will include representatives from the private sector, as well as the public sector.

      I personally believe that the recommendations of the Taskforce will be absolutely central to Government thinking and including for the next budget. You might be interested in my observations on our Exchequer fiscal strategy at the moment at http://bit.ly/9dKZDV — I think now there is a compelling argument for re-prioritisation…

      I hope the recommendations are seen as apolitical, and in the national interest rather than one particular party and one particular Taoiseach. I understand that one or two of my colleagues on the Taskforce had meetings with politicians from other the opposition parties during our work, although I personally have not yet had that opportunity..

      We’ll see…..

      best wishes
      Chris

  2. Kevin Murray says:

    Chris

    Perhaps we need a Smart Minister for the Smart Economy, rather than a Minister for Administrative Affairs & Public Sector Reform, in a reshuffle of the cabinet?

    Thank you for posting the blog. It left me with no option but to engage with the report before breakfast this morning!

    Kevin

    • chrisjhorn says:

      Hi Kevin!

      It will be very interesting to see what happens in the re-shuffle, and whether it leads to new Departmental structures.

      In Chapter 14 of the report, we allocate particular recommendations to particular Ministers — so if there is new Departmental structures, then our table of these allocations will need to be re-built so that responsibilities for the implementation of the Taskforce recommendations remain clear and transparent.

      Just about to have breakfast myself – greetings to Cork from Dublin 🙂
      Chris

  3. Pádraig Moran says:

    Hi Chris,
    I really enjoyed reading your post this morning. To be honest I only managed to scan through the Innovation report briefly. One thing that surprised me was how little attention there was on the pharmaceutical sector and also, the lack of submissions from any of the major players.

    The pharmaceutical sector within Ireland is a massive employer. The potential to develop major facilities from drug discovery through to formulation should not be overlooked. The IDA and Enterprise Ireland have done stellar work in attracting multi-nationals and supporting start-ups. However, I feel there needs to be greater interactions between Big Pharma and start-ups.

    Was there a feeling within the Taskforce that Pharma. Ireland has past her prime?

    • chrisjhorn says:

      Hi Padraig,

      The pharmaceuticals sector was well represented on the Taskforce with Brian Kelly, CEO of Celtic Catalysts; John Lynch, CEO of Merrion Pharmaceuticals; Bryan Mohally, VP Supply Chain Operation Europe, Johnson & Johnson; and Paul Roben, President of Celtic Consulting (in San Diego CA).

      While it is true that none of the major pharma players are amongst those public submissions published on the Taoiseach’s web site, nevertheless these submissions were only a fraction on the inputs we received. Bryan Mohally chaired Working Group 3: it issued a questionnaire and survey across the multinational sector, included the pharma sector, which is reported on in Appendix 5 of the report. The output of this work is in particular reported in the “Sectoral Actions”, pages 58-61 of the report — and included the pharmaceutical and bio-pharmaceutical sectors, and medical technologies and devices. And of course recommendation 11.3 urges the rapid construction of “wet-lab” facilities for start-ups in these sectors.

      So: quite the opposite from your query! I did not detect any feeling at all in the Taskforce about the demise of pharma in Ireland!!

      best
      Chris

  4. Pat Kennedy says:

    Interesting ideas, its good to see that the government are at last starting to look at our economy in a critical manner and from an innovate viewpoint, shame it took a recession to make that happen.

    Just a thought but if the name of the game is developing a greater entrepreneurial spirit in the country we obviously need to think about practical ways of doing this.

    Many of the macro studies and reports of the Irish economy give the impression that we should promote entrepreneurship in the “smart” sector where IP can be leveraged and where there is a high potential for international scalability. This is no doubt very important. However this is perhaps elitist, the government needs a dedicated strategy to help promote the creation of normal local businesses. We need to foster an entrepreneurial community for everyday businesses such as delivery drivers, freelance web developers, cleaning companies, retail shops, business service, small engineering and everything in between. Most of the jobs in the SME sector are not innovative on an international scale but innovative on a local scale and provide a real dynamic and benefit to local industry.

    This is perhaps under the remit of the county enterprise boards to help such business but CEB’s have traditionally been poor at promoting and addressing the needs of this type of business i.e. local retail and business services. The reason for this is that the CEB’s cannot be seen to be promoting businesses which maybe compete with an existing business in any way. This rule of thumb means that enterprise boards are slow at help such businesses.

    A simple and practical way the Irish government could promote the development of such small businesses in Ireland is to create a search engine for business opportunities in the country. !!!! Most people like the idea of working for themselves but don’t know if there is a market for their product or service in the locality. Using population data and CRO company data we could create a database or search engine for business opportunities.

    The engine could compare national and local business market data in one quick step, this would be very important data for any entrepreneur. e.g. I would like to start an IT company in Tralee fixing computers and setting up office networks for SME’s (The same idea applies to all types of local businesses, both main stream and niche.) I should be able to go to the government sponsored market search website, pick Tralee and pick my business category (IT Contractors) and press “submit”, this would automatically provide the me with a market analysis report with information such as:
    – Population of Tralee. (CSO Data)
    – Age profile for the population of Tralee. (CSO Data)
    – Number of IT contractors in the locailtity
    – List of similar sized town in Ireland (e.g. Mullingar, Athlone etc)
    – Number of IT contractors in similar sized town
    – etc

    This automatic report would say……
    – Mullingar, Athlone and Bray have similar sized populations and age profiles as Tralee.
    – There are 5, 7, 9 IT contractors in each of those towns.
    – There is only 3 IT contractors in Tralee
    – There is good market potential for another IT company in Tralee, this warrants further research.

    Note: Such a service would also discourage people from starting a business when there is a very poor market potential in a particular locality.

    This is a very important piece of information for any would be entrepreneur, i.e. Is there a market for my product or service? Such a system could not be developed privately but can alone be developed by the government which has access to the raw data. Once the data is in place its simply a matter of cross referencing it. Such a system would not be directly displacing existing jobs but providing would be entrepreneurs with a market analysis tool.

    One other item for consideration, many of the innovative entrepreneurial people that are spoke about so much as being the drivers of our smart economy are talented people most likely in full time secure employment. Many of have the interest and drive to start a great business but for personal reasons (family, mortage etc) cannot afford the risk associated with leaving full time job and starting a business. EI and many enterprise boards pay little consideration to people unless they are working fulltime at their business. EI and enterprise boards need to consider ways they can help people to start part time businesses. This allows individuals to start out in business while limiting the personal risk, allowing them to develop a product / service / client base gradually therefore when they do leave full time employment there are well set up to hit the ground running with their business and not put their family into excessive risk.

    These are just a few observations and considerations, I haven’t got around to reading the full reports yet so I apologise if I’m re-hashing existing stuff.

    • chrisjhorn says:

      Hi Pat,

      We certainly felt that entrepreneurship and innovation is needed across the entire economy, and not just those parts which earn foreign revenue (such as tourism, agrifoods and marine, and high tech exports). However, our focus is largely on the export sector.

      I personally like the idea of the search engine you describe, wonder how much could be gleaned at the moment by mining the existing engines at Bing, Yahoo and Google..

      It could also be built virally from the bottom up…

      Maybe you might wish to make a project submission to Your Country Your Call ?

      The changes we propose for Enterprise Ireland in our report included un-matched seed stage funding (for the next few years at least) – see rec. 9.2 on p68; and also loans up to 50Keuro for project investigation – see rec 9.10 on p74. Both are intended to help encourage would-be entrepreneurs to consider making the leap..

      best
      Chris

  5. Liam McGarry says:

    Hi Chris

    Great reading, as usual probably needs a double take to register the many valuable points. With respect to Start Ups & Entrepreneurship

    I believe a major barrier to start-ups is actually people’s desire to start a start-up. Recent research http://bit.ly/aA4nyu shows that China dominates the US in terms of entrepreneurship at every level (except VC funds) even though China ranks 151 (out of 183) countries to start a business in (US ranks 8th). A central ‘reason’ is that Chinese want to get rich. The research shows this hunger is the greatest driver. Even though Ireland is in a terrible recession I don’t believe this hunger and passion for start-ups is there [i feel the talent and informal support is there] and without this raw material the value of catalystic measures indicated in the report is restricted << Role Models and promotion of them may help

    With respect to encouraging private sector investment, what about establishing tax-efficient measures similar to the UK's Enterprise Investment Scheme (http://www.hmrc.gov.uk/eis/). Halo NI has just set up an Alternative Investment Scheme (only 2nd one in UK), which allows investors to pool money and invest in a number of EIS companies whilst maintain EIS tax advantages

    In funding start-ups what about looking at similar schemes to that used by NI Screen http://bit.ly/9Zz2H8, which provides 50% funding towards Total Project Costs at 2 crucial stages, proof of concept & product development. It also provides funding upfront (as opposed to majority of funds that are paid retrospectively), allows Value in Kind contributions up to 50% (max 25% of TPC) of match funding. Funding is to be repaid through a revenue share agreement (capped at funding +50%) dependent on the product not the company. This does not involve equity (opening way for investors when proof/product developed) and does not burden the company with debt if the that product fails.

    With respect to IP especially patents, should Ireland consider a national defence fund or global centre of expertise? This would help companies register IP but most importantly help companies defend patents wherever in the world. Defending patents and IP queries could bankrupt many start-ups, but with the state behind them providing reassurance and legal support if required – this would greatly alter the balance in favour of Irish start-ups. for example, if our company – Wee Man Studios Ltd – could avail of such a service, I know we would prioritise investment in R&D and registration of patents.

    Thanks as ever Chris for an engrossing and educational summary. Regards, Liam

    ps A few potentially useful sources of information:

    NI Assembly recently completed a report into improving public procurement, with some worthy recommendations http://bit.ly/cqPsGX

    The value of serial entrepreneurship & fall out from building world class companies is clearly evident from two recent businessweek articles http://bit.ly/dhq94u and http://bit.ly/atEWJY stating that the 'real value' of Google has been the 50 experienced employees or former employees investing in 400 new companies

    • chrisjhorn says:

      Thanks Liam.

      Re China, when one considers the poverty of the Cultural Revolution so recently, it becomes easier to understand the intensity of the desire to become rich amongst the current generation. The Chinese are truly entrepreneurial. I’ve met parents of friends there who had to survive on grass not so long ago… BTW I wrote http://bit.ly/2YpA1b recently on essentially the same point about entrepreneurial motivation: most entrepreneurs build their companies to create wealth (and not other objectives like creating jobs…).

      On tax, angel funds etc, there is quite a bit in the Taskforce report on this — both seed stage funding via Enterprise Ireland without a requirement for matching funds; and approved Business Angel funds. Also roll-over CGT relief for serial entrepreneurs (make an exit, re-invest in your next start-up). See the various recommendations in chapter 9 of the report….

      Also we propose a loan scheme (ie so no equity dilution…) for project investigation, up to 50K per project (recommendation 9.10).

      Re a national defense fund for IP, very intriguing suggestion….. I wrote about the international IP opportunity for Ireland and IP trolls at http://bit.ly/cVNhhK — which was based on some of the taskforce discussions. See also the proposal for the International Innovation Services Centre at the start of chapter 12 of the report.

      I hadn’t seen the NI Assembly work on procurement improvements, nor the great data from Business Week on Google angels, so thank you for both of those!

      And best wishes
      Chris

  6. Gerry says:

    Chris,

    Thanks for your postings – they made the report much more accessible and I am pleased to see the focus on indigenous start-ups having recently joined the ranks of the serial entrepreneurs.

    On the public procurement:
    In most large organizations a significant amount of innovation is “acquired” and consequently is it probably not justified that procurement is 100% conservative. We are tying the hands of our public servants unless they are explicitly tasked to spend some % of their overall procurement budget on taking risks to do things better.

    I was surprised that State aid rules are still being raised as a reason for not being more proactive on public procurement to support innovative companies. The UK http://bit.ly/9S5J3N and the Netherlands http://bit.ly/cGDfaV have developed programs to compete with the successful US SBIR program http://bit.ly/5AuYYW. There are even discussions about an EU wide SBIR scheme http://bit.ly/dpQYTM. I know Chambers Ireland made a submission on creating an Irish SBIR program, I was disappointed not to see any reference to it in the final report.

    I think flagship projects are a great idea for all sorts of reasons but by their nature they tend move too slowly and have too much admin for early stage start-ups. The advantage of SBIR procurement is their customer focus – the procuring agency has a real need that the start-up can address so there is potential for learning on both sides.

    A key thing about SBIR projects is that they de-risk the purchase from the customer’s perspective – while the taskforce report has emphasized the risk taking by entrepreneurs we probably need to acknowledge the risk taking on the part of customers in buying a new and unproven products and maybe we need to support them too?

    all the best

    Gerry

    • chrisjhorn says:

      Hi Gerry,

      A SBIR like programme is certainly under discussion within the civil service.

      In the last year or so, Enterprise Ireland have been undertaking some good initiatives across many Departments on promoting procurement from the SME sector. Simon Bradshaw has been leading this, see e.g. the new procurement guide.

      The flagship projects should not substitute the public procurement process. Instead they are intended to be open, collaborative projects for which there is benefit to Irish society at large and also – critically – huge export potential. They are also intended to include start-ups and SMEs, even if these are not members of the original consortium — one of the rules for awarding a flagship project is “ensure that other companies that can later add further value to the core flagship can participate if they so wish without having legal or financial obstacles, thus enabling start-ups and smaller companies to cluster around the core providers of the flagship”.

      So maybe SBIR and Flagships…

      best wishes
      Chris

  7. Liam McGarry says:

    Thanks Chris,

    Although Ireland has advanced IP legislation & judiciary mechanisms the issue faced by some small tech companies like ours is can we enforce a patent even if we get it, especially in the US (50% of our anticipated market)? If we can’t – is it worth patenting in the first place…

    Nevermind the 3 year delay for US Patents, the recent wave of US/Global lawsuits (Nokia, Apple, Kodak, etc), increase of opensource and creative commons ‘licences’… if we could have an inexpensive source of expertise and some form of state backed protection/insurance (even if this meant some form of securitisation or premiums), this would give us the confidence to patent more and make competitors think twice before taking us on. There are no guarantees but a shift in the balance to our favour could make all the difference for a company like Wee Man Studios

    Thanks, Liam

    ps two articles of interest – Can you copyright a tweet http://bit.ly/bNGrDp and recently launched report by the Royal Society on the need to invest in Science & Innovation in the UK http://royalsociety.org/news.htm

    • chrisjhorn says:

      It certainly is an interesting idea: I wonder whether if there were State backed protection/insurance, would/should the State then expect some claim on any license revenue produced ?

      Could the State manage a portfolio of IP patents and only license to Irish companies (…how to define the boundaries..) ? Could a private company (Irish presumably..) rather than the Irish State, do something similar instead ? An Irish “troll” friendly to Irish companies ?…

      Love the SWXS discussion on copyrighting a tweet – thanks! And the UK RS report.

      best wishes
      Chris

  8. Liam McGarry says:

    Chris

    I don’t think a system should be solely run by the state or restricted to ‘Irish’ companies (however defined). It could be initially sponsored by the state, but ultimately it should be self-sufficient and run by public/private board. Lets say the system is run by an ‘Operator’, one suggestion…

    Ireland creates a centre of excellence for IP & IP exploitation [ties in with legal infrastructure and desire to get more R&D in Ireland]. This is available to all Irish companies, multi-nationals and Universities [Users]. Users can get this expertise for a discounted fee providing patent first registered in Ireland and the patent is commercially exploited within 18 months.

    Where exploited the User can take out insurance with the Operator, say for 5% (exact figure, caps etc TBD) of future revenue from patent that provides ongoing legal protection for User.

    As part of the agreement between Operator & User, where the company goes bust or University project ceases – The Operator has first rights on the patent to exploit, sell or redistribute with priority given to proven Irish registered companies (e.g. serial entrepreneurs).

    Whether this is from a combination of Innovation Services Centre and/or Innovation Fund is open for debate.

    The goal is to encourage people to develop patents and commercialise them. Small companies get expertise and reduced risk. Larger companies register patents first in Ireland, which along with advanced legislation should encourage Ireland to be viewed as a preferred IP location by companies and professionals. There could even be some form of tax incentives to assist this.

    Ireland benefits by developing expertise in all aspects of IP, keeping patents in circulation and encouraging commercialisation.

    Regards, Liam

  9. Chris,

    Thanks for the efforts you dedicated to this innovation task force. It seems that the report has many good ideas on how to help grow innovative businesses in Ireland. In addition I think your efforts to explain it via your blog have been very helpful.

    One recommendation that surprised me was Introduce a scheme to enable a number of public servants each year to be placed into innovative high growth companies. How would you see this scheme working? What would the public servants do during their placement and who would select the companies to receive placements?

    Brian

    • chrisjhorn says:

      I think the proposal needs to be developed, but the basic idea I believe is that companies can offer to be a part of the scheme, and civil servants can so volunteer too; that the civil servants continue to receive their normal remuneration; and that the companies and civil servants match each other.

      best
      Chris

  10. Hello Chris
    Congratulations and thanks to the Task Force for its work.

    I thought it would be interesting to dust off a report entitled Stimulating Indigenous High Tech Manufacturing Industry which I wrote back in 1983 for an Education, Innovation and Entrepeneurship Research Programme.

    It estimated that, at that time, there were about 20-40 high tech firms in Ireland employing between 400 and 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 didn’t 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 using 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 here http://www.planware.org/briansblog/resources/sihtmi%20report%20summary.pdf

    • chrisjhorn says:

      Brian,

      I wasn’t previously aware of your report, and I think it would have been fascinating reading for all of us on the Taskforce to have read as part of our work — indeed, for anyone else reading this comment, can I suggest you take a look at Brian’s report from 1983 (link above)…

      Particularly interested in those recommendations from page 10 onwards which resonate today in the Taskforce report:

      – need for risk capital
      – need to augment domestic entrepreneurs with attracting overseas ones
      – shortage of international commercial skills
      – need for more progressive procurement policies by the State
      – need for oversight committee for the enterprise economy with public and private sector and Ministerial engagement
      – co-ordinated focus around a single enterprise agency for delivery of support and aid
      – grant aid for early stage ventures
      – put “wood behind the arrow” in a few carefully selected market niches
      – tax incentives to foster private risk capital
      – aid, coaching, administrative support from large established companies to younger smaller ones

      What happened to your report Brian (I note that you published it as a book, although Amazon has it out of print) ? Was there much public and policy debate and engagement at the time ?

      Fascinating.
      Thanks and best wishes
      Chris

  11. Hi Chris

    I had intended to send it as a submission to the Task Force but I forgot! It might have been a useful historical benchmark.

    The report was funded by a NBST program and published by them – apparently this included selling through bookshops around Dublin. Amazed you found a listing on Amazon. Would there be any interest in seeing a scanned copy of the full report (about 140 pages)?

    As I recall it, the report was viewed as being critical by the establishment. The Minister for Industry was due to formally launch it along with other reports in the series but, apparently, he back off because of my report’s criticisms of policies, structures and progress. Also, the report generated some negative headines which the agencies didn’t like. That aside, there was no discussion that I know of. I remember at the time thinking that it was the best report I had ever written as a consultant – so positive, forward looking, cutting edge etc. – and very disappointed that there was no follow up. I used to affectionally call it the SH*T report for short. For my part I subsequently formed a company “Invest-Tech” to try and implement the findings at venture level. I still run it via http://www.planware.org but its activities and ambition never lived up to its name.

    Thanks for responding
    Brian

    • chrisjhorn says:

      Hi Brian,

      I found the Amazon reference here.

      It might be worth scanning the entire 140 pages – if thats not too much of a job!! – and putting them up online somewhere: let me know…

      best wishes
      Chris

  12. OK. I’ll scan over next few days and post link.

    Brian

  13. Jean-marc Soustre says:

    Hello Chris,
    First of all let me congratulate you for clarifying the document.
    I would be delighted to get your view on the following points:
    1. we have created a Hub in Europe for online companies (Google, Facebook,Amazon, Microsoft etc…). These companies traffic billions through Ireland and as such generate taxes. All these companies have claimed loudly that their strategy is not online, but mobile for the next 10 years.
    Although it may offer quick wins – since it is an easy step forward in our strong position – I am not sure this has been taken into consideration. Moreover if we do not move forward… Any thoughts? Happy to discuss and share some ideas.
    2. Although it clearly appears that startups are essential, you also pointed out that the local market cannot sustain growth expectations. Hence the question: is there any way we ( IDA, EI NDRC etc…) can improve the exposure of our startups in the European level?
    Thank you again, Chris, for that great contribution.
    Best
    JMarc

    • chrisjhorn says:

      Hi Jean-Marc,

      good to see you at the Atlantic Corridor event recently..

      There is a fair amount of Irish start-up activity in the mobile world, but not to my knowledge particularly well integrated with the major players you mention – I may be wrong. Apps – in particular games – for mobile platforms like mobile Facebook – could be very interesting…

      Interesting observation on Europe and Irish start-ups: I had a private email comment from a good friend recently:

      The fact that Ireland has a comparatively huge number of 2-3 person software start ups but not a single representative currently in the EU Truffles 100 Software Companies says it all (though some may flip to the US earlier than from other jurisdications and skew the results a little).

      In general the Irish start-up community IMHO tend to focus on US (and UK) because of language; and in general are shyer about Europe and Asia. I guess the issue is which markets can drive scalable growth ?..

      best wishes
      Chris

  14. >In general the Irish start-up community IMHO
    >tend to focus on US (and UK) because of language;
    >and in general are shyer about Europe and Asia.
    I agree with you there.

    Our focus on UK and USA has served us well in the past, but in the future we need to focus on higher growth markets. Language will not be as much a barrier as we think since many people in these markets are growing their English language skills. Instead the issue will be one of where we focus.

    When I was young we were told that Ireland was a “developing nation” – not quite as well developed economically as e.g. Germany or USA, but still not quite a 3rd world economy. During the celtic tiger years we started to align ourselves more closely with the G7 developed nations. I think our recent emergence from bad times gives us a natural affinity with many of the new developing nations (e.g. India, China, Brazil adn Russia) and it would be a shame to waste this linkage.

  15. Hi Chris
    I have placed a copy of the full report (140 pages) at
    http://www.planware.org/briansblog/resources/sihtmi_report_full.pdf

    Bear in mind that it was written in 1983 when:
    – The Domain Name System for the Internet was created
    – Compaq launched the first portable PC.
    – 64k 8-bit memory devices were the norm
    – Lotus 1-2-3 and the IBM PC XT were launched
    – World market for NMR imaging machines was about 80 units
    – UK introduced the Business Expansion Scheme
    – EEC was formulating plans for technology support programmes.

    A lot of innovation has flowed under the bridge since then!

  16. Hi Chris,

    Thanks for your article, very thought-provoking as always.

    I’ve been following the commentary on the report since it launched and heard an interesting debate (I think on Marian Finucane’s show) about the recommended focus on science and mathematics in second and third level education. Their point was that the education system should be about producing well-rounded individuals, not about feeding an economic machine. Whether you agree or not, it occurred to me as I listened that perhaps we are overlooking the obvious in our rush towards science and technology.

    We live in an online world now and perhaps we should be focusing far more on evolving our communication skills (via all languages) across offline and online media. As an articulate, creative nation with a reputation for story-telling and friendliness, surely we are exceptionally well-positioned to capitalise on the rise of social media and online communication in general? Not quite sure how this would be incorporated into our education system but we should be very careful that we don’t lose one of our national cultural assets – a love of the spoken and written word.

    Siobhan

    • chrisjhorn says:

      Hi Siobhan,

      I didn’t hear the debate on Marion Finucane’s show (if indeed it was on her show). I think I would personally argue that competence in mathematics is absolutely fundamental to producing well rounded individuals..

      I think of mathematics as the skill of spotting patterns, learning to identify and classify them, and re-apply them in new situations – a core skill as a learning and intelligent human being.

      Likewise, science is the discovery and understanding of what exists around us. I would have thought that a desire and knowledge to understand what exists is also fundamental to a well rounded individual.

      On articulation and communication, one of our goals in the Science Gallery is to place researchers into the public forum where they can explain their ideas, theories and research to “ordinary” members of the public. It is also a place to be discovered, at the confluence of science and art.

      Just my 2c

      best wishes
      Chris

  17. david moloney says:

    Dear Chris,

    your introduction to the report is indeed interesting as is the report itself.

    Understandably the report attempts to be inclusive and to plan for the long term which is all good.

    The problem is that since 2001 the world in which the knowledge economy has operated has been changing rapidly and the speed of that change is accelerating.

    Large swathes of the economy have been unaffected by globalisation and have not seen what is coming down the pipe but from the IT sector and from my own perspective it is a case of having to run in order to even attempt to stand still.

    We are simply not educating enough engineers and scientists and the people entering these courses are simply not the highest calibre students.

    In Romania a single city of 500,000 inhabitants with 2 Universities graduates about 1000 engineers and computer scientists each year, more than the output of all the Iriah universities combined.

    What’s more engineers get paid about 3x what a surgeon in the public sector can expect in terms of salary, therefore IT courses attract the brightest and the best.

    You mention that in China people’s overriding aspiration is to become rich.

    I would say that the only way they see of becoming rich is to start their own enterprise.

    This is again because there are no protected sectors of the economy.

    I think you are correct about risk capital availability.

    Providing risk capital and rewarding early stage investment is critical to priming the pipe for graduates.

    However the fundamental problem is that the VC model is broken.

    It is no accident that most VCs have moved to later stage deals.

    What we need is an overhaul of the tax-system to ensure a return for those investors who invest at an early stage.

    A few years ago I heard from more than one individual who might have gone into a BES or similar scheme, “why would I invest my money in your company when I can invest in property or in bank shares”!

    CGT should reflect the associated risk and the length of time capital is left at risk.

    In my opinion sweat equity should be treated in the same way as any other risk capital.

    In my own case a BES investor could walk in off the street and get tax relief, and there was no seed-capital or other relief available.

    There needs to be an incentive for experienced professionals to give up their careers and go out on their own.

    This is where we are failing and the battle will be won or lost here long before longer term plans can come to fruition.

    Regards,

    -David

    • chrisjhorn says:

      Thanks David.

      There was much thought given in the Taskforce, and now reflected in its recommendations, to the need to greatly increase start-up capital and angel funding. The report recommends Enterprise Ireland make this one of its very highest priorities. There are also recommendations on boot-strapping angel communities, loans (not grants or equity..) to investigative projects, roll-over of CGT from exits to foster serial entrepreneurship etc.

      best wishes
      Chris

  18. Seamus Grimes says:

    [[This comment is posted by Chris on behalf of Seamus Grimes of NUI Galway, who apparently had problems himself in posting it directly..]]

    Having read the document, I would acknowledge that the report has considerable substance. The question is does it hang together?

    I think it is more balanced than some of the recent policy documents in recognising the future role for both inward investment and indigenous activity. I would like to see a more critical acknowledgment of the current balance of these two sectors in terms of the contribution they make to wealth creation. The report notes that both EI and IDA client companies make equal contributions in terms of employment and the purchasing of goods and services locally. While this is correct, it should look also consider the huge discrepancy (almost 10 to 1) in terms of exports.

    We should be wary about promoting ‘green’ (as in patriotic) capitalism, or indeed what Bhide calls ‘techno-nationalism’. Yes, there are benefits to controlling decision-making, but the global economy is not about embedding economic activities locally. Even small Irish technology companies must go global. In the world in which we live, Ireland must develop activities within an international/global context. While this report makes some attempt to deal with this broader context, it remains strongly Ireland-centric in many respects, as opposed to seeing Ireland’s role within an international context. The underlying issue about whether we should be good copycats or original generators of technology, etc needs to considered. There has been considerable organisational innovation within the context of foreign multinationals in Ireland, and the payoff in terms of sustaining operations in the country does not appear to be sufficient. The real challenge, however, lies in commercialising globally whatever technology or services originates within the control of Irish companies, before ther are bought off by multinationals who control much of the key markets.

    While accepting the fact that it attempts to look at both FDI and indigenous activity, there is a strong trend towards an endogenous view of development, as if to say we have tried the FDI model, now we must try a different approach. Unfortunately for policymakers, after a 15 year period of catching up with European core regions, we are now back to the basics and urgency of job-creation. Of course we want this next stage of development to be sustainable, but there is a huge pressure to make things happen in the short-term. I believe that while we must begin the job now, that promoting sustainable endogenous development is quite a long-term programme of at least 20 years. In the meantime we need to build of existing strengths, and we seem to have great difficulty in articulating what these are: the report makes a listing of key factors, but never really gets into specifying what the overall comparative advantage of Ireland’s niche role within global production and servicing is. The evolving multinational subsidiary model operating in and from Ireland in the EMEA region and beyond has been as much about transfer pricing as low corporation tax. On the other hand the report does have some recommendations about developing Ireland as a European innovation hub for services and particularly the management of multinational IP. It is good to see some positive suggestions along these lines for the next stage of the FDI model, which no doubt will remain significant for many years to come.

    The ongoing dominant role of multinational subsidiaries in our economy presents many challenges for policy makers, but it also provides some opportunities. A key issue is the extent to which the local management has autonomy about future developments. I would suggest that the record to date in terms of evolving towards more sophisticate activities has been quite good. Much of the policy thinking, however, tends to focus strongly on the indigenous sector. Perhaps this is partly explained by the difficulty of developing strategic plans for what are really only intermediate nodes within global production networks. How can such subsidiaries begin to think in terms of developing markets beyond the EMEA region and servicing them from Ireland? The report does give China a fleeting reference, and makes some vague remark about a new Trade and Investment Strategy in relation to Asia, but otherwise the focus in very much on Ireland in Europe.

    • chrisjhorn says:

      Hi Seamus,

      I made some comments on Enterprise Ireland and the IDA’s performance over the decade in an earlier post.

      The Taskforce views the multinationals here as a competitive advantage for Ireland, as I indeed noted in the main posting here. I also believe the Taskforce absolutely considered the international context, including in particular China, and the opportunity to become the best location within Europe for any European entrepreneur to become successful — with one of the strategic advantages being precisely the presence of the multinationals in Ireland…

      I think the Taskforce has tried to bridge the apparent gap in previous enterprise policy on the pros and cons of indigenous vs. multinationals. The opportunity is to link both, not least to take dormant intellectual property and orphan projects out into new companies..

      best wishes
      Chris

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  20. david says:

    Hi Chris,

    is there any update on what the government have done in the past 6 months to implement the recommendations of the task-force, given so much effort went into generating the report by people who have very demanding day-jobs?

    Or has the report ended up in the dustbin in Leinster house as I suspect?

    -David

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