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InnovatIon taskforce

Report of the Innovation Taskforce

March 2010

Baile Átha Cliath

Arna Fhoilsiú ag Oifig an tSoláthair

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ISBN 9781406424966

March 2010

Department of the Taoiseach,

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Foreword from the Taoiseach 1

Executive Summary 2

1. Vision 7

OurVision–InnovationIreland 7

ATimetobeAmbitious 8

TheNeedforanInflectionPoint 9

ANationalEffortisRequired 11

2. Context 13

EvolutionofEnterprisePolicy 13

ScaleoftheChallenge 17

SmartEconomyFramework,InnovationandEnterprisePolicy 18

EconomicandBudgetaryContext 19

3. theinnoVationeCosystem 20

OurConceptofInnovationhasBroadened 20

InnovationEcosystem 21

RoleoftheEntrepreneur 22

TheTaskforce’sApproach–PlacingtheEntrepreneur/EnterpriseattheCentre 22

4. PrinCiPlesforsuCCess 23

5. strengtheningtheKnowledgeBase 25

StateInvestmentinR&D 26

ImprovingHumanCapital:PrimaryandSecondLevelEducation 28

ImprovingHumanCapital:HigherEducation 29

ContributionofArts,HumanitiesandSocialSciences 31

CultivatingEntrepreneurshipinHEIs 32

BuildingtheCohortofWorldClassGraduatesWorkinginIreland 32

InternationalStudents 33

Life-LongLearning 34

6. transferringKnowledge 35

KnowledgeTransferfromHigherEducationInstitutionsintoIndustry 36

StrengthenEntrepreneurialCultureinHigherEducationInstitutions 37

FurtherAssistingCommercialisation 38

IntellectualPropertyArisingfromStateSponsoredR&DinHigherEducationInstitutions 39

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7. sCalingirishComPanies 43

GrowthCapital 43

Incentives 46

ExecutiveSkills 47

8 transformingirishenterPrise 48

FlagshipProjects 48

ConvergenceandInter-FirmCollaboration 50

LeverageNon-EuropeanInnovation:EuropeanAcceleratorProgramme 52

IncreasingR&DandInnovationCapacityWithinSMEs 53

NewProductDesignandDevelopment 54

CapturingOpportunitiesinFDI–A‘TeamIrelandApproach’ 56

SectoralActions 58

TaxRecommendations 61

TaxationofIntellectualProperty 62

TheR&DTaxCredit 62

MakingIrelandanAttractivePlaceforMobileTalenttoReside 63

9 inCreasingstart-uPs 64

TheInnovationFunnel 64

RoleofEnterpriseIreland 66

AngelFunding 68

TaxIncentives 69

BESandSeedCapitalReliefs 71

AttractEntrepreneurstoIreland 72

FeasibilityandProductInvestigation 74

10 suPPortingtheentrePreneur 75

EnterpriseAgencies 75

DevelopingtheEnterpriseCompetenceofPublicServants 76

IncreasingInterestIn,andAwarenessof,InnovationandEntrepreneurship 76

IntellectualProperty,EducationandRelatedSupports 77

InnovationPortal 78

BankruptcyLegislation 78

11 imProVingtheinfrastruCture 79

BroadbandInfrastructure 79

LaboratoryFacilities 80

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12 marKeting‘innoVationireland’ 81

InternationalInnovationServicesCentre 81

StrengthenIreland’sPositionasaLocationforResearch&CommercialisingIP 82

Marketingandpromotion 83

LinkstoAsiaandotheremergingmarkets 84

LinkswiththeDiaspora 84

North-SouthCo-operation 85

13 measuringsuCCess 87

EmploymentObjectives 87

SourceofJobs 89

PositiveFeedbackLoop 89

Metrics/Targets 90

MeasuringReturnsonStateSupportedR&D 91

14 imPlementingtherePort 92

ImplementationTable 94

aPPendiCes

1 MembershipoftheInnovationTaskforce 101

2 GlossaryofAcronymsandAbbreviations 108

3 ConsultationProcessandSubmissionsReceived 111

4 WorkingMethods 113

5 SummaryofStakeholderSurveyResults 114

6 SupportingTaxRecommendationsandComments 116

7 AdditionalProposalstoSupportMarketingIrelandasa LocationforResearchandCommercialisingIP 119

notesandreferenCes 120

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ForewordInDecember2008,theGovernmentpublisheditsmedium-termeconomicframework - Building Ireland’s Smart Economy - whichcontainsfivekeyactionareasfordrivingproductivitygrowthacrossallsectorsoftheeconomy,publicandprivate.ThisreportfromtheInnovationTaskforceisconcernedwithoneofthoseactionareaswhichinvolvespositioningIrelandasanInternationalInnovationHub.

WhentheTaskforcefirstmetjustoversixmonthsagoIreferredtotheGovernment’svisionforIrelandas“aninnovative,high-valueexport-ledeconomywithsomeoftheworld’sleadingresearch-intensivemultinationalsandthousandsofinnovativesmallandmediumenterprises.”IampleasedthattheTaskforcehasendorsedthisvision.However,whiletheTaskforcehasshownthatthe‘glassismorethanhalffull’intermsofIreland’scurrentperformanceandpotentialininnovation,ithasalsomadeclearthatIrelandstillhasadistancetotravelifwearetodevelopanInnovationEcosystemtomatchourambitions.

InthisReport,theTaskforcehasproducedmanyrecommendations,allfocusedonsupportingtheentrepreneurandenterpriseastheheartofthisecosystem.Theyhavefocused,correctly,onhowtodeliverastep-changeinthelevelofcompanystart-upsandtheirgrowthtointernationalscaleinorderdrivejobcreationininnovative,export-focusedsectors.

TheTaskforcehasmadeawiderangeofrecommendationsincludingintheareasofinvestmentinR&D,thehighereducationsector,accesstoIntellectualProperty,publicprocurement,taxandotherincentives,convergenceandotheropportunitiesfortransformingexistingcompanies,infrastructureandmarketing.

Thereportcontainsmanyinterestingideas,aswellascallingforreinforcementandbetteralignmentofexistingeffortsandprogrammes.Italsoposesachallengetoindustrytoseizetheopportunitiesarising.IlookforwardtoworkingwithmycolleaguesinGovernmenttotakeforwardtheTaskforce’srecommendationstomakeIrelandanInternationalInnovationHub.

IamveryencouragedbytheinterestintheworkoftheTaskforceanditshowsalevelofenergywhichweneedtocaptureaswemoveforward.IknowthattheTaskforcehas,byitself,alreadybeenanimportantstimulustothinkingandactionbymanyorganisationsandindividuals.

Finally,IwouldliketoexpressmysinceregratitudetotheTaskforcemembersfortheirexceptionalcontributionoftimeandeffortwhichhasresultedinacomprehensive,timelyandimportantreport.IcanassurethemthattheirworkisofcentralimportanceindeliveringtheGovernment’svisionforIreland’seconomicrenewal.

BrianCowen,t.d.Taoiseach

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Executive SummaryDespitetheseriouseconomicchallengecurrentlyfacingIrelandinrespondingtotheglobaleconomiccrisis,stabilisingthepublicfinancesandprotectingjobs,wehaveanopportunityatthesametimetolaythefoundationsforfutureeconomicgrowth.

Increasingourcompetitivenessbyreducingcosts,stabilisingthepublicfinancesandpreparingforaglobalrecovery,whileessential,willnotbeenoughtoensurewereturntosustainableeconomicgrowth.Increasingproductivity,thatisdevelopingnewwaystogetahigherqualityandquantityofoutputofgoodsandservicesfromeachunitofinput,isthekeydriverofeconomicperformanceandsustainability.Innovation,inboththeproductionanduseofideas,technologyandprocesses,isimportantinthiscontextbecauseitisakeydriverofproductivity.

whatisinnoVation?

“Innovationentailsinvestmentaimedatproducingnewknowledgeandusingitinvariousapplications.Itresultsfromtheinteractionofarangeofcomplementaryassetswhichincluderesearchanddevelopment,butalsosoftware,humancapital,design,marketingandneworganisationalstructures–manyofwhichareessentialforreapingtheproductivitygainsandefficienciesfromnewtechnologies”.OECD1

Whatweneedtodonowistoplaceinnovationattheheartofenterprisepolicy.OurfutureeconomicsuccessdependsonincreasinglevelsofinnovationacrossallaspectsofIrishenterprise–fromlargeIrish-ownedmultinationalstoforeignmultinationalslocatedheretoestablishedSmallandMediumEnterprises(SMEs)inservicesandmanufacturing,aswellasstart-upsandexistingcompanieswithhighgrowthpotential.

Innovationisabroadconceptandextendsbeyondtheenterprisesector.TheInnovationTaskforceendorsesBuilding Ireland’s Smart Economy,whichprovidesaframeworkacrossfiveactionareasforenhancingproductivityandpromotingsustainablegrowthintheIrisheconomy.

ThisreportdoesnotaddressallaspectsofthatSmartEconomyagendabutitdoesaddressonevitalaspect.Inlinewithourtermsofreference,ourfocusisonActionArea2inBuilding Ireland’s Smart Economy, namely “building the innovation or ‘ideas’ component of the economy through the utilisation of human capital – the knowledge, skills and creativity of people – and the ability and effectiveness of that human capital to translate ideas into valuable processes, products and services.”

Wedonotclaim,orbelieve,thereforethatthisReportisasolutiontoallofIreland’seconomicchallenges.Itdoes,however,containavisionandrecommendationsthatwebelievecanleadtoasignificantstep-changeinrestructuringtheeconomytowardsexport-ledsectors,arevivalofproductivitygrowthandthecreationofsustainableemploymentforfuturegenerations.

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irelandhasmanyattributeswhichmakeitsuitedtobecominganinnovationhubineurope.over500millionpeoplelivewithinathreehourflightofdublin.wehavefavourabledemographics,astrongeducationalstandard,agoodtaxandregulatoryenvironment,agrowingentrepreneurialcultureandaninternationalmindset.wehaveareputationforculturalinnovationandalargediasporawhoaretalentedinmanyfields.wehaveanexcellentgroupofinnovativemultinationalcompaniesandhaverecentlyhadsignificantsuccessinattractinghigh-valueresearch&development(r&d)activityintoireland.nevertheless,weneedtodomore.

ouraimisthatby2020irelandwillhaveasignificantnumberoflarge,worldleading,innovation-intensivecompanies,eachhavingaglobalfootprint,manyofwhichareirishheadquarteredandowned. Thesecompanieswillprovidehigh-qualityemploymentandgenerateexportsandtaxreceipts.Theywillvaryinscale,typeofactivityandpatternofcompanyownership.Whatwillbedistinctiveaboutthesecompaniesisthattheywillbeambitious,export-focusedand,aboveallinnovative.

inordertoachievethisvisionandsecureireland’seconomicfutureweneedtosignificantlyincreaseourcurrentrateofjobcreationandnewcompanystart-ups.

Thisrequiresaconcentratedandfocusednationaleffort.Policyandinvestmentdecisionsmustbecentredonsupportingandencouragingtheentrepreneurandinnovativeenterprisesthroughdrivinganeconomicandbusinessmodel,whichisbothinvigoratingandself-renewing.

Tomakeinnovationworkforuswehavetodevelopanecosysteminwhicheachelement,andeachinteraction,supportsinnovationacrosstheeconomyandsociety.Thekeyelementsinsuchanecosystemare:

a. Entrepreneursandenterprises(indigenousandforeign-owned);

b. Investmentinresearchanddevelopment;

c. Theeducationsystem,inparticular,highereducationinstitutions;

d. Finance,inparticularriskcapital;

e. Thetaxandregulatoryenvironment;

f. Publicpolicyandinstitutions.

TheTaskforceagreedsixprinciplesasfundamentaltocreatingthisecosystemandtransformingIrelandintoanInternationalInnovationHub.Theseare:

1. Theentrepreneurandenterprisemustbeatthecentreofourefforts.

2. Establishing,attractingandgrowingandtransformingenterprisesmustbethefocusofacoherentnationaleffort.

3. Availabilityofsmartcapitaliscrucialforstarting,growingandtransformingenterprises.

4. Aneducationsystemwhichfostersindependentthinking,creativityandinnovationisvitaltoachievingtheSmartEconomy.

5. TheStateshouldactivelyacceleratesuccessbyencouragingflagshipprojectsandbyprioritisingtheprovisionofexcellentinfrastructure.

6. WemustsharpenthefocusofournationalresearchsystemtotargetareasofpotentialstrategicandeconomicadvantageforIreland.

Knowledgeisthecurrencyoftheinnovationeconomyandtheeducationsystemispivotalinmakinginnovationhappen.WehavemadesignificantinvestmentinR&Dinrecentyearsandwemustbuildonthisinvestmenttostrengthenthebaseofknowledgewhichisanessentialelementofasuccessfulinnovationecosystem.

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that is why our first key recommendation is to deliver on the investment framework set out in the strategy for science, technology and Innovation (sstI) 2006-13 and achieve the goal in the renewed Programme for Government of investing 3% of GDP in r&D by committing to investment in an updated sstI for the 2014-2020 period.

Thisrequiresgreaterandmoreco-ordinatedpublicresearchinvestment,leveragingofmoreprivatesectorinvestmentandchannellingthisinvestmentintoagreedareasofnationalpriority.

Webelievethatcurrenteconomicdifficultiesshouldnotbeallowedtodiminishthelevelofinvestmentwhichwebelieveisnecessaryorinhibitthereturnoninvestmentsalreadymade.AmoreefficientandeffectiveapproachtoidentifyingandaccessingIntellectualProperty(IP)arisingfrompublicresearchinvestmentisvitalifwearetostrengthenourcommercialisationfocus.WemakeanumberofrecommendationsinrelationtoIPwhichwebelievecouldmakeIrelandacentreofinternationalbestpractice,creatingsignificantemploymentandForeignDirectInvestment(FDI)opportunities.

akeyrecommendationisthedevelopmentofanationaliPprotocolasapriority,sothatentrepreneursandcompanieshavepredictabilityaboutthetermsonwhichtheycanaccessiPcreatedathighereducationinstitutions(heis)inordertoturnitintoproductsandservicesthatmeetcustomerneeds.

WealsorecommendthatmoremeaningfulmetricstomeasureperformanceofHEIsandTechnologyTransferOffices(TTOs)shouldreflectthisProtocolandthataportionofstatefundingforHEIsmightbelinkedtothesemetrics.

the achievement of clarity and consistency in our national IP regime will set a standard for the consistent and speedy treatment of IP and give us a competitive advantage within the eU while the process of finding, accessing and bundling IP from the HeIs needs to be rationalised.

We recommend that we build on this advantage by developing and marketing Ireland as an International Innovation services centre offering global IP management, licensing and trading services.

Ifwearetostartandgrowinnovativeenterprisesonanunprecedentedscale,wealsoneedtoincreasetheavailabilityofsmartcapital.AkeygoalmustbeatransformationinthescaleandnatureoftheirishVentureCapitalenvironmentbyattractingtoptierventurefinancingtoirelandsoastosuccessfullyscaleinnovativecompanies.ThiscanbestbeachievedthroughtheInnovationFund-Ireland,asenvisagedinBuilding Ireland’s Smart Economy, implementationofwhichwillbeshapedbythemarket-testingexercisecurrentlyledbytheNationalTreasuryManagementAgency(NTMA)supportedbyEnterpriseIreland(EI).

Wemustalsorealisetheopportunitytoredirectcapitalinvestmentintoinnovativecompanies,includingthrough“businessangels”whoalsotransferknowledgeandexperience.

that is why we recommend that Ireland should nurture a national portfolio of Business angel funds. Until this has been achieved, we suggest that temporary state intervention in the form of a new seed capital scheme is required. We also identify a set of tax initiatives to incentivise start-up and angel funding activity.

WhileEnterpriseIrelandisveryactiveinthisspace,ithasabroadfocusandwebelievethatitmustincreasinglyfocusonstart-upandearlystageactivitiesifwearetoachievethejobcreationtrajectoryenvisagedinthisReport.

OneofIreland’smostsignificantattributesandopportunitiesindrivinginnovationisitsvibrantmulti-nationalcommunity.Despiteincreasingcompetition,therearenewForeignDirectInvestmentopportunitiesforIrelandtobeexploitedbytheIDA,aswellasscopetotransformexistingFDIenterprises.TheattractionofbluechipcompaniestoIrelandtocarryoutresearch,development,productdesignandotherinnovationactivitieshereisanincreasinglyimportantstrandwithinourinwardinvestmentportfolioandwerecommendstepstostrengthentheinnovationecosystemtherebyhelpingtoattractmorenewinvestmentandembedexistingfdi.

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wealsorecommendmeasurestohelpincreaser&dandinnovationcapabilities,includingintheareaofproductdesign,withinirishindustry.

Aswellassustainingourstrengthsinparticularsectorswemustalsograspthesignificantopportunityofferedbynewdevelopmentsinconvergingtechnologies.Wemuststrengthenandscaleindigenouscompaniesincludingthroughincentivisingcollaborations.WebelievethattheStatecanleveragetheseexistingattributesandresourcesinavarietyofwaystodriveourtransformationtoanInnovationHub.

Forexample,werecommendthatirelandcanbranditselfasaninnovationhub,infactandinimage,throughattractingtheeuropeanheadquartersofprivateuscompaniesviaaspeciallydevisedeuropeanacceleratorProgramme.

Webelievethatpublicprocurementshouldbeusedtodriveandstimulatethedevelopmentofinnovativesolutionswithexportpotential.wethereforerecommendthatanumberofcarefullyselectedflagshipprojectsshouldbesetintrainrequiringthedevelopmentofinnovativenewproductsandservices,manyofwhichwilloccurthroughcross-sectoralcollaborationbetweencompaniesbothindigenousandmultinationalCorporations(mnCs).

Furthermore,weproposethatateamfromthekeyagenciesshouldbeformedtoensurethatwetakefulladvantageofnewopportunitiesinconvergencebydrivingthenecessaryinvestment,regulatoryandeducationactions.

Ourfuturehumancapitalissignificantlyshapedbyoureducationsystem.Wethereforebelievethatinnovationandcreativitymustbepromotedatalllevelsoftheeducationsystem.IntheHEIsectorwesupportthedeliveryofscaleandcapacitythroughrationalisation,collaborationandalliancessuchastheInnovationAlliancebetweenTrinityCollegeDublinandUniversityCollegeDublinandtheStrategicAlliancebetweentheNationalUniversityofIreland,GalwayandtheUniversityofLimerick.LookingtothefuturewemustdevelopsufficientrevenuestreamstosustainexcellenceinourHEIs.

AtsecondlevelweneedtoraiselevelsofcompetenceandattainmentinmathsandsciencessubstantiallysuchthattheyfeedintoScience,Technology,EngineeringandMaths(STEM)disciplinesatthirdandfourthlevelsandweneedtodevelopandreinforcecreativityandproblemsolvingcapacitiesacrosstheworkforce.WebelievethatmathematicsattainmentiscrucialinthisregardandsuggestadditionalmeasurestoimprovethisincludingincentivessuchastheawardingofCaobonuspointstothosetakinghigherlevelmathematicsforLeavingCertificate.

Similarly,entrepreneurialskillsneedtobefosteredatsecond,thirdandfourthlevelsofoureducationsystem.Webelievethatamoreconcertednationaleffortatworkforceup-skillingisalsoessentialforacompetitiveandproductiveworkforcetosupportdevelopmentofasmarteconomy.Westronglysupportplacementschemesincompaniesforbothgraduatesandundergraduatestofacilitatethetransferofhightechnologyskillsandexpertise.

Giventhescaleofourambitions,andthechallengesIrelandfaces,werecognisethatwemustalsoincreaseourcurrenthumancapitalstockbyproactivelyattractingpeopletoirelandtostartupinnovativecompanies,toaugmenttheindigenousbaseofpotentialentrepreneurs.

Thisrequireseffectivemarketingtoensurethatpotentialinvestors,entrepreneursandresearchersareattractedheretohelpstrengthenourinnovationeco-system.AllStateagenciesandHEIsneedtojointlymarketandbrandirelandasaleadinginnovationlocationanddestinationofchoiceforeuropeanandotheroverseasinvestors.WeneedtofullyutilisethewillingnessoftheDiasporatocontribute,whilestrategicallyre-focusingeffortstowardsnewandemergingmarkets.

Keytothiseffortisanorganisedprogrammeofvisitsandotheractivitieswherebyministers,departmentsandstateagenciesconveyaconsistent,positivemessageaboutirelandasacentreofexcellenceforinnovation.

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Wealsoneedtofindwaystoenhanceunderstandingacrosssocietyoftheroleeverypersoncanplayinbuildinganinnovation-intensiveeconomyandmakingtheSmartEconomyareality.

Weneedaseachangeinattitudes–inpublicandprivatesectors-towardsinnovationandentrepreneurship,torecognisethattheyinvolverisk,andoccasionallyresultinfailure.Legalarrangementsalsoneedtoavoidanysenseofstigmafromafailedbusinessventureprovidedtherehasbeenareasonableapproachtobusinessrisk.thatiswhywerecommendthatpersonalbankruptcylegislationneedstobereformed.

HighqualityphysicalinfrastructureisanotherimportantingredientinbuildingasuccessfulandinnovativeeconomyandinattractingoverseasentrepreneursandFDI.UniversalaccesstohighqualitybroadbandisonekeyinfrastructurefortheSmartEconomy.whileirelandhasseenincreasinguptakeofbroadband,acceleratedprogressisrequired.wealsoidentifywetlaboratoryspaceforlifesciencesasadeficitwhichmustbeaddressedasamatterofpriority.

Giventhescaleofthetransformationnecessaryandthebroadrangeofactionsrequiredweneedcleartargetsagainstwhichprogresscanbemeasured,andmechanismsfordoingso.Wehaveprovidedanestimateofhowmanyjobsmightbecreated–117,000by2020isatthelowerendofourprojections(seeChapter13)-andwebelievethattherecommendationssetoutinthisreport,ifimplementedinacoherentanddeterminedfashion,candelivertheinflectionpointinperformancewhichisrequired.

WebelievethatengagementbetweenitsmembershasalreadyenabledtheTaskforcetoinfluencepolicyandprogrammesrelevanttoinnovationoverrecentmonths.Wehaveidentified24KeyRecommendationswhichweconsidershouldbeimplementedasamatterofpriority.ourrecommendationsaresetoutinthetableonpages94 – 106,alongwithindicativetimelinesandcostestimatesandweproposethedevelopmentofmeaningfulmetricsbywhichtomeasureandevaluateprogress.

Werecognisethedifficulteconomiccontextandthatsomeoftheserecommendationshavesignificantcostimplicationswhichwouldrequirere-prioritisationoflimitedresourcesatatimeofseriousbudgetarypressure,whileothersrequireare-alignmentofeffortswithinDepartmentsandAgencies.themeasureswehaverecommendedaredesignedtosecuretheoutcomesweproposeasnecessaryandfeasible,anditisinthatcontextthatweputthemforwardforevaluationbythegovernmentasitprioritisesitsuseofscarceresources.Inthesameway,thesuggestedtaxchangescanbeevaluatedintheframeworkofanalysisoftaxreliefswhichinlinewithpublicpolicyshouldunderpinandjustifyallsuchprovisionsofthetaxcode.

WhileallrecommendationsintheReportarenotnecessarilysupportedbyallmembers,andmaynotrepresentthepositionofeachmember’sorganisation,thisreportrepresentsourcollectiveviewoftherightoverallpathwayforwardtocreateaninnovative,high-value,export-ledenterprisesector.

werecommendanewhigh-levelimplementationCommitteereportingtothetaoiseachandtheCabinetCommitteeoneconomicrenewaltoensurethattherecommendationsareimplementedinadynamicandresponsivefashionreflectingthefast-changingglobalenvironmentinwhichirelandmustcompete.

AlistofalltheRecommendationsalongwithassociatedtimelinesandresponsibilityforimplementationissetoutonpages94-106.

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1. VisionOur VisiOn – innOVatiOn ireland

“ The Ireland of the future will be a smart, high-value, export-led economy. It will have some of the world’s leading research-intensive multinationals, a number of which will be Irish-owned. It will have thousands of innovative small and medium enterprises.”

The Taoiseach, announcing the establishment

of the Innovation Taskforce, in June 2009.

+ We agree. Our vision is that by 2020 Ireland will be an Innovation Hub with a significant number of large, world leading, innovation-intensive companies, each having a global footprint, many of which are Irish headquartered and owned.

+ These companies will provide high-quality employment and generate exports and tax receipts. They will have scale, and will recycle capital and experience while reinforcing a positive international image of Ireland as a place to invest risk capital and develop new innovative products and services.

+ Our vision also involves the creation of thousands of innovative companies, from very small start-ups through small, medium and larger companies, many of which aspire to scale themselves.

+ This requires a transformation in how we generate jobs and growth, and a shift in how we learn and how we work. It means making connections between ideas and people in ways which have not been tried before. It involves re-evaluating our attitudes to both success and failure in order to reap the rewards of innovation.

+ Our vision encompasses existing companies and sectors that are strong in Ireland today with the aspiration to grow and innovate, thereby creating further jobs and profits. It requires a transformation of existing Irish businesses, as well as continuing to support moves by MNCs here into higher value activities which provide high quality jobs.

+ It also encompasses new companies: spin-outs from university or started by people working in Irish or MNC industry today. Many of these will be in emerging industries or in converging sectors using cutting-edge technology and concentrating significant efforts in research and development (a number of examples of innovative companies are interspersed in Textboxes within this Report).

+ To be very clear, our vision is not just about start-ups or businesses run by “people wearing white coats” - it includes family-run businesses, SMEs and MNCs that have been in existence in Ireland for many years. And they are supported by an innovative and entrepreneurial public service.

What is distinctive about these companies is that they are ambitious, they are export-focused and above all they are innovative.

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A TIME TO BE AMBITIOUS

WE NEED TO BE AMBITIOUS

Itissometimesassumedthatbysimplyimprovingcostcompetitivenesswewillreturntotheeconomicgrowthpaththattransformedthiscountryduringthe1990s.

Wedisagree.Whilewemustbecostcompetitive,weneedtofindnewsourcesofcompetitiveadvantagethatwillprovidehigh-qualitysustainablejobsandeconomicgrowth.

TheeconomicchallengefacingIrelandatthistimeistosecureareturntothehighestsustainablerateofeconomicgrowthbasedonrisingincomesperheadforapopulationwhoseemploymentrateishigh.

Successinmeetingthisobjectivewillrequireahighlevelofproductivityacrossthewholeeconomy,thatisthemeasureofthewayinwhichresources–physicalandhuman–aredeployedtoproducegoodsandservices.

Inthefirstinstance,thisrequiresthatproduction–andthecostofinputstoproduction–arecompetitiveintermsofinternationalmarkets.Thepressureonunitcosts,includingwages,iseasedasproductivitylevelsrisewithinandacrossfirms.

Productivitycanbeincreasedbyincreasingtheefficiencywithwhichresourcesareusedtoproduceexistinggoodsandservices.Thisisanimmediateandcontinuingimperativeforfirmsandthepublicservice,inallsectorsandatalllevelsoftechnologicalsophistication.

Butamorechallengingandultimatelymoreeffectiveroutetoproductivitygrowthisthroughthedynamicofferingthatflowsfromactivitiessuchasproductandprocessdevelopment,productdifferentiation,marketsegmentationandchangesinthecompetencesandscaleoffirms.Thesearethecentralelementsofinnovation,andtheyprovidethebasisforamoresustainableandlessvolatilegrowthperformancethanstrategiesfocusedsolelyonlowcostsandoperatingefficiencies.Innovationthereforeiseveryone’sbusiness.

Itisvitalforthesurvivalofexistingbusinessesandtheirprospectsforreturningtogrowth.Itisvitalforthepublicservice,ifthegrowingdemandsforservicedeliveryaretobemetinthefaceofsocialanddemographicchange.Itisvitalforemployersandentrepreneursatalllevels,iftheyaretohaveaccesstorewardingopportunitiesasthepaceoftechnologicalandorganisationalchangequickens.

Irelandneedsaradicalincreaseinjobcreationtoprovideopportunitiesforthosewhoarecurrentlyunemployedandthoseenteringthelabourmarketfromschoolsandcollegesovertheperiodahead.

Mostjobsintheeconomy,andmostofthejobsassociatedwiththerapidincreaseinemploymentoverthedecadeupto2005,arenotinoccupationswithahightechnologycontent.Thatislikelytobethecaseinthefuture.Butjobretentionandcreationwillrequirethatallsectorshavethecoreskillsandcompetenciestosuccessfullychangeinthewaytheyworkasnewtechnologiesandprocessesarediffusedandadoptedacrosstheeconomy.

Entrepreneurswillbeneededandwillneedtobesupported–toleadsuchchangerightacrosstheeconomy,inthepublicandnon-profitsectorsaswellasatalllevelsoftheprivatesector.

Fortunately,thereisevidencefromthesurveysofemployers2andemployeescarriedoutbytheNationalCentreforPartnershipandPerformance(NCPP)3,andfromthereviewoftheleadershipofchangeindifferentsectorsbytheNationalEconomicandSocialDevelopmentOffice(NESDO)4,thatthereisapositiveorientationtowardschangeandinnovationacrosstheeconomyandaresilienceinfacingtheprospectofcontinuingrapidandpervasivechangeintheworldofwork.

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Giventhatourinterestisintheeconomicimpactofinnovation–thatisinthejobsandvalueaddedgeneratedandretainedinIreland–wehavefocusedourattentiononhowinnovationinstrategicaspectsofIreland’seconomicperformancecanbeincreasedradically,tomatchthescaleofthechallengesweface.

Becauseinnovationappliedtoeconomicactivityisaninteractiveprocess,wehavelookedattheecosystemwhichsupportsandpromotesinnovationinIreland.TheactorsinthissystemandthewaytheycurrentlyinteractareuniquetoIreland,justaseverycountryandregionhasitsowninnovationcharacteristics.

ThisecosystemisoftendescribedintermsoftheplaceofscienceandtechnologyintheIrisheconomy,andthisisindeedcriticallyimportant.However,innovationextendsbeyondthistoinvolveinstitutionsconcernedwitheducationandthelabourmarket,aswellasthemarketsforknowledge(intermsofintellectualproperty)andfinancialmarkets.

THE NEED FOR AN INFLECTION POINTWhileacknowledgingthebreadthoftheinnovationchallenge,wehavefocusedourattentionontheaspectsofIreland’sinnovationecosystemwhichhaveaparticularimpactonthedevelopmentofdynamic,knowledge-basedenterpriseswiththepotentialandambitiontogrowtosignificantscaleinproductsandservicesofglobalsignificance.Specifically,wehaveconsideredhowtoacceleratetheestablishmentandgrowthofsuchfirms,whetherarisingfromthetransformationofexistingbusinesses,thediversificationoftheIrisheconomy,activitiesofFDIcompanies,start-upsassociatedwithnewknowledgegeneratedinIrishresearchcentresortheattractiontoIrelandofentrepreneurswithglobalmarketambitions.

Irisheconomicpolicymakershavetakenbravestepsatkeypointsinoureconomichistorytointerveneandcauseinflectionpointsinoureconomicdevelopment.Theseinterventionsresultedinsignificantproductivityincreasesandlaidthefoundationsforprosperity–nowisthetimetodothatagain.

Weknowthatproductivitygrowthfellbacksignificantlyduringthepropertyboombutwealsoknowthekeyrolethatinnovation-inboththeproductionanduseoftechnology-playsinenhancingproductivityandeconomicoutput.Thus,ourobjectiveistopositionIrelandasanInnovationHubinEurope.

Itisimportanttomakeclearthatthisdoesnotjustinvolvehigh-techinnovation.Itisaboutprocessesaswellastechnologies,domesticaswellasinternationally-tradedsectors,multinationalaswellasindigenousenterprises,andpublicaswellasprivatesectors.ToillustratethiswehaveinterspersedtheReportwithexamplesofinnovativecompaniesandexamplesofinnovationwhichhasresultedinsignificantjobcreationandbenefitstosocietyintermsofthedevelopmentofnewproducts,processesandservices.Thefirstsuchexampleisoverleaf.

WE NEED TO BE AMBITIOUS

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Box 1.1

CitiCitihashadapresenceinIrelandforthepast45years.Itemploys2,000peopleinDublinandWaterford.OriginallyabranchofCitibank,N.A.,ittheninvestedinanddevelopedaregionaloperationsandservicecentrewithsupportfromtheIrishGovernment.ThiscentrequicklybecameaRegionalServiceCentre(RSC)ofoperationalexcellence.

OnthebackofthesuccessoftheRSC,CitimigratedanumberofmajorglobalandregionalproductstoIreland.Theseproductsincludeworldwidepaymentbusinesses,tradeservices,securitiesandfundservices.TheglobalandregionalmanagementoftheseproductsarenowmostlylocatedinCiti’sprincipalvehicleinIreland,CitibankEuropeplc.Theservices,clientdeliveryandproductbusinesseshavequicklybeensupplementedbycomprehensiveskilledproject/implementationteams.

Asaresult,CitiinIrelandhasnowbecomeamajorcentreforglobalcustomersofCiti’sGlobalTransactionServices(GTS)business.

Citiwasthefirstfinancialservicescompanytosetupadedicatedresearchanddevelopmentfacility.ThisglobalResearch,Development,InnovationandLearning(RDIL)CentrewasopenedbytheTaoiseachonWednesday30thSeptember2009.Thiscentrehasbecomeahubfordevelopmentalandfundamentalresearchprojectsinthefinancialservicesbusiness.CitiiscontinuingtodevelopitscorecapabilitiestosupportthedevelopmentofinnovativeproductsandservicesfromIreland.Todate,Citihasinvestedover€62millioninRD&IprojectsinDublinandcreatedaCentreofExcellenceforthedevelopmentofproductsandprocessesforCiti’sEuropeMiddleEast&Africa(EMEA)business.

TheRDILCentreiscurrentlyworkingonnewinformationtechnologiestotransformthemodesofinteractionbetweenclientsandbanksinthefuture.Examplesofinnovationsbeingworkedonincludedigitalaccountmanagement,portalandmulti-channeltechnologies,mediaandcollaboration,mobiletechnologyandanalytics.

weneedtobeambitious.itisnotanoptionmerelytosustainthecurrenttrajectoryofjobcreationin,andstart-upof,innovativeexport-focusedcompanies.thatwillnotcreateenoughjobs,itwillnotearnsufficienttaxrevenues,anditwillnotensureanadequatestandardoflivingforourpeopleinthelongerterm.inordertosecureireland’seconomicfutureweneedtocreateaninflectionpoint,agamechanger.achievingthisinflectionpointisthefocusofthisreport.

Webelievewecanreinventourselvesagain.AndweontheTaskforcearenotaloneinthis.Wewerebothastonishedandgenuinelygratifiedbythecreativityoftheideasputforwardinthelargenumberofsubmissionsreceived(seeBoxbelow).Thisgivesusconfidencethatwecandeliveronourvisionoftranslatingtheideasandcreativityofourpopulationintosustainablejobsforourpeople.

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Box 1.2

Note on consultationTheTaskforceconductedanextensiveconsultationprocess,bothformalandinformal.117responseswerereceivedtoapubliccallforwrittensubmissionsandeachofthesewasconsideredbyTaskforcemembers.AlistofrespondentsisatAppendix3.Asummaryofthesubmissionsisavailableatwww.innovationtaskforce.ie.

Issuesaddressedinthesubmissionsinclude:

+ Definitionsofinnovationandmetricsforsuccessofinnovationpolicy;

+ Theneedtoembedinnovationmorefullyinalllevelsoftheeducationsystem;

+ Theneedformoreresearchcollaborationandalliances;

+ HowtoimproveratesofcommercialisationofIPandTechnologyTransfer;

+ Incentivesandtaxationpolicy;

+ TheneedtouseStateprocurementtoleverageinnovation;

+ HowtoattractentrepreneurstoIrelandandleveragingtheIrishDiaspora;

+ Sectoralinnovationopportunitiesandtheneedtopursueopportunitiesinconvergingtechnologies;

+ Thecontributionwhichcanbemadebydesign,arts,thehumanitiesandsocialsciencestoinnovation;

+ Infrastructuraldeficits.

Aswellasformalsubmissions,theTaskforceWorkingGroupsmetwithawidevarietyofstakeholders.FurtherdetailsontheWorkingGroupsareinAppendix4.

OneoftheTaskforceWorkingGroupsalsoconductedaweb-basedsurveytoinformitsdeliberations.Over200responseswerereceivedandthefindingsofthesurveyaresummarisedinAppendix5.

TheTaskforcewouldliketotakethisopportunitytothankallthosewhofedintoitsdeliberations.ManyoftheproposalscontainedinthisReportweredirectlyinfluencedbysubmissionsreceived.TheTaskforcehopesthatallrespondentswillhaveanopportunitytoparticipateinacontinuingdialogueandsharedeffortonIreland’sinnovationpolicyasthevisioninthisReportistakenforward.

A NATIONAL EFFORT IS REqUIRED OneofIreland’sstrengthshasbeentheconsistentsupportacrosspolitical,administrativeandothersystemsfortheattractionofForeignDirectInvestment(FDI).WebelievethatthesamestrengthandconsistencyofeffortisrequiredforourupdatedvisiontotransformourselvesintoanInnovationHubforEurope.

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WerealisethattheGovernmentfacesseverebudgetarypressuresinrestoringthepublicfinances,andallourrecommendationsmustbeviewedinthatcontext.Nonetheless,webelievethatfulleconomicrecoverywillonlybeachievedifweprioritisethisagenda.

InthisReport,weidentifytheessentialcomponentsoftheenvironment–orwhatwecallthe ecosystem–thatwemustputinplacesothatnewideascanbecreated,nurturedandputtoworktocreatejobsandeconomicbenefitsforthecountry.Wehavealsosetambitiousgoalsforthenumberofjobswhichwebelievecanbedelivered.

Whileourvisionisundoubtedlychallenging,wealsobelievethatitisrealisticgivenourmanystrengthsandtheprogresswehavemadeinrecentyearsinbuildingourknowledgebaseandinnovationcapability.Ourobjectivescanbedeliveredalthoughthiswillnothappenovernight.

whatisrequirednowisasustainednationalefforttobuildasuccessfulinnovationecosystemcentredaroundinnovativeenterprisesandtheentrepreneur.

ourvisioncannotbedeliveredbygovernmentactionalone.ourvisionrequiressupportandcommitmentfromallstakeholdersandinvolvesculturalandbehaviouralchangesacrossourpopulationasawhole.webelievethatireland’spopulationisreadyandabletomeetthischallenge.

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2. ContextEVOLUTION OF ENTERPRISE POLICY

Ireland is now confronted with a serious economic challenge – responding to the recession and protecting employment, whilst at the same time ensuring that we lay the foundations for future economic growth. Ireland has faced and overcome such challenges in the past. Many of the strengths that helped us in the past still hold true today and can, if accompanied by the right infrastructure, be used to meet this latest challenge.

Theseedsforthedramaticeconomicgrowthrecordedinthe1990sandearlypartofthisdecadeweresowninthe1960sas,forthefirsttime,Irelandembracedthetwinphilosophiesofinvestmentinhumancapital(primarilythedecisiontoprovidefreesecondleveleducationtoall)andencouragingFDIintoIreland.ThiswasfurtherunderpinnedbythegrowingappreciationamongstpolicymakersofthevalueofthethenEECandtheopportunitiesofferedbythenascentfreetradearea.Asasmallandevermoreopeneconomy,however,Irelandwasatthemercyoftheglobaleconomy.Cyclicalglobaldownturnsandtheoilcrisesofthe1970scombinedwithsomepoordomesticpolicydecisionsstuntedIrisheconomicgrowthandrequiredare-orientationofpublicpolicy.

By1987anewconsensusemergedattheheartofIrisheconomicpolicymaking.Spurredonbyrecordunemployment,massemigrationandarapidlydeterioratingfiscalsituation,theGovernmentandotherkeystakeholdersreachedagreementonaSocialPartnershipdealthatprovidedforindustrialpeaceinreturnforreducedlevelsofpersonaltaxation.Thisdeal,alliedtocontinuedlowtaxationoncorporateprofitscontributedtothecreationofavirtuouscircleofincreasedlabourparticipation,higherpersonalincomes,andexpandingGovernmentrevenues.

Theimproveddomesticeconomicclimate,inconjunctionwithIreland’straditionaladvantagesofgeographicallocation,EnglishlanguagefluencyandahighqualityworkforceatcompetitivecostledtomassiveinflowsofFDI,primarilyfromtheUnitedStates.Asanopen,competitiveandflexibleeconomy,withalowcorporatetaxratetogetherwithmembershipoftheEuropeanUnion,andmorerecentlytheEuro,Irelandwas,andcontinuestobe,anidealbaseforglobalcompaniestosupportglobalandEUmarkets.

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Box 2.1

Factors Underpinning Our Economic Success

AnumberoffactorscontributedtoIreland’seconomicprogressoverthepast20years:

+ JoiningtheCommonMarketofferedIrelandaccesstoestablishedEuropeanmarkets;thesubsequentevolutionoftheCommonmarketintotheEUandEuroareaensuredprogressivelygreatereconomicunitywithinEurope.

+ Globaltradeexpandedatanunprecedentedpace.Inparticular,advancedsectorssuchasInformationandCommunicationsTechnology(ICT)andLifeSciences,whichweretargetedforinwardinvestmentbyFDIpolicy,experiencedsignificantgrowththroughthemidandlate1990s.

+ Awellqualifiedworkforceandconsistent,long-termconsensus-basedpolicieswhichhavedeliveredafavourablecorporatetax,fiscalandwagesettingenvironment.

+ Theabilitytoidentifynewandemergingopportunitiesacrossthemanufacturingandinternationallytradedservicessectors,targetspecificinvestmentsandestablishIrelandasaleadinglocationforFDIhasbeenakeyelementinoursuccesstodate.

ThesefactorshelpeddriveexportsandemploymentgrowthwithinIreland.Employmentalmostdoubledbetween1988and20085,whileexportsincreasedfrom$22billionto$211billion6.ThishelpeddriveincreasesinIrishlivingstandards,withGrossDomesticProduct(GDP)percapitaincreasingfrom$10,455in1988to$45,026by20087.

Overthepastdecade,ithasbecomeclearthatIreland’sinternationalcompetitivenessdependsincreasinglyongoodsandserviceswhichhavehighknowledgecontent.TherehasalsobeenarecognitionthatIrelandneedstoshiftintomoreknowledge-basedactivities,transformingexistingenterprises(bothIrishandforeign-owned)andattractinganewwaveofinvestmentinareassuchasinformationandcommunicationstechnology,energy,medicaldevicesandbiotechnology.

Asaconsequence,since2000enterprisepolicyhasplacedincreasingemphasisoninnovation:

+ ScienceFoundationIreland(SFI),legallyestablishedin2003,isfundingexcellentscientistsandengineersworkingatthefrontiersofbiotechnology,informationandcommunicationstechnologyand,morerecently,sustainableenergyandenergy-efficienttechnologies.

+ HigherEducationAuthority(HEA)/ProgrammeforResearchinThirdLevelInstitutions(PRTLI)investmentshavebeenstrengthenedandalignedtoco-ordinateinfrastructureprovisionandthedevelopmentofhumancapital.

+ TheIDAreinforceditsdrivetoattractR&DactivitiestobothupgradeexistingFDIclientoperationsinIrelandandtoseednewactivity.

+ EnterpriseIrelandhasincreaseditsfocusondrivingindigenouscompanyinnovationandcommercialisationfromincreasedR&DactivityinHEIs.

Thisinvestmentisbeginningtohaveasignificantimpactincluding:

+ TotalR&Dspendinghasalmosttrebledto€2.6billionin2008,whichisequivalentto1.66%ofGrossNationalProduct(GNP)8.

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+ BusinessExpenditureonR&Dhasrisentoanestimated€1.68billionin2008-doublethelevelrecordedin2000.By2007,163companieswerespendingover€2 milliononR&D9.

+ HigherEducationR&Dspendinghasalmostquadrupledincurrenttermsover10yearsandisnowattheEUandOECDaveragelevels10.Ireland’sresearchoutputandreputationhasbeendramaticallyenhanced.TwoIrishuniversitiesareintheworldtop100–oneinthetop5011.

+ Ireland’svolumeoutputofresearcharticlesroseby33% between1998and2007 12,whileIreland’sshareofworldpapershasrisenby20%13anditscitationsharehasrisenby32%14.

+ 50%ofIDAinvestmentsin2009wereinResearchDevelopment&Innovation(RD&I)withover€500millionofinvestment.Therearenowabout170IDAsupportedcompanieswithasignificantR&Dmandatewithaspendofapproximately,€1.2billion15.

TheCommunityInnovation16surveypublishedbytheCentralStatisticsOffice(CSO)estimatesthattotalspendoninnovationactivitiesin2008wasalmost€5.3 billion.

EUdataalsoshowsthatthisinvestmentisbearingfruit.WhileIrelandremainsanInnovationFollowerratherthananInnovationleader,itsinnovationperformanceasmeasuredbytheEUInnovationScorecardisnowabovetheEU27average.ItisagrowthleaderwithinthisgroupofcountrieswitharateofimprovementabovethatoftheEU27.

ItissometimesarguedthatIrelandshouldbeclevercopycatsratherthandevelopingitsownR&Dcapacity,i.e.weshouldjustdothe‘D’inR&D.However,whileitisoftenthecasethatcompaniesmakemoremoneyfromadaptingandutilisingtechnologybyprocessinnovationthantheydofrominventingnewtechnology,economicevidencesuggeststhatR&Dstimulateseconomicgrowthdirectlythroughinnovationandalsoindirectlythroughtechnologytransfer17.Thus,acountry’sabilitytoabsorbforeigntechnologyisenhancedbyinvestmentineducationandbyinvestmentinownR&D18.ThusIreland’sabilitytoabsorbandadaptinnovationfromelsewhereiscruciallydependentonhavingastrongR&Dcultureandsmartpeople.

TheGovernment’sStrategyforScience,TechnologyandInnovation(2006)signifiedarecognitionoftheimportanceofR&DandinnovationforIreland’seconomicdevelopmentandwasdesignedtobringIrelandintolinewithcountriesthatcreateasignificantproportionoftheirGDPfromthecreationandutilisationofknowledge–countrieslikeSingapore,Australia,Germany,Denmark,Austria,andFrance.

westronglybelievethatgovernmentinvestmenttodatehasbroughtirelanduptoacrediblebasefromwhichtobuildasustainableinnovationecosystemcapableofcompetingglobally.irelandmustremaincommittedtoourambitionsinthisarea,aswellasensuringthatweenhanceourinnovationperformanceacrosstheenterprisesector.however,thereisaneedtomoreexplicitlypositiontheentrepreneurandinnovativeenterprisesatthecentreofallourefforts,andtomoveourcreationofexport-focusedcompaniesandjobsontoanewandmoredynamictrajectory.

Manyofthestrengthswhichhelpedusinthepaststillholdtruetoday19andcan,ifaccompaniedbytherightpolicyinfrastructure,beusedtomeetthislatestchallenge:

+ Wehaveawellestablishedlegalsystemandastabledemocracy.

+ Oureconomyisopentoenterpriseandinnovation.Irelandisthethirdmostglobalisedeconomyintheworld20withtradeover150%ofGDP21.

+ Wehaveagrowingenterpriseculture.

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+ Theproportionof24-34yearoldswithatleastdegree-leveleducationissignificantlyhigherthantheOECDandEUaverage.ThenumberofPhDgraduatesperthousandofthepopulationandemployedinindustryhasrisensignificantly.

+ WehavethesecurityofEuropeanUnionmembership,thebenefitsoftheeuroasourcurrency,andfreemovementofpeople,goods,servicesandcapital,aswellasover500millionpeoplelivingwithinathreehourflightofDublin.

+ Wearenativespeakersoftheinternationalbusinesslanguage.AlargenumberofMNCsarelocatedhere,manyofwhichareinvolvedinR&Dactivitiesalready.

+ Wearearelativelysmallmarketinglobalterms,whichcreatestheopportunityformarkettrialsandexperimentationinIrelandbeforetheexpenseofaddressingglobalmarkets.

+ WehavealargeandinfluentialinternationalDiaspora.

+ Throughinvestmentsoverthelastdecadewehaveestablishedacapacityandreputationforleadinginternationalqualityresearchinanumberoffields.

+ Wehavearichculturalandscientificheritage(seeBox2.2).

Whileacknowledgingtheseconsiderablestrengthsandthesignificantprogressmadetodate,theTaskforcebelievesthataninflectionpointorgamechanger(asoccurredinboththe1960sandthe1980s)intheperformanceofIrishenterpriseisrequiredifwearetoreturntoexport-ledgrowthandcreatethenumbersofsustainablejobsrequired.Thisisaparticularchallengeinthecontextofaglobalenterpriseeconomywhichischangingsignificantlyinfavouroflower-costemergingeconomies.Thescaleofwhatneedstobedoneshouldnotbeunderestimated.

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Box 2.2

Ireland’s cultural and scientific heritageEmigrantsfromIrelandspreadabeliefineducation,literature,poetryandartacrossEuropeduringthetenthandeleventhcenturies.TheIrishcontributiontotheworldliteraturehasbeenvaluable,basedonourrichCelticandearlyChristianheritages.ThebooksofKells,DurrowandDimmaareinternationallywellknown.Morerecently,JamesJoyce,OscarWilde,OliverSt.JohnGogarty,WilliamButlerYeats,GeorgeBernardShaw,SamuelBeckett,JohnBKeane,SeamusHeaney,JohnBanville,JohnMcGahern,FrankMcCourt,MaeveBinchy,SebastianBarry,WilliamTrevor,ColmTóibín,AnneEnrightandRoddyDoyleareamongstourmostinternationallyrecognisablewriters.Wehavealsomadestrikingcontributionsinthefieldsofmusic,theatreandfilmincludingthroughU2,LiamNeeson,BrendanGleeson,GabrielByrne,ColinFarrell,SaoirseRonan,JimSheridan,NeilJordanandinternationallyrenownedproductionssuchasRiverdance.

Concurrentlywithourliteraryandculturaltradition,Irelandhasmadesomeastonishingcontributionstoscienceandengineeringfromthe17thcenturyuntiltoday.RobertBoylecontributedtotheunderstandingofgases.FrancisBeaufortderivedtheBeaufortwindscale.GeorgeBoolediscoveredthealgebraunderlyingcomputinglogic.WilliamRowanHamiltonevolvedanewbranchofmathematics.NicholasCallaninventedtheelectricalinductioncoil.WilliamParsonsdiscoveredthespiralnatureofgalaxies.JohnTyndallcontributingtotheunderstandingofthenatureoflight.WilliamThomsoninvestigatedheat,leadingtotheKelvinscale.GeorgeFrancisFitzgeraldproposedthatamovingbodyshrinks,thusinfluencingEinstein’srelativitywork.ErnestWaltonworkedwithJohnCockrofttoshowthattheatomwasnotinfactmonolithic.GeorgeJohnsonStoneycalculatedthemagnitudeofasingleunitofelectricity,whichhethennamedthe“electron”.MaryWardwroteonthemicroscopicnatureofplants.KathleenLonsdaleinfluencedX-raycrystallography,anddiscoveredtheflatnatureofthebenzenering.JDBernalsimilarlyinfluencedX-raycrystallographyforworkonproteins,nucleicacidsandviruses.DenisBurkittwasanearlypioneerinunderstandingcancerandJohnBell’stheoremiskeyinquantummechanics.

SCALE OF THE CHALLENGE WhileIrelandneedstoregain,andisintheprocessofregaining,ourcompetitiveedgebyreducingtherelativecostofdoingbusinessinIreland,thisalonewillnotbesufficient.Theworldhasmovedonandthemodelwhichworkedinthe1990snolongersuffices.

WhiletheUnitedStateswillremainanimportantsourceofFDI,theroleandsignificanceofneweconomicleaders,particularlyChina,hasgreatlyincreased.Chinahasapolicyofactiveengagementwithmanygovernmentsworld-widetofostertrade,economicdevelopment,andtoacquirebothrawmaterialsandfriendlyexportmarkets.Ourpoliciesmustrespondtothisnewreality.

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Meanwhile,therelativecostofmanufacturingandproductionhasuniversallycontinuedtofall.Marketcompetitionforcescompaniestosourcethemostefficientproductioncentresanywhereontheplanet.WithinEurope,theaccessionoftennewmemberstatesin2004,andafurthertwoin2007,hasledtointensecompetitionforFDIthroughouttheEuropeanUnionandglobally.

Educationstandardshaverisendramaticallyinmanyjurisdictions,togetherwithcompetenceinEnglish.IrelandisnowonlyoneofmanyalternativelocationswhichcanofferanEnglishspeaking,high-skilledandyoungworkforce,coupledwithalow(orinsomecountrieszero)corporationtaxregime,andextensivecapitalanddevelopmentgrantaid.Irelandneedstofindnewwaystocompetesuccessfullyinthisfast-changingworld.

SMART ECONOMY FRAMEWORk, INNOVATION AND ENTERPRISE POLICYBuilding Ireland’s Smart EconomywaspublishedbytheGovernmentinDecember2008inresponsetothechallengesfacingtheIrisheconomyinachangedworld.Itidentifiesfiveactionareasforsustainableeconomicrenewal,withtheobjectiveofincreasingproductivityacrossallsectorsoftheeconomy:

+ SecuringtheEnterpriseEconomyandRestoringCompetitiveness;

+ BuildingtheIdeasEconomy–Creatingthe‘InnovationIsland’;

+ EnhancingtheEnvironmentandSecuringEnergySupplies;

+ InvestinginCriticalInfrastructure;

+ EfficientandEffectivePublicServicesandSmartRegulation.

AsthisSmartEconomyFrameworkhighlights,therearemanyaspectsofasuccessfulenterprisepolicy.Theseincludecostcompetitiveness,labourmarketandskillspolicies,investmentinphysicalandotherinfrastructure,tradepromotion,taxandregulationetc.Eachoftheseisofobviousconcerntotheenterprisesectorduringthisdifficulteconomicperiod.

TheTaskforcehasnotbeenaskedtoexaminealltheseissueswhicharebeingaddressedinmanyotherpolicydevelopmentprocesses,exceptwheretheyimpingedirectlyonourtermsofreference.

InsteaditsfocusisonprogressingthesecondactionareaoftheSmartEconomyvision:“building the innovation or ‘ideas’ component of the economy through the utilisation of human capital – the knowledge, skills and creativity of people – and its ability and effectiveness in translating ideas into valuable processes, products and services.”Inthecontextofthisobjective,theTaskforcewasasked:

+ Toexamineoptionstoincreaselevelsofinnovationandtheratesofcommercialisationofresearchanddevelopmentonanationalbasiswithaviewtoacceleratingthegrowthandscale-upofindigenousenterpriseandtoattractnewknowledge-intensivedirectinvestment;

+ Tobringforwardproposalsforenhancingthelinkagesbetweeninstitutions,agenciesandorganisationsinthepublicandprivatesectorstoensureacohesiveinnovationandcommercialisationecosystem;

+ ToidentifyanyspecificpolicymeasureswhichmightbenecessarytosupporttheconceptofIrelandasanInternationalInnovationDevelopmentHubincludingintheareasoflegislation,educationalpolicy,intellectualpropertyarrangements,venturecapitalandimmigrationpolicy.

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Ourfocusthereforeisontheissueofinnovationintheenterprisesectorand,inparticular,ondrivingandsupportingentrepreneurship,whichisincreasinglyrecognisedasadriverofincreasedproductivityandeconomicgrowth.

Itisimportanttonotethat(asalreadymentionedinChapter1andasweexplaininthenextchapter)innovationisnotjustrelevanttohigh-techorstart-upbusinesses.Ireland’sfutureeconomicsuccessdependsonincreasinglevelsofinnovationacrossallaspectsofIrishenterprise–fromlargeIrish-ownedmultinationalstoforeignmultinationalslocatedheretoestablishedSMEsinservicesandmanufacturing,aswellasstart-upsandexistingcompanieswithhighgrowthpotential.

innovationisthereforeattheheartofenterprisepolicyandourrecommendationsseektosupportincreasedinnovationacrossallpartsoftheirisheconomy.

Inthefollowingchaptersweelaborateonourunderstandingofinnovationandtheprincipleswhichhaveinformedourwork.WerecommendspecificactionswhichwillhelptodeliveraninflectionpointinthelevelofinnovationinIrishenterpriseandtherebydriveanupdatedmodelofsustainableeconomicgrowth.

ECONOMIC AND BUDGETARY CONTExT Thepast12monthshavebeenparticularlydifficultwithIrishGNPestimatedtohavecontractedbyatleast10%22in2009(orover7.5%23inGDPterms).Afurthercontractionintheeconomyisforecastfor2010(albeitatamuchmoremodestrate).Whilegrowthisanticipatedtoreturnduring2010,bothintermsofGNPandGDP,overallannualgrowthisforecasttofallagainthisyear.

Themostobviousimpactoftherecession,however,canbeseenintheemploymentandunemploymentfigures.ThenumberofpeopleemployedinIrelandfellfrom2.1million24 tojustover1.9million25overthe12monthstoQuarter3,2009(anannualdecreaseof184,700or8.8%).Overthesameperiod,unemploymentincreasedby120,400(or75.5%)toreach279,800.Thisequatestoaseasonallyadjustedunemploymentrateof12.4%26-bywayofcomparisontheunemploymentratewasjust4.6%attheendof2007.Unemploymentisforecasttopeakthisyearandtoeasethereafteraseconomicgrowthresumes27.

AlthoughtherearesignsthattheIrisheconomyisbeginningtostabilise,seriouschallengesremain.TheTaskforceacknowledgesthattheGovernmentfacesdifficultchoicesinreconcilingdifferentlegitimatepolicygoalsandwillhavetoweightheseconsiderationswhenconsideringourReportandrecommendations.

nonetheless,westronglybelievethatitisonlybyinvestingfinancialresourcesinthisagenda,inparticularinhumancapitalandthetechnologythatsupportsit,thattheirisheconomywillrecovertoprovidelevelsofgrowthandemploymentwhichwillinturnsustainthelevelofpublicservicesdesiredbytheirishpopulation.wedonotseeanalternativepathtorecoveryotherthanonedrivenbyinnovation.

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3. The Innovation EcosystemOUR CONCEPT OF INNOVATION HAS BROADENED

“Innovation entails investment aimed at producing new knowledge and using it in various applications. It results from the interaction of a range of complementary assets which include research and development, but also software, human capital, design, marketing and new organisational structures – many of which are essential for reaping the productivity gains and efficiencies from new technologies28” - OECD.

innovation–theintroductionofaneworsignificantlyimprovedproduct(goodorservice),process,ormethod-haslongbeenacknowledgedascentraltoeconomicperformance.

ManyofthesubmissionstotheTaskforcehighlightedthechangingnatureandunderstandingofinnovation.Inrecentyearsattentionhasincreasinglybeenfocusedoninnovationinproductdesign,businessprocessesororganisationaldesign.ServicesfirmsinnovatethroughinformalR&D,thepurchasingandapplicationofnewtechnologiesaswellastheintroductionofnewbusinessmodels.

Intheinternetagecharacterisedbyopensystems,innovationisoftenfacilitatedbynewformsofcollaborationandinteraction,forexamplewherebusinessesengagewiththeircustomersandsuppliersinanopen-endeddialogue,whichcansometimesleadtonewbusinessideasandmodels.

Internationalresearchhashighlightedtheimportanceofnewexperimentalformsofworkorganisation,thewayinwhichfirmslocallyandinternationallyarenetworkedandtheshiftingboundariesofthedivisionoflabourindesign,developmentandproduction29.‘Softskills’suchastheabilitytoworkinmulti-disciplinaryteamsthereforebecomemoreimportant30.

Migratoryflowsofpeopleandtheirrelationshipsisanotheremergingthemeinresearchontheinnovationprocess,forexamplehelpingtotransferknowledgebetweenregionsandcountries.

Innovationalsotakesplaceinanon-commercialcontext,forexampleinapublicservice,healthcareorcommunitydevelopmentsetting.

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INNOVATION ECOSYSTEMGrowingandharnessinginnovationhasitschallenges:innovationisnotasimplejourneyfromAtoB,butonewhichloopsaroundthroughtimeandspace.Tomakeinnovationworkforuswehavetodevelopasysteminwhicheachelement,andhowitinteractswithotherelements,supportsinnovationacrosstheeconomyandsociety.Theelementsthatmakeupsuchanecosysteminclude:

(i) entrepreneursandenterprises(indigenousandforeign-owned);

(ii) investmentinresearchanddevelopment;

(iii) theeducationsystem,inparticularhighereducationinstitutions;

(iv) finance,inparticularriskcapital;

(v) thetaxandregulatoryenvironment;

(vi) publicpolicyandinstitutions.

Thediagrambelowsetsoutthemainelementsofthenationalinnovationsystem.

figure3.1:mainelementsofthenationalinnoVationsystem

Asuccessfulinnovationpolicyrequiresallelementsoftheecosystemtoco-operateandcollaboratetogether,andininternationalnetworks,toensurethatknowledgeisdeveloped,transferredandappliedinproductiveways.

Entrepreneursandenterprisesareattheheartoftheecosystembecausethesuccessorfailureofourvisiondependsonourcapacitytotranslateideasintoexportablegoods,servicesandsustainablejobs.

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ROLE OF THE ENTREPRENEURWhileastronginnovation-intensivemultinationalsectoriscrucialtothefuturesuccessoftheIrisheconomy,thereisapowerfullinkbetweeninnovationandnewfirms.Theentrepreneurplaysakeyroleinthisregard.

Manyinnovationsstartwithsmallcompanies,particularlyinmorerecentyearsinbiotechnologyandtheinternet,forexample.Entrepreneursplayakeyroleindrivinginnovationinstart-upsandhigh-potentialgrowthcompaniesofsmallandmediumsize.Importantly,inanincreasinglycompetitiveworld,entrepreneurialindividualshavebeenshowntostimulateinnovationandtransformationinestablishedfirms.

Whilemostenterprisesarenotventure-backed,venturecapitalhasaparticularlyimportantroletoplayinhigh-growthenterprises.Innovativefirms,particularlyinhightechnologysectors,finditdifficulttoraisemoretraditionalformsoffinance(e.g.bankdebt).RiskcapitalprovidedbytheVCsector,andassociatedmanagementexperiencethereforebecomescrucial.Theempiricalevidence31showsthatventure-backedstart-upsredefinetheUSeconomythroughdirecteffectsandspill-overeffects.Essentially,whileSiliconValley-spawnedcompaniesemployonlyaminorityofallAmericans,itislikelythatproductivityintheUSeconomywouldbesignificantlylowerwithoutthecompaniesithasspawned.Similarly,theAgency-backedsectorinIrelandemploysjust15.5%32oftheworkforceyetweknowthatthepresenceofthesecompanieshasresultedinsignificantspilloversintotherestoftheeconomy.

Theevidencealsosuggeststhatgovernmentscanintervenetostimulateandsupportentrepreneurshipandassistinprovidingsupportingrisk-capital.InSiliconValleythegovernmentwastheinitialcatalystinthegrowthoftheregionandinparticularsectorsandfirms.Thepresenceofhigh-qualityuniversities,astronghumancapitalbase/goodeducation,andastrongresearchbasearecrucial(althoughtheminorityofventure-backedfirmsarelikelytobespin-outsfromHEIs).

Theventurecapitalenvironmentisalsocrucial.However,venturecapitalandtheentrepreneursitfundsarenotasubstituteforvibrantuniversitiesorcorporateresearchlabs–allelementsareessentialtoasuccessfulecosystem.

THE TASkFORCE’S APPROACH – PLACING THE ENTREPRENEUR/ENTERPRISE AT THE CENTREWhileacknowledgingthemovetowardsawiderdefinitionofinnovation,theTaskforce’sprimaryfocusis,inaccordancewithourTermsofReference,oninnovationinanenterprisecontext.

Inparticular,webelievethattheentrepreneurandinnovativeenterprisesmustbeatthecentreofoureffortstodeliverthevisionwehavesetout.

ThisfocusontheentrepreneurandenterpriseatthecentreoftheinnovationecosystemunderpinstheprincipleswehavedevelopedinthenextchapterasthebasisforourReportandoursubsequentrecommendations.

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4: Principles for SuccessThe Taskforce has agreed six principles which we believe are fundamental to our goal of transforming Ireland into an International Innovation Hub.

1 ourfirstfundamentalprincipleisthattheentrepreneurandenterprisemustbeatthecentreofourefforts.Ournationalpolicyframeworkmustbeshapedaroundencouragingentrepreneurs,retainingthosewhoarehere,andattractingothersfromabroad,bymakingiteasierforthemtosucceedinIrelandthananywhereelseinEurope.Inparticular,wemustaimtoattractserialentrepreneurswhohavegrownandexitedbusinesses,andembarkedontheirnextventure.Ourlegal,taxationandoverallpolicyframeworkmustbealignedandtargetedtowardsachievingthisend.Culturally,wemustbesupportiveofandincentivisethosehighachieverswhothroughtheirentrepreneurialandinnovativeeffortsgenerateemployment,increasetaxreceiptsandtherebybenefittheeconomyasawhole.

2 oursecondprincipleisthatestablishing,attractinggrowingandtransformingenterprisesmustbethefocusofacoherentnationaleffort.Wemustensurethatournationalcultureandpoliciesaresupportiveof,anddrive,ambition,innovationandtransformationandacceptthattherewillbesomefailuresalongtheway.Wehaveanumberofadvantagesthatwemustexploitinthisregardincludingourrelativelysmallsizeandourthrivingmultinationalcommunitywhichofferssignificantpotentialforcollaborationandtheexploitationofconvergingtechnologies.Successfulcompaniesusuallycreateafurtherpositivefeedbackloopasentrepreneurialemployeesleavetocreatetheirstart-upsasspin-outsfromtheparentcompany–inthecaseofIONATechnologies,morethan30spin-outsemergedoveradecade,usuallywiththefullblessingoftheseniorIONAteam.IndividualsmaythereforealsoneedtodemonstratemoreflexibilityandmobilityintheircareerambitionstoachieveourSmartEconomyvision.

3 ourthirdprincipleisthattheavailabilityofsmartcapitaliscrucialforstarting,growingandtransformingenterprises.RiskcapitalcanbeattractedtoIrelandifwecancreateacultureofinnovation,inwhichnewventuresandcompaniesgrowrapidlyandbringleadingofferingstotheglobalmarket.Theseofferingscanbenew

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products,newservices,newprocessesand/ornewdesigns,andanycombinationofthese.Rapidgrowthnotonlycreatesjobs,butalsocreatesbusinessexperienceinglobalmarketswhichcanthenbefedbackintonewcyclesofstart-upsandintoexploitingfurtherwavesofnewtechnology.Generally,wherepossible,theprovisionofcapitalshouldbelefttothemarketbuttheremaybecircumstanceswherethestateneedstointervenetoensurethatinnovatorsandbusinesseshaveaccesstostart-upandgrowthcapital.Entrepreneurswhosuccessfullyexittheirbusinessesshouldbeencouragedtore-cycletheirwealthdirectlyintonewbusinesses,andsharetheirexperiencebymentoringyoungerentrepreneurs.

4 ourfourthprincipleisthataneducationsystemwhichfostersindependentthinking,creativityandinnovationisvitaltoachievingthesmarteconomy.Educationhasarolebothindevelopingtheskillsnecessaryforinnovativeexport-ledfirmsandmoregenerallyinengenderingculturesandattitudeswhicharesupportivetoinnovationmorebroadly.Alllevelsoftheeducationsystemmustcontributetoembeddingthesevaluesinourpopulationfromtheveryyoungtotheoldermembersofourworkforce.Aparticularfocusmustbeonthedevelopmentofcreative,highly-skilledgraduatesaswellaslife-longlearning,mentoringandcontinuousprofessionaldevelopment.

5 ourfifthprincipleisthatthestateshouldactivelyacceleratesuccessbyencouragingflagshipprojects(seechapter8)andbyprioritisingtheprovisionofexcellentsharedinfrastructure.TheStatecanintervenebyprovidingexcellentinfrastructureuniversallytoallinterestedcompanies.Suchsharedinfrastructurefairlyobviouslyincludestransportandlogisticsnetworks,broadband,and“wet”laboratoriesforlifesciencecompanies.Butfromtimetotime,itmayemergethatanintelligentandfar-sightedinterventionbytheStatecanprovideasubstantial,competitiveand,ideally,uniqueadvantagetocompaniesoperatinginIreland.SuchinterventionsmaychangeanddisruptanentireglobalindustrybecausethosecompaniesusingthenewinfrastructuregainconsiderableadvantageovertheirinternationalcompetitorsallowingIrishcompaniesdevelopasolutionwhichcanthenbeexported.Thisinturncanattractyetfurtherforeigndirectinvestment,ascompaniescometoIrelandtousethishighlyinnovativeinfrastructure.TheStatebenefitsbytheadditionalemploymentresultingfromcompaniesusingtheinfrastructure,andpossiblyalsofromrevenuesreceivedbyuseoftheinfrastructureitself.ThisStateinvestmentmustbeundertakenwithaholisticviewofitsreturnoninvestment.

6 ourfinalprincipleisthatwemustsharpenthefocusofournationalresearchsystemtoensurethatitistargetedatareasofpotentialstrategicandeconomicadvantageforireland.Inparticular,ourresearchsystemmustbealignedwithaneffectivetechnologytransferandcommercialisationinfrastructuretoensurethatthesignificantinvestmentbeingmadeyieldsincreasingrewardstoeconomyandsocietyintermsofemployment,revenueandsolutionstosocietalchallenges.ThisrequiresactionfromPublicResearchFundingAgencies,fromHigherEducationInstitutions,andfromenterpriseandindividualresearchers.TheinclusionbysomeHEIsofinnovationasathirdpillarofeducationalongsideteachingandresearchisawelcomedevelopment.Webelievethatfurthertransformationisnecessarytomaximisetherelevanceofourresearchsystemtothechangingdemandsofanexport-focussedSmartEconomy.

Inthechapterswhichfollowwesetoutaseriesofrecommendationsinformedbytheseprincipleswhichwebelievewillhelptoachieveourvisionofasuccessfulinnovationecosystemwiththeentrepreneurandenterpriseasitscentraldriver.

Theorderofthechaptersreflectsalogicalflowthroughtheelementsoftheecosystem,ratherthananyrankingofimportance.

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5. Strengthening the Knowledge Base

Traditionally, economic growth has been seen as accumulating physical capital and putting it to work to make things which could be sold to the end user. Capital is still important, but knowledge is the new currency of the innovation economy and our long-term economic success is tied inextricably to human and knowledge capital.

Theinnovativeenterpriseswespokeaboutinthepreviouschaptersneedallthreeformsofcapitaltofueltheirgrowth.

Theeducationsystemisthereforepivotalinmakinginnovationhappen.Itisthekeytofosteringthegenericqualitiesofproblemsolving,creativityandotherpersonalskillsdevelopmentthatcanhaveafarreachingimpactontheinnovationcapacityofIrishsociety.Curriculumdevelopmentsatprimaryandpost-primarylevels,aimedatdevelopingthesegenericqualitiesfromanearlyageneedtoberesourcedandgivenimpetusaspartofouroverallinnovationstrategy.Manyofthebuildingblockstosupporttheinnovationtransformationhavebeenlaid.Theprimarycurriculumhasbeenoverhauledandisnowmuchmorelearnercentred.Atsecondlevel,importantrecentelementsofacontinuingprogrammeofcurriculumreformhaveincludedanewJuniorCertificateSciencesyllabus,anewsubjectofLeavingCertificateTechnologyandarevisedprogrammeinDesignandGraphicsCommunication.ProjectMathsisrollingoutwithastrongproblem-solvingfocus.Inhighereducationthetransformationhasbeenprofoundasresearchandcommercialisationhave,alongsideteaching,becomeacorepartofthemission.

Themostimportantrecommendationwecanmakeistokeepfaithwiththisoveralldirection.Thisisnotrivialtask,however.Already,economiccontractionhasmeantthatthepaceofinvestmenthasbeenslowedandcatchingupwillrequireseriousconsiderationorrebalancinginvestmentprioritieswithintheNDP.Werecommendthatthisshouldbedone.

Norcanwelettheoverallsoundnessofthecurrentstrategicdirectionblindustoareasateachleveloftheeducationsystemwherethereissignificantroomforimprovement.Therefore,inthischapter,wefocusbothontheoverarchinginvestmentpriorityandthespecificareaswherechangeisneeded.

ItisimportanttonotethateducationwasoneofmanysignificantandcomplexissueswhichtheTaskforcehadtoconsideroverarelativelyshortperiodoftime.WedonotclaimthatourrecommendationsarecomprehensiveorcoveralltheelementsofeducationalreformwhichneedtobeundertakentotransformIrelandintoanInternationalInnovationHub.Insteadwefocusonareasofparticularconcerntoourmembersandthosewhomadesubmissionstous.Whererelevantweacknowledgetheworkofothergroupswhoarespecificallyfocussingonaspectsrelevanttoourremit,inparticulartheHigherEducationStrategyGroupwhichisconsideringreformwithinthesector.

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STATE INVESTMENT IN R&DOnlyfifteenyearsago,Irelandhadnosignificantresearchbasetospeakof.Thelevelofresearchanddevelopmentactivitywaslowinbothhighereducationandindustry.Sincethen,Governmenthasestablishedanewagency,SFI,toincreasethequalityandquantityofresearchperformedinIreland,andPRTLIinvestmentshavedeliveredworldclassresearchinfrastructures.Theseinitiativesandotherresearchinvestmentshavesupportedthedevelopmentofhighereducationbasedresearchthatisofworldclassstandard(ourworldrankingofresearchqualityhasincreasedfrom33rdin2003to17thin200933)andfitswithwidersupportsforcommercialisationandbusinessR&D(seeexampleinBox5.1below).Thisisanessentialfirststeptowardsafullyfunctioninginnovationecosystem.

Box 5.1

The Centre for Research in Adaptive Nanostructures and Nanodevices (CRANN), TCD, UCC and Hewlett-PackardTheCentreforResearchinAdaptiveNanostructuresandNanodevices(CRANN)isanSFI-fundedresearchcentreatTrinityCollegeDublinandUniversityCollegeCork.OverthelastthreeyearstheinvestigatorsinthecentrehavecollaboratedwithHewlett-Packard(HP)inthejointdevelopmentofflexible,transparentandhighlyconductivethinfilms.ThisprojectusesfundamentalresearchthathasbeenundertakenintheuniversitiesandisdirectlylinkedtoamajorstrategicinitiativewithinHPtodevelopflexible,transparentdisplays–“electronicpaper”–utilisinglow-costrole-to-rolemanufacturing.

TheresearchprogrammeisfundedthroughtheSFICSETprogramme,withadditionalIndustrialandDevelopmentAgency(IDAIreland)fundingsupportingassociatedtechnologydevelopmentwithinHPIreland.Thecollaborationhasproducedoutstandingresults;thenoveltechnologiesdevelopedhavebeenusedtomanufactureprototypesacrosstheHPorganisationincludingHPLabsinBristolandPaloAlto,andtheTechnologyDevelopmentOrganisationinCorvallis.Anumberofscientificpapershavebeenpublishedinhigh-impact-factorjournalsandthetechniquesdevelopedhaveresultedininventiondisclosuresatbothCRANNandHPleadingtopatentapplications.Mostimportantly,theresearchhasnowresultedintheprojectoutputsbeingidentifiedontheglobalHPproductdevelopmentroadmapasatechnologycandidatefornext-generationproducts,providingtheopportunityfortechnologydevelopedinIrelandtounderpinamajornewproductinitiativeforaglobalmultinationalcorporation.

AsaresultofthisSFI-sponsoredprogrammeHPIrelandisnowrecognisedwithinHPasaproviderofimportanttechnologysolutionsfortheorganisation–enablingthegrowthoftheresearchmandatelocally.CRANNisnowwellintegratedintoHPCorporationandhasdevelopedanewandmoreextensiveresearchprogrammetocontinueintothefuture.Irelandisnowassociatedwithcreativeresearchandinnovation,arecognitionthatiscriticalforIrelandasitdemonstratesacapacitytodeliverrealvaluetoindustry,aidingintheattractionofnewforeigndirectinvestmentandthefurtherembeddingofexistingindustryandtheirassociatedjobs.

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However,therearetwobigdangersasweseeit.Firstly,thatinvestmentinknowledgecreationwillnotbemaintained.Andsecondly,highereducationinstitutionswillfailtobuildtheconnectionswithindustrytoensurethatthisresearchgetscommercialised,anissuewhichweaddressspecificallyinthenextchapter.

5.1 Keyrecommendation

DeliverontheinvestmentframeworksetoutintheStrategyforScience,TechnologyandInnovation(SSTI)2006-13andachievethegoalintherenewedProgrammeforGovernmentofinvesting3%ofGDPinR&DbycommittingtoinvestmentinanupdatedSSTIforthe2014-2020period.

ThecurrentfamilyofagenciesthatfundorengageinresearchincludeSFI,EI,IDA,HRB,IRCSET,IRCHSS,EPA,SEI,TEAGASC,theMarineInstitute,andtheHEAwhichalsohasanoverarchingresponsibilityforallocationoffundingacrossthehighereducationsystem.Whilstthesestructureshavethestrengthofeachagencydeliveringtotheneedsoftheirspecificcommunities,themultiplicityofagenciesplaceslimitationsonthecapacitytoensuresufficientfocus,aswellasefficiency,coherenceandvalueformoney.

Improvedco-ordinationisrequiredbetweenalltheIrishpublicagenciesthatmanageresearchfunding,toensureoptimumValueforMoneyofpublicresearchfunding.WerecognisethatvalueformoneyismeasuredbytangibleindicatorssuchasIP,spin-outcompaniesandjobs,aswellasmoreintangiblefactorssuchasanincreasedknowledgebase,apoolofskilledgraduatesandinternationalreputation.

Werecommendthatstepsbetakentoimprovethisco-ordinationasamatterofpriority,buildingontheannouncementinBudget2010ofamovetoasinglefundingstream,toensurethatallresearchfundingisbeingusedinthebestwaypossibletohelptheentrepreneur/enterprisetosucceed.Anidentifiedpathwaytofundeachresearchprojectwouldalsoremovebarrierswhicharisewhenaprojectneedstoswitchbetweendifferentfundingagenciesduringtheprocess,includingappropriatecommercialisationsupports.

WhilewerecognisethatcontinuedfundingofabroadbaseoffundamentalresearchiscrucialtothefutureoftheSmartEconomy,wealsobelievethat,aswebuildtowardsagoalofinvesting3%ofGDPinR&D,greaterresourcesshouldbecommittedtofundingappliedresearchthatisfocusedontheneedsofindustryinIreland,whilecontinuingtoinvestinthepeople,skillsandreputationthatcomesfromactiveworldclassresearchersworkinginareasofimportancetotheIrisheconomy.ThisprioritisationandfocusshouldbeinformedbydetailedanalysisandunderpintheeffortsofallrelevantDepartmentsandAgencies.Implementationofseveralrecommendationsinthisreport,suchasproposedFlagshipprojects(Recommendation8.1)shouldalsobealignedwithidentifiednationalpriorities.

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5.2 KeyrecommendationBuildingontheannouncementinBudget2010,thecurrentstructuresfordeliveryofresearchfundingshouldbereformedwiththegoalofimplementingthefollowingchanges:

+ Consolidatefundingstreamsandenhanceco-ordinationtodeliveroptimumvalue-for-money;

+ Ensurethatfundedresearchhasanidentifiedfundingpathwayandsingleleadresponsibleagency,underpinnedbycommercialisationsupports;

+ Aswebuildtowardsourgoalofinvesting3%ofGDPinR&D,commitgreaterresourcestofundingappliedresearchthatisfocusedonidentifiedpriorityopportunitiesforindustryinIreland.

IMPROVING HUMAN CAPITAL: PRIMARY & SECOND LEVEL EDUCATIONWebelievethatIrelandneedstosubstantiallyraisenationalmathematicalandpurescienceattainment,particularlyatsecondlevel.

Adiverserangeofadvisorygroups(includingtheExpertGrouponFutureSkillsNeeds34andtheNationalCompetitivenessCouncil35)andkeyenterpriseandprofessionalbodies(includingICTIrelandandEngineersIreland)haverecognisedtheneedforIrelandtoraiseitslevelofmathematicalachievementtoensureitwillcontinuetosuccessfullycompetewithothereconomiesandtofulfiltheGovernment’svisionoftheSmartEconomy.Ireland’sabilitytorepositionindustrytowardsknowledgeintensivehigh-technologysectorswilldependcriticallyonthesupplyofpeoplewithmathematics,science,engineeringandtechnologyskills.

Mathematicsisimportantbecauseitunderpinsmanyotherdisciplinessuchasscience,technology,businessandfinance.Knowledgeofmathematicsisalsoaprerequisiteformanyoccupationswithwhichitmaynotnormallybeassociatedincludingnursingandsocialsciencerelatedoccupations.Higher-levelmathematicswillbeakeydeterminantofIreland’sabilitytocreateacohortoftoptier,world-classengineeringandsciencegraduates.Itisalsofundamentalrequirementforthedevelopmentofaworld-classresearchandinnovationsysteminIreland.

WestronglyendorsetheProjectMathsprogrammewhichisasignificantinvestmentinpromotingbetterunderstandingofmathematicsatsecondlevel,enhancingattainmentandincreasingtheproportionofstudentstakinghigher-levelmathematicsandmustbecommended.WealsonotethattheMinisterforEducationandScienceisestablishingagroupinpartnershipwithindustry,HEIsandthesecondlevelsystemtoseehowbestpositiveattitudestomathscanbepromoted,howparticipationinhigher-levelmathscanbeincreasedandtoaddvaluetotheProjectMathsinitiative.WesuggestthatapanelofinternationalexpertsinmathematicsfromoutsidetheIrishsystemshouldbeestablishedbytheNationalCouncilforCurriculum&Assessment(NCCA)tosupporttheworkofthisGroupandtheongoingimplementationofProjectMathsgenerally.

TheTaskforcealsocallsformoreexperiencedmathematicians,engineersandscientiststomakethemselvesavailabletoprovidementoringandsupporttoteachersandtotalentedstudents.

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5.3 KeyrecommendationIntroduceadditionalmeasurestopromotethetake-upofhigherlevelmaths,includingpossibleincentivessuchastheawardingbyHEIsofCAObonuspointsonapilotbasisstartingwithLeavingCertificate2012,sothatthisyear’sLCcohortcanmakeinformedsubjectchoicesoncommencingFifthYear.

5.4 supportingrecommendation+ Increaseinvestmentinintensivetrainingformathematicsteachersand

thefullrolloutofProjectMaths;

+ ImplementthenewsyllabusesinLeavingCertificateBiology,PhysicsandChemistry.Implementnewapproachestoassessmentbasedontheexperienceofthecurrenttrialinschools;

+ Introduceanewmentoringprogrammeforteachersandtalentedstudents,involvingexperiencedmathematicians,engineersandscientistswhowewouldencouragetomakeawidercontributiontoadvancingthequalityofteachingandlearningintheirdiscipline.

IMPROVING HUMAN CAPITAL: HIGHER EDUCATIONHigherEducationiscentraltotheinnovationsociety.HigherEducationadvancestheknowledgeandskillsofstudentsandtrainsthenextgenerationofresearchers,policymakersandbusinessleaders.HEIshaveaspecificresponsibilitytocreatenewknowledgewhichunderpinstheevolutionofnewservicesandproducts.Allofthishappensthroughconstantinteractionbetweenstudents,staffandsocietyatlarge.WeseefourvitalrolesforHEIs,specifically.

1. Undertakeexcellentresearch,scholarshipandteachingacrossalldisciplines,whichisreflectedinthequalityofgraduatesemergingintothelabourmarket;

2. Developstrongresearchgroupsselectedforfundinginacompetitivemannerinidentifiedareasofstrategicprioritywhichhavethecapacitytoimpactonthefullresearchandinnovationcontinuum;

3. Strengthenthecommercialisationfunctionandincreasinglygenerateeconomicvaluefromtheintellectualpropertygenerated(wewilldealspecificallywithsomeoftheseissuesinthenextchapteronknowledgetransfer);

4. Collaboratewithandsupportentrepreneursandenterprisesinresearch,innovationandcommercialisationandprovideassociatedskillsthroughlife-longlearning.

Aspartofthedriveforimprovednationalcompetitivenessandtheneedtoaddmaximumvaluethroughpublicinvestment,thenumberandrolesofinstitutionswithinHigherEducationiscurrentlybeingconsideredbytheHigherEducationReviewGroup.

WeverymuchwelcomeandstronglysupporttheTCD-UCDInnovationAllianceannouncedinMarch2009(forfurtherinformationontheTCD-UCDAllianceseeTextbox5.2below)andtherecentlyannouncedstrategicalliancebetweentheUniversityofLimerickandNUIGalway.

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Webelievethatsuchinter-HEIalliances,includingpartnershipswithtoptieroverseasHEIs,suchastheNUIG/ULrelationshipwithGeorgiaTech,mustbedevelopedandstrengthened,andstrongperformanceincentivised,toensurethatourresearchandtechnologytransferecosystemhasthenecessaryscaleandcapacitytodriveustowardsourvisionoftheInnovationIsland.Wewouldalsoencouragecross-borderco-operationwithHEIsinNorthernIrelandtohelpachievecriticalmassinareaswheretheislandcancompeteinternationally.

Box 5.2

TCD-UCD Innovation AllianceTheInnovationAlliancebetweenTrinityCollegeDublinandUniversityCollegeDublinestablishedon11March2009combinesthestrengthsofthetwonear-neighbourinstitutionstohelpdevelopastronginnovationecosystemforIreland.Itwillengagewithenterpriseandgovernmentonspecificinitiativestotransformgraduateeducationandscaleupenterprisedevelopmentandhasanumberofcomponents.

theinnoVationaCademy

TheInnovationAcademybuildsontherespectivestrengthsoftheuniversitiestocreatearobustandmutuallybeneficialcontinuumbetweenteaching,researchandinnovation.TheoverarchinggoaloftheInnovationAcademyistoproduceanewbreedofgraduate,expertintheirdisciplines,butimbuedwiththecreativity,entrepreneurship,mentoringandsupportstorapidlyconvertknowledge,ideasandinventionsintocommercialuseandsocietalbenefit.Conceptually,theInnovationAcademywillbroadenthestudentexperiencethroughformalentrepreneurshipandinnovationtraining,producingbusinessawareandpolicy-adeptgraduates–addingvaluetotheorganisationstheyenterasemployeesandenabled,throughtheirtraining,toengageinthecreationofnewventuresthemselves.

aJointVentureinenterPrisedeVeloPment

AkeyobjectiveoftheInnovationAllianceistoenhancethecommercialisationofideas,discoveriesandinventionsgeneratedwithintheinstitutions–arisingfromspecificuniversity-basedresearchofourstaff,orfromtheinnatecreativityofourstudentsorourresearchpartners.Todrivethedevelopmentoftechnology-andideas-intensiveenterprise,theAllianceisdevelopinganewjointventure–builtaroundtrueincubationandscaling–tofacilitate:

+ Ajointapproachtoscale-upthecapture,protectionandcommercialisationofintellectualproperty,withamajoroperationalshifttowardsopeninnovationandincreaseddealflow;

+ Anembeddedone-stopsolutionforbusinesscreationanddedicatedincubation.Itwillmaximizethepre-investmentvalueofIrish-basedintellectualpropertythroughinclusionofallthenecessarysupportsforpre-moneyearly-stagecompanies,includingmentoring,legalexpertise,marketexperts,accommodation,prototyping,andfinancialadvice;

+ Co-developedandco-marketedenterprisecapabilitiesacrosstheinstitutions,underpinningthefuturegrowthandscalingofnewventurespost-investment.Thesefacilitieswillhousecampuscompaniesspinning-outofthetwouniversitiesbutequallythespinning-inofnationalandinternationalcompanies,whereproximitytotheacademicexpertiseandcampus-basedtechnologiesoftheAlliancepartnerswillconferacompetitiveadvantage.

JointresearChstrategy

TheInnovationAlliancewillbuildonexistingexpertiseandinvestmentstoadvanceresearchprogrammesofscalewhichfocusonimportantnationalneeds,maintainestablishedforeigndirectinvestment,attractadditionalFDI,includeindigenousenterprise,traingraduates,andengagepartnersthroughanopeninnovationframework.Aframeworkwillbedevelopedtoincentiviseparticipationbyindustry(buildingonexistingresearchandtrainingrelationshipswithover400companies)throughallavailablemechanisms,includingpublic-privatepartnershipwiththeState.

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WebelievethatthenewHEstrategymustcreateamomentumforrationalisationofprovision,strongercollaborationbetweenprovidersandwithenterpriseandemployersandcontinuousimprovementineducationoutcomes.Itwillalsoneedtoaddresstherequirementforaninvestmentframeworkforthefuturewhichisbasedonarealisticassessmentofneeds,anacknowledgmentofthelimitedcapacityofpublicfundingtofullyaddressthoseneedsand,asacorollary,therequirementforadiversityofrevenueearningoptionsforHEIs,includingcommercialisationandpossiblytuitionfees.

WearealsorecommendingfurthercollaborationwithregardtodevelopingstandardisedapproachestocommercialisingIntellectualPropertywhichwouldinvolveallhighereducationinstitutions(seechapter6).

5.5 supportingrecommendationDrawingontheexampleoftheTCD-UCDInnovationAllianceandthemorerecentNUIG-ULStrategicAlliance,wesupportfurthercollaboration,alliancesandstreamliningofprovisionbetweenHEIsaswellasnewmodelsofHEI-industrycollaboration.

CONTRIBUTION OF ARTS, HUMANITIES AND SOCIAL SCIENCESTherelationshipbetweenthescience,engineeringandtechnologydisciplinesandinnovationiswellarticulatedinseveralpolicydocuments.Lessdevelopedandunderstoodistherolethatthearts,humanitiesandsocialsciencescanplayinsupportingenterpriseandemployment.WhilefullyendorsingtheemphasisplacedonscienceandtechnologyintheSSTI,theTaskforcebelievesthatinawell-functioninginnovationecosystemSTEMdisciplinesarecomplementedbythearts,humanitiesandthesocialsciences(AHSS)andmoreneedstobedonetoenhancethatcomplementarity.Innovation,increasingly,willoccuratthemarginsofdisciplines.TherearegreatopportunitiestobegraspedbymergingthepotentialoftheAHSSwithscientificpossibilities.Bysharingdiverseideas,insightsandapproacheswecanmakethegreatestprogressinmeetingarangeofsocialandeconomicchallenges.

TheAHSScontributetoinnovationatasocietalandindividuallevel.Fortheindividual,theAHSSdisciplinesdevelopawiderangeofskillsbeyondspecificqualifications.Theseskills,describedasgenericbecausetheycanbeappliedinawidevarietyofnon-disciplinespecificareas,includecriticalandanalyticalthinking,culturalawareness,communicationandbroaderperspectives.Theyareskillsmuchsoughtafterbyemployersininnovativeindustriesandbusinessesfortheircontributiontoamoreflexibleandmulti-skilledperson.Theseskillsareparticularlyrelevantinthecontextofthetrendtowardsconvergence(seechapter8).

TheArtsandHumanitiescanhelptranslatesciencetothewiderpublicwhilevisualartanddesignresearchcanmakecomplexinformationmoreunderstandable.ResearchinlawunderpinstheefficiencyofIntellectualPropertyinincentivisingandrewardinginnovationwhilemodernlanguagesplayanobviousroleindrivinginternationaltradeandcross-culturalcollaboration.Thesedisciplinesalsohaveauniquecontributiontomaketocertainsectorsoftheeconomyincludingservicesandwhatarebroadlydescribedasthecreativeandculturalindustries.

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Creativeindustriessuchastelevision,on-lineeducationprovision,webdesign,developmentofassistivetechnologiesanddigitalcontentaregoodexamplesofareasofeconomicactivitywhicheffectivelyharnessthesynergiesbetweenAHSSdisciplinesandthoseofSET.Theyareleadingtoincreasingeconomicreturnsfromthecreationofintellectualpropertyaswellasservicesinareassuchasmarketingandadvertising.

5.6 supportingrecommendationPromotethecontributionofAHSStotheinnovationecosystem,and,inparticular,seektoincreasesynergiesbetweendifferentdisciplineswithinAHSSandSETdisciplines.

CULTIVATING ENTREPRENEURSHIP IN HEIsThereisscopetoincreasethefocusonentrepreneurshipwithinHEIsinIreland,withaviewtoensuringthatbothundergraduatesandpostgraduatesareexposedtotheconceptandencouragedtodeveloptheinter-disciplinaryskillsrequiredtotranslatetheiracademiclearningintotheenterprisearena(asisenvisagedinourfourthprinciple).Thisappliesacrossalldegreeprogrammes,includingengineering,science,law,businessstudiesandthecreativearts.TheTCD-UCDInnovationAllianceincludesanumberofspecificmeasurestohelpachievethisobjectiveandtheTaskforcewelcomestheseandsupportstheirimplementation.

TheTaskforcealsosuggeststhatHEIs,withsupportfromrelevantagencies,developBusinessPlanCompetitionswithfundedprizeswhichwouldprovideseedcapitalforwinningstudentstostartnewenterprises.

5.7 supportingrecommendationAllHEIsshouldintroduceinitiativestocultivateinnovationandentrepreneurshipatbothundergraduateandpostgraduatelevel,drawingwhereappropriateonthemodelproposedbytheTCD-UCDAlliance.ThiscouldincludeBusinessPlanCompetitionswithfundedprizes.

BUILD THE COHORT OF WORLD CLASS GRADUATES WORkING IN IRELANDAswellasbuildingthebaseofskillsacrosssocietyintheareasofscience,engineeringandmaths,andenhancingnationalinterestincoursesinengineeringandscienceinourHEIs,thereisaneedtocreateacohortoftoptier,world-classengineeringandsciencegraduateswhoareversedintheverylatesttechnologydevelopmentsworld-wide.Theprincipalvehicletoachievethisisinvestmentwhichsupportsworld-class,peerreviewedresearchandPhDeducationinHEIs.UndertheSSTI,graduateeducationhasbeenimprovedbythemovetostructuredPhDsandtheconsequentbroadeningoftheskillsbaseingraduateeducation.OurvisionrequiresamoreenergeticflowofpeoplebetweenHEIsandindustryandviceversa.Itisimportantthereforetoprogressimplementationoftheresearchcareersframeworkwhichhasrecentlybeendeveloped.

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Onefurtherwaywhichcouldhelptostrengthenthebaseofhighly-skilledgraduatesinIreland,istoincreaseparticipationbyIrishstudentsinworld-leadinginstitutionsabroadandcreateanincentivefortheseengineersandscientiststoworkinIrelandduringtheircareers.ThiscanbeseenascomplementingourrecommendationsinthesectionbelowaboutinternationalisationofIrisheducationandtwo-wayflowsofstudentsthroughtheIrishsystem.

5.8 supportingrecommendationIntroduceaProgrammetoincentiviseparticipationincertainpostgraduatecoursesintheworld’stoptenEngineering,ScienceandBusinessSchoolsbyindividualswhowouldthenreturntoworkinIreland.Oneapproachwouldbealimitedtaxrelief‘futures’schemewhichwouldallowsuccessfulgraduatesavailofapersonaltaxrelieftooffsettheirtaxliabilitiesarisingfromemploymentwithintheState.Analternativewouldbeatwo-waymobilityprogrammebetweenIrelandandinternationalHEIs.

INTERNATIONAL STUDENTSInternationalstudentscanplayanimportantroleinnationalinnovationsystems.TheTaskforcebelievesthatIrelandshouldcreatethekindofvirtuouscircleobservedintheUSwhereanexcellentresearchandinnovationsystemattractsthebestinternationalstudentsandfaculty.Thisinturnenhancesthequalityandreputationofthesystemanditsinstitutionswhichthensupporthighlevelsofcommercialisationandawellqualifiedpoolofemployeesforindustry.

Anewco-ordinatedapproachtomarketingIrelandtointernationalstudentsisnowbeingimplementedbytheGovernmentworkingwiththeHEIs.AttractingtoptierstudentstoIrelandalsohelpsraiseIreland’sinternationalprofileingeneralintheglobalresearchcommunity.ToptierforeignalumnifromIrishHEIsmayinturnriseintheirownsocietiestobeadvocatesforIreland.Thiscouldbeparticularlyimportantinbuildinglinkageswithnewhighgrowthmarkets.

AttractingPhDstudentsfromoutsidetheEUplaysanimportantpartinouroverallinnovationeco-systembybuildingthebaseofhighqualitystudentswhowillinturnfacilitateknowledgetransferintoenterpriseandcommercialisationofresearch.Thecontributionofthesestudentsneedstobeadequatelyreflectedinfuturefundingandfeesframeworks(forexamplethroughtheHEA)andmarketingeffortsbytheHEIs.

ConsiderableprogresshasbeenmadeinsimplifyingimmigrationandworkpermitrequirementsforoverseasresearchersinbothHEIsandindustry,mostrecentlythroughtheHostingAgreementInitiative.Howeverinordertoremainattractive,weneedtogofurthertoensurethatPhDstudentsandPhDgraduatesfromoverseasdonotfacedifficultiesinobtainingresidencystatus.

Inaddition,itisimportantthatweincentivisesuchhighly-qualifiedstudentstoremaininIrelandandfacilitatethem,eitherinseekingemploymentinIreland,orinworkingtowardsestablishmentoftheirowncompany.

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5.9 supportingrecommendations+EnsureeffectivestreamlinedimmigrationarrangementsforSSTI-related

PhDstudents,postdoctoralresearchersandtheirfamiliesre-locatingtoIreland;

+Introducefast-trackresidencystatusforPhDgraduatesemployedbyIrish-basedbusinesses;

+IncreasethecurrentsixmonthextensionduringwhichaPhDgraduatecanstayinIrelandtoseekanotherjobto12months.

LIFE-LONG LEARNING Amoreconcertednationaleffortatworkforceup-skillingisessentialtobuildingacompetitiveandproductiveworkforcethatcansupportinnovationacrosstheeconomy.

Onthebasisofinternationalmetrics,Irelandperformswellintermsofoverallhighereducationparticipationandattainment.Ourparticipationrateiscontinuallyincreasingandhasgrownfrom55%in2004to66%in2007andisnowapproaching70%36.However,thesefiguresconcealanimportantageprofiledifferentialinoveralleducationalattainment.IrelandisinthetopquartileoftheOECDfortertiaryeducationattainmentamongthe25-34yearagegroupsandisjust1%belowthetopquartileinthe35-44yearagegroups.However,Irelandperformslesswellcomparativelyfortheover45s37.Thisreflectsthefactthatmanyofthosecurrentlyworkinghavenothadtheopportunitytoparticipateinhighereducation.

Itisessentialthatwecontinuetoimproveparticipationratesinhighereducation.However,wemustalsorecognisemanyofthosecurrentlyworkinghavenothadtheopportunitytoparticipateinhighereducation.Thisrepresentsbothachallengeinthatweareunder-skilledcomparedtomanyofourcompetitors,butalsoanopportunity.Apositivechangetothisprofilecouldleadtoasignificantimprovementinnationalproductivityandcompetitiveness.

5.10 supportingrecommendationThereshouldbeapolicyshifttowardslife-longlearningwithinourHigherEducation,FurtherEducationandtrainingsystem.HEIs,FÁS,andotherpublicagencies,aswellasemployers,needtobetteraligntheirrespectiverolesinthisregard.

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6. Transferring Knowledge

Higher Education Institutions play a key role in developing research in identified areas of strategic priority and in strengthening the commercialisation function and generation of economic value from the intellectual property generated. We must optimise knowledge transfer between HEIs and Industry.

Inthischapter,wesuggestactioninanumberofdifferentareastoimprovethelinkagesbetweenHEIsandotherelementsofthenationalinnovationsystem,particularlyindustryandrelevantGovernmentAgencies.WefocusontheneedtofurtherincentiviseinnovationwithinHEIsandontheneedtoimprovetheefficiencyandeffectivenessofoursystemforconvertingIPintocommercialisedproductsandservices.ThegoalistofacilitateoptimumknowledgetransferbetweenHEIsandindustry(foranexampleseeBox6.1below),andtofast-tracktheaccessbyentrepreneurs,existingcompaniesandstart-upstoHEIIP,enablingexistingcompaniestoscale,andsupportingdevelopmentsinareassuchasconvergingtechnologies.

Box 6.1

Neonatal Brain Research Group, UCCScienceFoundationIrelandPrincipalInvestigators,Dr.GeraldineBoylan,Dr.GordonLightfootandDr.LiamMarnaneconductresearchintheNeonatalBrainResearchGroupinUCC.Thegrouphasdevelopedinnovativesoftwaretodetectseizuresinnewbornbabies.Seizures,whichareoftenimpossibletodetectvisually,mayoccurinup20%ofprematureinfantsandrequireimmediateevaluationandtreatmenttopreventlongtermbraininjury.

TheprimarydetectiontoolusedbytheNeonatalBrainResearchGroupusesanEEG(electroencephalograph)devicethatmeasurestheelectricalactivityofthebrain.Thegrouphasdevelopedaninnovativetechnologyusingsignalprocessingandmachinelearningtechniquestoautomaticallydetectseizuresfromthiselectricalactivity.ThepatentedintellectualpropertydevelopedhasledtotheacquisitionofadditionalgrantsfromotherfundingagenciesincludingtheWellcomeTrust,EnterpriseIrelandandtheEuropeanUnion.Inaddition,theresearchteamiscollaboratingwithaglobalhealthcarecompany,CardinalHealth,tobringtheirnoveltechnologiestomarket.

CareFusionisamedical-technologycompanythatisawhollyownedsubsidiaryofCardinalHealth.CareFusion’sIrishoperationhasbeenbasedinGort,Co.Galway,foroverthreeyears.Withover100employees,CareFusionmanufacturesalargerangeofmedicaldeviceproducts,whicharedistributedtoover70countriesworldwideandprovideclinicaldiagnosisandtreatmentforpatientswithseriousillnesses.

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kNOWLEDGE TRANSFER FROM HIGHER EDUCATION INSTITUTIONS INTO INDUSTRYThereisanopportunitytostrengthenthelinksbetweenbusinessandHEIsthroughtheuseofgraduateandundergraduateplacementprogrammes.Suchplacementswillhelpbusinessesimprovetheircompetitivenessandproductivityandensurethatgraduateshaverelevantindustryexperience,whichisparticularlyimportantinthecurrenteconomicdownturn.

AradicalshiftisnowneededintheexperiencewhichourundergraduatesandpostgraduatesundergoatourHEIs.Innovationandentrepreneurshipneedstobefosteredinyounggraduatesandinsocietyatlarge.OurHEIscandomuchtonurtureandfosteranaspirationtostartacompany,byexposingtheirstudentstosomeoftheissuesinvolvedbutpracticalexperiencethroughplacementscouldprovevaluableingroundingtheoreticallearningintherealityofoperatinginindustry.

Giventhecurrentdepressedlabourmarket,thereisariskthatrecentgraduatesinEngineeringandScience,andotherdisciplines,mayemigrateorhavetheirskillsdecline,leavingaskillsshortfallinthelabourmarketinthemediumterm.

Graduateinternshipsprovideanopportunityforcompaniestobenefitfromtheskillsandknowledgeacquiredthroughtheeducationsystem,whilegivinggraduatesanopportunitytogaininitialexperienceintheworkplace.

TheGovernmentintroducedarangeofnewlabourmarketactivationmeasuresduring2009includingaWorkPlacementProgrammemanagedbyFÁS,whichfacilitatesgraduatesforamaximumplacementofninemonths,providedthattheyhavebeeninreceiptofsocialwelfareforatleastthreemonths.Theschemeislimitedto2,000individualsnationwideandthoseplacedcontinuetoreceivetheirsocialwelfareentitlements.

TheTaskforcebelievesthatthereisscopetosupplementthiswithatargetedschemeforgraduateswithSTEMdegrees.Thisshouldallowforplacementofupto12monthsandbestructuredthroughabursaryschemeinvolvingpaymentofunemploymentallowanceaswellasatop-uppaymentbytheemployer,whilemakingclearthatacompanyhasnolegalobligationattheendoftheinternshiptoconferemployment.

Tobesuccessfulthiswillrequirestrongsupportandparticipationfromindustry.Therelevantindustryrepresentativebodiesshouldtakealeadingroleindevelopingandpromotingittotheirmembers.

6.1 supportingrecommendations+ Introduceaschemesimilartothe“KnowledgeTransferPartnership

Programme”intheUK38byplacingrecentgraduatesincompaniestofacilitatethetransferofhightechnologyskillsandexpertise;

+ AspartofthecurrentWorkPlacementProgrammeintroduceatargetedstrandforSTEMgraduateswiththeassistanceofindustryrepresentativebodies;

+ EstablishanationalundergraduateinternshipprogrammewhichbuildsonexistingHEIinitiativesbuthasamoreconcertedinvolvementofindustry,especiallyasregardsconsistencyintheavailabilityofplaces.Thismayrequireanelementofsubsidisationfortheparticipatingfirms.

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STRENGTHEN ENTREPRENEURIAL CULTURE IN HIGHER EDUCATION INSTITUTIONSTheTaskforcebelievesthatweneedtorecogniseandrewardentrepreneurialcultureinourHEIsinaccordancewithoursixthprinciple.Specifically,aclearcareerpathisneededthatdevelopspeople’stalentsandwhichfixesaremunerationframeworkwhichrewardspeopleappropriatelyandencouragesmobility.

HEIscandevelopmanyinitiativestoimprovethecurrentcultureofinnovationandIPmanagementwithintheirinstitutions.Careerpromotionsshouldbelinkedtoinnovationactivities.Specificoutputsthatarenotcoveredbyapublicationlist(e.g.licensed,ratherthanunlicenseddormant,patents;specificcollaborationswithbusiness;consultancywork;productdesignanddevelopmentcollaborations;involvementinaspin-outetc.)shouldbecriteriaforappointmentsandpromotion.Alumniwhoareinnovatorsshouldbecelebrated.“InnovationChampions”whoseroleistoidentifycommercialisationopportunitiesandadviseandencouragecolleaguesonmattersrelatingtoinnovationcanbeappointedwithineachHEIDepartmentandSchool.ThereshouldberegulartrainingandeducationonIPissues.SeniorresearcherscouldalsobetemporarilysecondedtoanentrepreneurwholicensesIP.

6.2 supportingrecommendation+ ImplementanewsuiteofHRandperformancemanagementpoliciesin

theHEIstoincentiviseandrewardinnovationandcommercialisation.Theseshouldinclude:

- Facilitationofstaffwhowishtoprovidetheirexpertisetoinnovativecompanies,throughfull-timeorpart-timesecondments.ThefillingofanyvacanciesarisingfromsuchsecondmentsshouldbeexemptfromanyrestrictionsrelatingtotheEmploymentControlFramework;

- Seektoensurethatacademicswhotakeleaveofabsence/sabbaticalstogainindustryexperience,arenotpenalisedintheiracademiccareer;

- Ensurethatcareeradvancementisbasedonvaluingcommercialisationworkaswellasresearchandteachingperformance.

+ ResearcherswhodeveloptechnologythatistransferredtoacompanythroughalicenceorothermechanismshouldbeinvitedtoapplyforspecificStateresearchfundingtofurthersupportthebasicresearchprogramsbeingconductedinthatresearcher’slaboratories(e.g.similartotheUKROPA(RealisingOurPotentialAwards)Scheme).

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FURTHER ASSISTING COMMERCIALISATIONTheBusinessPartnersProgrammewasestablishedin2009asapilotprogrammetogiveparticipatingentrepreneursaccesstoEI’sportfolioofpotentialstart-upcompanies.EIworkswithindividualsonadefinedresearchprojecttoproduceastart-upreadycompanyinsixmonths.

Theentrepreneurswhogetinvolvedhavetheexperienceofbuildingstart-upteamsaroundnewbusinesses.Theyalsohavemanagementexperienceintechnology-basedcompaniesandindevelopingtechnologyconceptsintocommercialproductorserviceoffers.Theprogrammehasprovenverysuccessfulinitspilotphase,andEIshouldcontinuetoruntheprogrammein2010andbeyond.

CommercialisationofStatesponsoredR&DshouldbefurthercatalysedbyenablingbothIrishresidentandoverseasentrepreneurstobeplacedintoHEIR&Dcentresandlaboratories.Entrepreneurinresidenceschemescanalsohavefruitfulimpactonacademicresearchersbyhelpingthemunderstandkeyresearchchallengesandopportunitiesfacedbyspecificglobalindustries,andtheindustry“stateofpractice”.Inturnthismaymakeresearchersmorelikelytoproduceresearchsolutionstoexistingcommercialproblems.AschemeontheselineswasintroducedbySFIin2009andshouldbemaintainedandpromoted.

LaboratoryaccessprogrammestoHEIsarereasonablycommonin,forexample,theUSA.TheyprovideanopportunityforSMEs,whowiththeirownresourcescouldnotaffordexpensiveresearchequipment,toundertaketheirownadvanceddevelopment.IntheIrishcase,accessoncommercialtermsmaybeattractivetobothSMEsandtheHEIs.

Productdesignanddevelopmentteachingprograms–conductedinclosecollaborationwithindustrypartnersaroundspecificprojects–arealsoinuseatleadingUSHEIengineeringdepartmentsasextensionsofcompanyin-houseproductdevelopmentteams.Companiesworkwiththeseengineeringschoolprogramstotestdrivenewproductconceptsnotontheircriticalpath,ortogainaccesstoout-of-the-boxthinkingbyuniversitygraduatestudentsandfaculty.

6.3 supportingrecommendations+IntroduceaschemetoensuregreateraccessbyindustrytoHEIspecialist

equipmentandlaboratories;

+Significantlyincreasetheplacementof“entrepreneursinresidence”intorelevantR&DlaboratoriesandcentresoftheHEIs.

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INTELLECTUAL PROPERTY ARISING FROM STATE SPONSORED R&D IN HIGHER EDUCATION INSTITUTIONSTheIntellectualPropertycreatedinthenation’sHEIsisacriticalbuildingblockofaninnovativeSmartEconomyandiscentraltoourfirstprinciple.Entrepreneursandcompaniesneedaclear,consistent,speedyandpredictablesystemtofacilitatetheirengagementinresearchwithHEIs,andtofindandaccessIPcreatedatHEIs,inordertoturnitintoproductsandservicesthatmeetcustomerneeds.

Ideally,thissystemshouldenableanentrepreneurorcompanyto:

+ gotoasinglelocationtofindallresearchopportunitiesandallIPthathasbeengeneratedacrosstheentireHEIsystem;

+ immediatelygetreferredtothekeypersonwhowillnegotiateanagreement,andonlyberequiredtonegotiatewithonekeyperson,eveniftheactivity/IPexistsinmultipleHEIs;

+ getthesame,standard,predictableandprofessionalserviceeverytimetheyaccessthesystem.

SuchasystemwouldgiveIrelandacompetitiveadvantageovermanyothercountries,astheplacetogotoinnovate.

TheTaskforcerecognisesthatsignificantprogresshasbeenmadeinrecentyearstowardsachievingthesegoals-particularlywiththestrengtheningoftheTechnologyTransferandDevelopmentofficesoftheHEIs,fundedthroughEnterpriseIreland.Wealsorecognise,however,thatthereismoreworktobedoneinordertogettoasystemthatistrulyentrepreneur-friendly.

OurconsultationprocesshighlightedaviewthatthereiscurrentlyadisparityofapproachestofindingandaccessingIPfromthevariousHEIswhichmakesittimeconsuming,expensiveandchallengingtocommerciallyexploitIrishStatefundedIP,particularlyincaseswheremultipleHEIsmaybeinvolvedinassemblingtechnologyforaninnovativesolution.

WeareawareoftheconcurrentForfásReviewofCurrentSupportstoEncouragetheExploitationofIntellectualProperty(IP)emanatingfromtheHigherLevelResearchSectorandwelookforwardtothefindingsofthatreport.

WeacknowledgethatanefficientsystemforfacilitatingindustryinvolvementinState-fundedresearchwithHEIs,andforcommercialisingIPfromHEIs,involvesinputandparticipationfromanumberofstakeholders,includingGovernment,R&Dfundingagencies,theHEIs,andtheentrepreneursandcompaniesthatusetheIP.Alllinksinthechainmustoperateefficientlyinorderforthesystemasawholetofunctionproperly.AsastartingpointthesestakeholdersshouldagreethatthekeyprincipleincommercialisingIPfrompublicly-fundedresearchshouldbethegrossreturntotheeconomy,andnotsolelytotheHEI(s)involved,whilerespectingtheimportanceofmaintainingtheincentivestoindividualresearchers.Whenevaluatingthe“grossreturntotheeconomy”here,wemeanissuessuchasthecreationofjobsandnewcompanies,enablingexistingcompaniestoscale,andsupportingdevelopmentsinareassuchasconvergingtechnologies.

Withthatinmind,wemakethefollowingrecommendationswithaviewtobuildingonpastprogressandachievingthesystemdescribedabove.

PositionirelandasonelocationintheeuwherethereisaclearandconsistentnationalpolicyandrulesfortheownershipofandaccesstostatesupportediP.

ThereiscurrentlyconfusionamongstbothindustryandHEIsaroundnationalpolicyinrespectofthetermsthatapplytoHEI-industryresearchandaccessrightstoHEIIP.ThisisnotanissueuniquetoIreland,andothercountrieshavetakeninitiativestoimprovethesituation.

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Industryneedspredictabilityaroundtheseissues.Weknowfrominternationalexperiencethatpredictabilityandconsistencyofapproachinrespectofindustry-HEIinteractionsevolvesovertime(e.g.transactionrate;scale;longtermpartnerships).Consistencycanalsobecreatedbywayoflegislation(e.g.BayhDoleActinUSA).

Irelandhasanopportunitytobeoneofthefewlocationsintheworldforwhichthereisclear,fairandunambiguousoperatingproceduresforStatesupportedIP.WerecommendanationalIPProtocolbeintroduced,whichestablishes“groundrules”whichmustbefollowedwhenagreeingtermsaroundownershipofandaccesstoallStatesupportedIP.Itshoulddealwithatleastthefollowingissues:

inresearChProJeCtswithindustry:

+ thecriteriafordecidingownershipandaccesstoIP(itisenvisagedthecriteriawouldsetout:allthepossibleoptionalcontributionswhichtheentrepreneurcouldmaketotheproject(bothfinancialandin-kind);otherpossiblereturnstoIreland/EEAwhichcouldresultfromtheproject,andtherightsreIPownershipandaccesswhichtheentrepreneurwouldbeentitledtoinreturnforthosecontributions/returns);

+ thecriteriaforagreeingappropriatewarrantiesandindemnities;

+ themutualresponsibilities,obligationsandrightsofcollaboratingparties;

+ theresponsibilities,obligationsandrightsofpartiestodeclarebackgroundIP;

+ theabilityandlimitationsofanacademicresearchertopublishanduseresultsforresearchpurposes.

inliCensestoindustry:

+ thecriteriaforagreeingappropriatewarrantiesandindemnities;

+ issuesrelatingtopaymentsandreturnstobesoughtbytheStateforlicensesandspin-outs:withthekeyprinciplebeingthegrossreturntotheeconomy,andnotsolelytotheHEI(s)involvedbeingtheprimeoutcomesought,whilerespectingtheimportancetomaintaintheincentivestoindividualresearchers.

OncetheIPProtocolhasbeendeveloped,moremeaningfulmetricsbywhichtheHEIsandTTOsaremeasured,needtobeadopted,toreflectthisIPProtocol.

InordertoincentiviseinnovationandcommercialisationactivitieswithinHEIs,aproportionofStatefundingfortheHEIsshouldbelinkedtonationalmetricsoninnovationandcommercialisation.

6.4 Keyrecommendation+DevelopandpublishanationalIPProtocol,whichestablishes“ground

rules”whichmustbefollowed,whenagreeingtermsaroundownershipofandaccesstoallStatesupportedIP;

+AdoptmoremeaningfulmetricsbywhichHEIsandTTOsaremeasured,toreflecttheIPProtocol;

+LinkaproportionofStatefundingfortheHEIstonationalmetricsoninnovationandcommercialisation.

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CLARIFY AND STANDARDISE IP TERMS OF STATE FUNDING AGENCIESTherehavebeenmixedsignalsfromvariousStatefundingagencieswithrespecttoexpectationsaroundIPmanagement.Fundingagenciesneedtoadoptaclearandstandardisedapproacharoundthisissue,toensureHEIIPhasoptimumcommercialvalue,andto“fast-track”theduediligenceprocessfortheentrepreneur.

TherehavealsobeenmixedsignalsfromvariousStatefundingagencieswithrespecttotheexpectedreturns/outputsfromHEI-industryresearchcollaborations.ThishasledtostrainedrelationsbetweenHEIsandindustry.ThisisnotanissueuniquetoIreland,andothercountrieshaverecognisedthisissueandhavetakeninitiativestoimprovethesituation.FundingagenciesneedtodevelopaframeworktoenablespeedyagreementbetweenHEIandindustrycollaboratorsofresearchterms,andwhichareinlinewiththeIPProtocol.

6.5 supportingrecommendation+ Ensureallfundingagenciesadoptandpublishstandardisedrequirementsfor

themanagementofIPwithinHEIs,inaccordancewiththeIPProtocol;

+ Developaframeworktoensurethat,whenfundingcollaborativeprojects,alltermsareagreedbetweencollaboratorsbeforetherelatedfundingisdrawndownandthatthosetermsarealignedwiththeIPProtocol.

ENSURE THAT IP PROCEDURES, PROCESSES AND CONTRACTS WITHIN HEIs ARE WORLD CLASS AND STANDARDISED ACROSS HEIs AS FAR AS POSSIBLEHEIresearchersneedtoproperlymanagetheirIPinordertoensureithasoptimumcommercialvalue,andto“fast-track”theduediligenceprocessfortheentrepreneur.Astheemployersoftheresearchers,HEIsplayanimportantroleinimprovingthecultureofIPmanagementbyresearchers.

HEIscouldintroduceanumberofinitiativestoenableindustrytoexperienceapredictable,consistentandspeedyapproachinallinteractionsinrespectofHEIIP.Thedevelopmentofmodelcontracts,andalignmentofIPpoliciesamongstallHEIs,wouldgreatlyassistindustryinthisrespect.

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6.6 supportingrecommendationsEnsure:

+ TheIPmanagementpoliciesandprocedureswithinallHEIsarebestinclass,inparticulartoavoidinadvertentIPleakageorinadvertentexposuretocommercialliability,andthatthesepoliciesandproceduresarestandardisedacrossallHEIs,asfaraspossible;

+ That,withtheassistanceoffundingagencies,researcherswithinHEIsareappropriatelyincentivisedtoproperlymanagetheirIP;

+ AgreementsbetweenHEIsareinplacetoenablespeedylicensingofIPfrommultipleHEIsinaccordancewiththeIPProtocol,withasinglecommerciallead;

+ AnexpertgroupofrepresentativesfromtheHEIsandtheprivatesectorisappointedtodevelopmodelcontracts,inlinewiththeIPProtocol,forallactivitiesattheHEI/Industryinterface,tobeusedbyallHEIsattheoptionoftheentrepreneur/company(i.e.non-disclosureagreements,materialtransferagreements,licenceagreements,etc.)(internationallyacceptedmodelcontractstobeusedasastartingpoint).

RATIONALISE THE PROCESS OF FINDING, ACCESSING AND BUNDLING IP FROM THE HEIsTheTaskforcerecognisesthatsignificantprogresshasbeenachievedinrecentyearsinestablishingtheTTOsandthattheinitialpriorityshouldbetoestablishandimplementaNationalIPProtocolanddelivertherelatedrecommendationsabove(6.4-6.6).Intandemwiththis,webelievestepsarerequiredtoenablespeedyaccesstoHEIIPandinparticularIPbundlingwhichtakeaccountofourprinciplethattheentrepreneurandenterprisemustbeatthecentreofourefforts.

6.7 KeyrecommendationConveneanexpertgroupofrepresentativesfromIndustry,theVCsector,theHEIs,thelegalprofession,andthepublicsector,whoareinformedbyTTstructuresinternationally,torecommend,bySeptember2010,themostappropriatestructurethatwouldachievethefollowing:

+ AnationalofficethathasknowledgeaboutcurrentresearchprojectsandaccesstoallIPcreatedthroughouttheHEIsystemaswellasthemandatetobundle,marketandfacilitatespeedycommercialisationofIPfromallHEIsinaccordancewiththeIPProtocol;

+ Inthatoffice,asinglepointofaccess,andpointofcontact,fortheentrepreneur,toallIPthathasbeengeneratedacrosstheentireHEIsystem;

+ MechanismsputinplacetoensurefullsupportoftheactivitiesofthisofficebytheHEIs/TTOs.

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7. Scaling Irish Companies A core challenge identified by the Taskforce is to help more Irish companies grow quickly to significant scale.

GROWTH CAPITALGivenourambitionsforthe“SmartEconomy”,andtheneedtocreateaninflectionpointinthecreationandgrowthofinnovativecompaniesweneedatransformationinthescaleandnatureoftheIrishVentureCapital(VC)industry.ThiscouldbeachievedbyattractingtoptierventurefinancingtoIrelandsoastosuccessfullyscaleinnovativecompanies.

Atpresent,inIreland,thereiscapacitytomakeonlyarelativelysmallnumberofnewinvestmentsabove€2 millionayear.Further,theusualinvestmentsbytheindigenousVCcommunityarerelativelysmallbyinternationalstandards.

DuetothelimitednumberofindigenousVCsthereisalsoinsufficientdomainexpertisetocoverthewidevarietyofmarketswhichourcompaniesaretargeting.Further,withouttheoperationalexperienceofrunningandgrowingglobalinnovationcompaniesintheseorrelatedmarkets,therecanbeatendencytoriskrelatively(comparedtotoptierVCs)smallamountsofinvestment,ratherthanlargerbetsonnewinnovationswhichmaychangeglobalindustries.

AnentrepreneurisatriskofspendingtoomuchtimefundraisinginIrelandforwhatwillbe,bytoptierstandards,asmallamountobtainedrelativetotoptierstandards.

EnterpriseIrelandhasmadeconsiderableeffortstodevelopthedomesticIrishVCindustrywithsignificantinvestmentfromtheNPRF.ThechallengesfacingtheIrishVCindustryaresimilartothosefacedinmostEuropeancountriesparticularlythosewithasmalldomesticmarketandwithoutsignificantsourcesofdomesticriskcapital.

Todate,EIhascommitted€139.5 millionthroughthemostrecentSeedandVentureCapitalScheme,whichhasleveragedafurther€386.5 millionofinvestmentintheIrishVCmarket39.Inaddition,afurthertwocommitmentshavebeenmadetoFundmanagerswhoarecurrentlyfundraising.CentraltothestrategyunderpinningtheSchemewasthelong-termviabilityandscaleoftheIrishVentureCapitalindustry.

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OnecriticalchallengefacingIrelandistocontinuetosupportthedevelopmentoftheIrishVCindustry,whichwillremainanimportantpartoftheoverallVCecosystem,particularlyinthecurrenteconomicenvironment,asVCscommenceanewfundraisingcycleinthecomingyears.Awell-functioningdomesticVCsectorcancomplement(includinginvestingalongside)theinternationalventurecapitalthatwillbeattractedundertheInnovationFundIrelandproposal.TheTaskforcethereforesupportscontinuedinvestmenttosustainandbuildfurtherthedomesticVCsector.

However,theTaskforcebelievesthatweneedtotransformtheindustrytomatchtheexistingpotentialforgoodinnovativedealsgiventheexistingbaseofexperiencedentrepreneursinIreland,aswellastheincreasewhichcanflowfromsuccessfulimplementationofthisreport.

Acquisitionisalsoanimportantstrategypursuedbymanyscalingcompaniesrequiringaccesstoriskcapital.Onepossibleshort-termopportunitythatmightbecreatedbyaccesstotoptierriskfinancing(venturecapitaland/orprivateequity)wouldbeto'roll-up'someofthetechnologyclustersofrelativelysmall(byglobalstandards)Irishcompaniesintoglobalcompaniesofscalewhichcouldtheneachprovideenhancedsolutionstocustomersworldwide.

TheInnovationFund,asenvisagedintheGovernment'sSmartEconomyFramework,isacreativeandintelligentwaytofixthisasfastaspossible.CentraltotheapproachistoattractsmartcapitalandtoptierventurefinancierstocometoIreland,ideallywithactivepartnersphysicallyrelocatingtoIreland,andnetworkedintoaglobaltoptierventurefinancingfirm.

AtthetimeofpublicationofBuildingIreland’sSmartEconomy,anumberofinternationaltoptierVCfirmsexpressedstronginterestintheconcept.SubsequentdevelopmentsininternationalfinancialmarketsmandatedthenecessityforrevisedconsiderationofthetimingoftheintroductionoftheFund.TheGovernmentalsousedthisasanopportunity,priortoproceeding,toobtaintheviewsandrecommendationsofthisTaskforceastohowtheInnovationFundcanbestsupportthedevelopmentofIrelandasanInnovationHub.WebelievetheInnovationFund,asenvisaged,ismoreimportantthanever.WeareawarethattheNTMA,workingwithEI,iscurrentlytaskedwiththegroundworkforestablishingtheFund.

WhilewestronglysupporttheestablishmentoftheFundassoonasispossible,itisvitalthatthisisdoneinaninformedway.Balancingthetaxpayers’financialinterestandthefactthateachtier1VCfundhasitsownindividualperspectivesandneedsmeansthata‘onesizefitsall’approachwouldbenaïve.Furthermore,dependingonthefund-raisingstageofeachpotentialVCpartner,therewillbeaneedtophasetheintroductionoffunds.Weareawarethatmanyothercountriesandregionaleconomieshaveendeavouredtointroduceinnovationfundsandmanyhavebeenineffectiveindeliveringeconomicbenefits.Forthistoworkwewouldbeoftheviewthatamarketassessmentgaugescarefullytheappropriatetimingandstructureofthefunds.Basedonitsexperience,skillsandreputationweareconfidentthattheNTMA,withtheassistanceofEnterpriseIreland,istheappropriateauthoritytocompletethisprocess.

ArelatedinitiativetoencouragetoptierventurefinancingtolocatepartnersinIrelandistoleveragetheirportfoliocompanieswithaEuropeanbaseinIreland,aswediscussinRecommendation8.3.

Anotherapproachwouldbethedevelopmentof“entrepreneurinresidence”schemesinourHEIs,opentotoptierVCfunds,asproposedinRecommendation6.3.

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7.1 Keyrecommendation Attracting top-tier venture partners from abroad to Ireland is a priority and

can best be achieved through implementation as soon as possible of the Innovation Fund - Ireland, envisaged in Building Ireland’s Smart Economy.

ThereareanumberofotheropportunitieswhichwebelieveshouldbeexploredtohelpuniquelypositionIrelandasalocationfortoptierventurefinancing:

+ themnCsoperatinginireland:ManyofthesehavesophisticatedtreasurymanagementactivitiesthatknowIrelandwell.Aformallink,includingequityparticipation,toaMNCcanhelpayoungcompanygrowinpartnershipwiththeMNCandcanprovidetheMNCwithaccesstonewtechnologyandinnovationinitiallyprovenintheglobalmarket;

+ thediaspora:AsevidencedbytheGlobal Irish Economic ForumhostedbytheGovernmentinSeptember2009inFarmleigh,thereispotentialtodrawonthewillingnessofmembersoftheDiasporatohelp,manyofwhomhaverelevantexpertiseaswellasresources;

+ thenPrf:WearefortunatethatwehaveinIrelandanexperienced,proven,professional,commercial,sophisticatedmanageroffundsintheNPRF.Thisorganizationhascredibilitywithtoptierglobalinvestmenthouses,talkstheirlanguageandhascommercialacumen;

+ theifsCecosystemofprofessionals:TheworkofmanagingcapitalisacorecompetencythatwehavebuiltintheIFSC.SkillsavailablefromindividualsandfirmswithintheIFSCcanbedeployedtoassistinstrengtheningtheVCindustryoperatinginIreland;

+ theiseQ:WehaveaninternationallynetworkedandprofessionalstockexchangewhichcanhelpcompaniestopreparethemselvesforIPO,includingfloatingonotherinternationalexchangesincludingtheNASDAQ.

7.2 supportingrecommendations

InadditiontoimplementingInnovationFund–Ireland,mechanismsshouldbeexploredwhichwouldutilisethefollowingopportunitiestoenhancetheavailabilityofVentureCapitalinIreland:

+ ExistingMNCslocatedinIrelandshouldbeinvitedtosuggestmeansbywhichtheywouldbewillingtoassignsomeoftheirtreasuryfundsintoIrishbasedinnovativecompaniesorventurecapitalists;

+ FacilitatingtheIrishDiasporawhowishtoinvestinriskcapitalforIrishbasedinnovativecompanies;

+ Creatingaprogrammetoaccessventuredebt(acommercialinstrument,particularlyfrominternationalprivateequityfirms)forlaterstagecompaniesbasedinIreland.

Investmentshouldalsocontinueindevelopingasustainable,forward-lookingandhighqualityIrishVentureCapitalIndustry,complementingtheInnovationFund-Ireland.

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INCENTIVESSometimesentrepreneursaretemptedtosellout“toosoon”becausetheyarepersonallyfinanciallyconstrained.Givenourlevelofambitionfortheeconomy,weneedtoincentiviseourentrepreneurstoremainambitioustobuildcompaniestosufficientlylargescale.

ItisalsoimportantthatifacompanyeventuallyissoldtoanMNC,theIrishoperationisofsuchascaleandimportancethatithasagoodchanceofremaininginIreland.

Thebestwaytocounteratendencytoexitprematurelyistheavailabilityofgrowthcapitalfrominvestmentfirmsthatwillbuyintothecompany,allowingtheentrepreneurtopartiallyexit,whilealsoenablingandincentivisingthemtobuildthebusinessfurther.InvestmentfirmsofthisnatureexistinUKandUSandcoverIreland,butoftennotatthelowersizerangeofavailablecompanies.ItmightbepossibletouseInnovationFund–Irelandtohelpattractoneormoreofthesegrowthorventure/growthfirmstobetterservetheIrishmarket.

Inthemeantimehowever,weproposearemedytoassistentrepreneursinmaintainingtheirambitiontogrowandscalecompanies.WesuggesttheintroductionofaScalingIncentiveScheme(SIS).Thiswouldprovideforperiodic“SISdividends”which,ontherecommendationofthecompany’sBoardofDirectors,couldbepaidtothefoundingentrepreneur(s)atthecriticalgrowthstageinacompany’slifecycle,i.e.duringthescalingperiod.Theschememightworkasfollows:

+ Theentrepreneur(s)shouldhavemorethanathresholdownershipinterestinthe(exportledinnovativegrowth)companyof10%(each);

+ SISdividendscouldonlybepaidonceeverythreeyears;

+ Suchdividendswouldbecappedatthelowerofeither10%oftheincreaseinvalueofthecompanyorgroupinthepreviousthreeyears(orsincethelastsuchSISdividend),orthelevelofthecompany’sdistributablereservesonthatdate;

+ Thereliefmightbeclawedbackintheeventofasaleof50%oftheentrepreneur’sshareholdingwithinasixmonthperiod.

Weappreciateconcernsaboutintroductionofanewtaxincentivescheme.However,ifimplementedappropriatelyitcouldassistinincentivisingentrepreneurstohaveambitiontoscaletheircompanies.

7.3 supportingrecommendationInordertosupportandincentivisethescalingofinnovativeindigenouscompanies:

+ introduceaScalingIncentiveScheme(SIS)toacknowledgesuccessfulscaling,whilstcontinuingtogrowacompany;

+ inimplementingtheInnovationFund–Ireland(seeabove)endeavourtoensuretheprogrammeincludesmanagerswhichspecialiseininvestinginfastgrowingexistingcompanies.

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ExECUTIVE SkILLS Asacknowledgedinourfirstandsecondprinciples,Irelandneedstodevelopacohortofexperiencedsmarteconomyentrepreneursandbusinessexecutiveswhohavethenecessaryskillstodevelopglobalinnovativecompanies.

Ambitiousentrepreneursandrisingyoungexecutivescanlearnconsiderablyfrompracticalexecutivedevelopmentwhichplacesanemphasisoncoaching,mentoringandespeciallymeetingsuccessfulpeers.

EnterpriseIreland’sLeadershipforGrowth(L4G)programme,operatedinconjunctionwithStanfordGraduateBusinessSchoolandotherproviders,hasbeenparticularlysuccessfulinenablingCEOsofIrishbasedinnovativecompaniestomeetCEOs,businessexecutives,andventurecapitalistsinSiliconValley.EIalsohavearangeofexistingsupportsintheareaofsales/marketingincludingdedicatedmanagementdevelopmentprogrammes.

WhileL4Ghasbeenhighlybeneficial,ithasfocussedtodateonthedevelopmentofthecapacityandcapabilitiesofCEOs.ThereisnowanurgentneedtofurtherdevelopthecompetenceofindigenousexecutivesintwokeyareaswhichwillbecrucialinbuildingIrishcompaniesthatcancompeteglobally,namely(i)raisinginternationalfinancetoscaletheircompaniesand(ii)positioningandsellingproductsintheglobalmarketplace.Inparticular,weshoulddrawontheexperienceofthoseIrishCFOs,CEOsandseniorsalesexecutiveswhoalreadyhavepracticalexperienceandsuccessinthisregardtogiveseminarsandevencoaching.

AfurtherchallengeistostrengthenthesalescompatibilitiesofSMEswhoneedtomarketandsellinoverseasmarketsatarelativelyearlystageintheirdevelopment.

7.4 supportingrecommendation

BuildonthesuccesstodateoftheLeadershipForGrowth(L4G)programmeby:

+ ContinuingtheexistingL4GprogrammeanddevelopingadditionalprogrammeswhichexposeseniorexecutiveswithinexistingIrishenterprisestobestpractice,casestudiesandpersonalfacetofacecontactwiththeexecutivesandfoundersofsuccessfulinnovativecompanies;

+ PlacinganimmediatefocusondevelopingtheskillsetsandexperienceofCFOs,andCEOs,intheareaofraisinginternationalfinancefromIrelandtoscalecompanies;

+ Strengtheningtraininganddevelopmentprovisionintheareasofinternationalmarketingandsales.

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8. Transforming Irish Enterprise Innovation has a central role to play in transforming existing Irish enterprises, both in the FDI and indigenous sectors. In this chapter we identify a number of ways to achieve this, including some initiatives which can support greater linkages between MNCs and the SME sector, thereby building a stronger overall enterprise component of the ecosystem.

FLAGSHIP PROjECTSThefirstcustomerwinandsuccessisanimportantmilestonefortheentrepreneurwithaninnovation,asacknowledgedinourfifthprinciple.TheStatecanprovidetheinitialcustomerendorsementwhilealsoactingasareferenceforotherpotentialcustomers.Theveryfirstdeploymentwithacustomerisalsoalearningopportunity,demonstratingwhatworks,whatdoesnotwork,howacustomerdeploystheinnovation,whatotherneedsthecustomerhasbeyondtheinnovationitselfandsoon.

Importantly,theroleofothercompaniessupplyingthesamecustomerisalsoclarifiedwithrespecttotheinnovation,anditfacilitatesdevelopmentandrefinementofjointsolutions,forexamplebetweenmultinationalslocatedinIreland,indigenouscompaniesandnewstart-ups.

PublicprocurementcanbeusedtopurchaseinnovativenewservicesfortheState,whichinturnfosterco-operationbetweencompaniesoperatinginIrelandinthedevelopmentofproductsandservicesforsaleoninternationalmarkets.

Werecognisethatinnovationinvolvesriskandthatconcernsaboutperceivedwasteofpublicfundscanincentivisethepublicservicetoberiskadverse,includinginitsprocurementpolicy.Weneverthelessbelievethattheriskofinnovationcanbereconciledwiththenecessarycautionrequiredinpublicprocurement.

In2009theGovernmentpublishedBuying Innovation: The Ten Step Guide for Smart Public Procurement and SME Access to Public Contracts40andtheTaskforcewelcomesthisinitiativeandsupportsitsimplementation.

Weunderstandthattheenterpriseagenciesarealreadyworkingtoidentifymajorprocurementprojectsacrossthepublicserviceinordertoensurethatanyspin-offbenefitsofthisnaturearecaptured.

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However,theTaskforcebelievesthatinadditionitisdesirabletotakeamorestrategicandambitiousapproachtoleveragingpublicprocurementtopromoteinnovationwhichcanthenbeexported.StateprocurementtomeetanidentifiedpublicneedwoulddrivecollaborationbetweenMNCs,SMEsandHEIresearchtomeetatangiblegoal.

Wesuggestthatanumberofpilotareasbeidentifiedfirsttotestthisapproach.WhilethecriteriainselectingprojectswouldneedtobeagreedbyGovernment,wesuggestthattheymightincludethattheproject:

+ Meetsaspecificdefinedpublicneed;

+ Issufficientlynovelthatitwillleadtoaglobalmarketopportunity–otherlocationswouldbenefitfromthesamesolution;

+ Shouldresultinanexportablesolution,withclearchannelstotheglobalmarket;

+ IdeallyincludesacombinationofindigenouscompaniesandMNCsoperatinginIrelandandmightpossiblyattractfurtherMNCstoestablishinIreland;

+ Isbasedonanopenandtransparentcallforproposals;

+ Ensuresthatothercompaniesthatcanlateraddfurthervaluetothecoreflagshipcanparticipateiftheysowishwithouthavinglegalorfinancialobstacles,thusenablingstart-upsandsmallercompaniestoclusteraroundthecoreprovidersoftheflagship.

TheapproachwillonlybesuccessfulifithasanIPmodelwhichmaximisesthepotentialtofosteraclusterofco-operatingcompaniesinIrelandaroundthesolution.

ItwouldnotbeappropriatefortheTaskforcetorecommendanyspecificprojectsforuseinapilotphase,butsomeexamplesforillustrativepurposescouldbe:

+ Remotehealthcaremonitoringandearlydiagnosis:whichcouldincludehomemonitoringofpatients,includingpost-operativeandtheelderly,providingearlydiagnosisandassistingprevention.AnopportunityarisingmightbeforassessmentanddiagnosistobeprovidedviacallcentresfromIrelandtomanymarkets.Irelandalreadyhasexpertisetooindistributedwirelessmonitorsandsensors,andbiodiagnosticdevices.

+ Intelligenthigh-efficiencystreetlighting,combiningwirelessdisplaysandassettracking:streetlightingisanopportunityforsmartenergymanagement.Becauseoftheheightofstreetlighting,displaytechnologiescouldbeincluded;wirelessbasedsensorscouldalsobeusedtotrackassets,includingstolengoodsandpropertytaggedwithlowcostandsecureRFIDtags.

AvariationonthisapproachwouldbeforIrelandtoanticipateanEUorotherinternationalobligation,forexampleimplementationofanEUDirective.Inthiscase,theremaybeapossibilitytoinitiateaflagshipprojectwhichwouldhaveconsequentialexportopportunitiesacrosstherestoftheEUandmaybefurtherafield.

Clearlysuchprojectswouldneedtobeidentifiedonfootofrigorousanalysis.TheinitiativeshouldbeoverseenbyaCommitteechairedatMinisteriallevelwhichincludestheenterpriseagenciesandtheNationalPublicProcurementOperationsUnit.

8.1 KeyrecommendationTheGovernmentshouldidentifyasuitableprocurementmodelandthenpilotanumberofFlagshipprojectswherepublicprocurementtomeetspecificpublicneedswouldstimulatethedevelopmentofinnovativesolutionswithexportpotentialthroughcollaborationbetweenMNCs,SMEsandHEIs.

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CONVERGENCE AND INTER-FIRM COLLABORATIONMarketandtechnologyconvergenceisanopportunitytotransformtheestablishedindustrialbaseinIrelandwhilealsoprovidingentirelynewbusinessopportunities.OurexperiencesuggeststhatcollaborationbetweenenterprisesalreadyoperatinginIrelandbutindifferentsectorsiscurrentlyonlymodest.

Withourstrongbaseofcompaniesandresearchcapabilitiesacrossanumberofsectors,Irelandhasaperhapsuniqueopportunitytotakeadvantageoftheincreasingconvergenceoftechnologies.Thisconvergenceisleadingtonewopportunities,newtypesofbusiness,newproductsandservices,anincreasedblurringbetweenformerlydiscretesectorsandnewcustomermarketsformanyofthemoretraditionalsectors(seeBox8.1forarelevantexample).

Box 8.1

Creganna-Tactx MedicalCregannawasestablishedin1980toprovideengineeringservicestotheIrishmicro-computerandelectronicsindustries.Whilethecompanygrewsuccessfullyservingthissector,thecompanyfoundersweresearchingforalternativemarketstoincreasethevalueaddedofitsproductsandgaininternationalgrowthpotential.Inthemid-90sCregannaenteredtherapidlygrowingmedicaldevicesector,makingthestrategicmovetofocusexclusivelyonthisareain1999.

Thecompanyexpandeditscustomerbasethroughofferingagrowingportfolioofinnovativemedicalcomponenttechnologiesandmanufacturingservices.In2004thecompanyexpandeditsserviceofferingtoincludecontractdesign,developmentandprototyping,enablingCregannatosupportclientsattheearlieststagesoftheproductlifecycle.CregannaalsolauncheditsInnovationCentre–adedicatedunitcommittedtodevelopinginnovativesolutionsforitscustomers.

Cregannaisnowrecognisedwithinthemedicaldeviceindustryasanexpertcontractdesignandmanufacturingpartnerandisasuppliertoallleadingcompanieswithinthesector.InnovationandcommitmenttoR&Dremainscentraltothecompany’sbusinessplanandisakeydriverofgrowthresultinginadoublingofsalesoverthethreeyearsto2008.Cregannaiscurrentlyactivelyresearchingopportunitiessuchasconvergentmedicaltechnologies.In2009CregannaacquiredTactxMedical,firmlyplacingCreganna–TactxMedicalinthetoptenglobalprovidersoftechnologiesandservicestominimallyinvasivemedicaldevicecompanies.

Creganna–TactxMedicalhasmorethan800staffworldwideandemploysover550peopleatitsGalwayheadquarters,includingover170inR&Dandengineeringdevelopment.In2009Creganna–TactxMedicalhadcombinedrevenueof$110million.

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Forexample,advancesinthefoodsectortowardsfunctionalfoodsbringtheclinicaltrialandproductionprocessesclosertothoseinthebiopharmasector.Electronics,micro-andnano-technologieswillplayastrongerroleintheLifeSciencessectorasnewdrugdeliverymechanismsaredeveloped.Theuseofsensorsembeddedinconstructionmaterialsandwirelesscommunicationscreatesaverydifferentenvironmentfornewbuildings,energyefficienciesandfacilitiesmanagement.

TheTaskforcebelievesthatconvergenceoffersopportunitiesforboththetransformationofexistingMNCinvestmentinIrelandandtodevelopsynergiesbetweentheindigenoussectorandMNCs(accordingtooursecondprinciple).LeadingHEIresearcherswhoarenetworkedintotheinternationalresearchcommunityshouldbepartoftheseengagementsbetweenconvergentindustries.

8.2 Keyrecommendation+ Establishateamdrawnfromtherelevantagencieswithresponsibilityfor

ensuringcollaborationsbetweenfirms,andwiththeHEIsector,totakeadvantageofconvergenceopportunities.Itshouldbringforwardand,asappropriate,implementactionsinthefollowingareas:

- supportforprioritisedareasofconvergenceopportunitythroughexistingornewpublicfundingschemes;

- publicfundingschemeswhichincentiviseinter-firmcollaborationsinrespectofconvergingtechnologies;

- ensurethattheregulatoryenvironment(andhowitisappliedorinterpreted)issupportiveofconvergencee.g.combinationmedicalproducts;

- educationandtrainingprogrammesthatprovidethemulti-disciplinarycapabilitiesrequiredtosupportcrosstechnologyandcrosssectoralconvergence;

- establishmentofanindustry-ledconvergenttechnologiesnetworktofacilitatecollaborationbetweencompanies,academicsandmedicalpractitionersacrosstheformerlydiscretesectorsofpharma,bio,medtech,ICTandengineering;

- marketingIreland’sadvantagesasalocationforconvergencefocusedactivities.

+ Industry,includingMNCslocatedinIreland,shouldalsobeaskedtoidentifyspecificareasofopportunitywheretheywouldbeinterestedinparticipatinginconvergence-relatedactivities.

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LEVERAGE NON-EUROPEAN INNOVATION: EUROPEAN ACCELERATOR PROGRAMMEOnewaytohelppositionIrelandasanInternationalInnovationHubistoattracttheEuropeanheadquartersofsuccessfulprivateUScompanies.Thiswouldcomplementeffortstoincreasethelevelofstart-upcompaniesinIreland.

TheobjectivewouldbetotargetcompaniesbackedbytoptierVCfundsthatalreadyhaveestablishedbusinessmodelsandinnovativeofferingsintheirhomemarket.IrelandshouldprovideahighlyattractivelocationtoexpandtheirinternationaloperationsintotheEuropeanmarket(andpossiblyfurtherafield).

Rapidlygrowinginnovativecompanies,backedbytoptierVCfunds,arehighlylikelytoexiteitherbyIPOortradesaleafterafewyears.TheirexpansionintotheEuropeanmarketislikelytosignificantlyincreasethevalueofthatexit,butthecompanymaynothavethecashflowtofundaEuropeanexpansion.

Inaccordancewithoursecondandfourthprinciples,theTaskforcebelievesthereisanopportunitytotargetcompaniesatthatstageofdevelopmentthroughaEuropeanAcceleratorProgramme.AswellasIDAmarketingefforts,thiscouldinvolvebuildingrelationshipswithtoptierVCfunds(seeRecommendation7.1)andofferingthepossibilityofanequityinvestmentintheEuropeanexpansion.

Ifsuccessful,suchaProgrammewouldofferanumberofadvantages:

+ itwoulddeliverjobsinIrelandinarelativelyshorttimescalethroughcompanieswhicharealreadyoperatinginnovativebusinessmodelsintheirownmarkets;

+ itwouldhelpincreasetoptierventurefinanceinterestinIreland;

+ itwouldprovideanestablishedandrepeatableformulaforEuropeanbusinessdevelopment,whichprovideslittleoperationaldistractionfortheparentcompanies;

+ itwouldattractseasonedbusinessexecutivesfromtheprivate,high-growth,enterprisesectortolocateinIrelandtodevelopEuropeanbusinessoperations(particularlyforinternationalmarketingandsales);

+ theStatecanexpecttoreceiveareturnonitsinvestmentwithinareasonablyshortperiodoftimeasaresultofaliquidityevent(bytheparentcorporationitselfexiting);

+ overarelativelyshortperiodoftime,anumberof‘quickwins’couldadvanceourvisibilityasanInnovationHubinEurope.

8.3 KeyrecommendationTheIDAandEIshouldjointlydevelopandimplementa“EuropeanAccelerator”Programmewiththeinitialgoalofattracting20companiesfromwithintheportfoliosoftoptierventurecapitalfundstoopentheirEuropeanheadquartersinIrelandintheimmediatefuture,andaimtogrowthisnumbertenfoldwithinthenextfiveyears.

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INCREASING R&D AND INNOVATION CAPACITY WITHIN SMEs Ireland’sfuturesuccessdependsonincreasinglevelsofinnovationacrossallsectorsofIrishenterprise.EconomicevidencesuggeststhattheabilitytoabsorbandadaptinnovationiscruciallydependentonhavingastrongR&Dculture.

InAppendix6dealingwithcertaintechnicaltaxissues,wesuggestchangingtheexistingcaponoutsourcingofR&DforthepurposesoftheR&DTaxCredit.ThiscouldbeofparticularbenefittoSMEswhowishtoengageincollaborativeR&D.WealsorecommendinvestigatingthepossibilityofintroducinganimprovedtaxcreditforqualifyingSMEs,takingintoaccountanyimpactthismayhaveonothersupportsavailabletoSMEsunderStateAidrules.

Inaddition,manySMEsthatcurrentlydonotcarryoutR&Doftenfalloutsidetheremitofcurrentresearchandinnovationinvestmentandsupportprogrammesandwebelievethateffortsarerequiredtoincentivisecompaniestocarryouttheseactivitiesforthefirsttime.

WhileSMEscangainacompetitiveedgebyinnovatingacrossalltheiroperations,day-to-daypressurescanmakeitdifficultforsmallercompaniesinfindingthetimeandresourcestoengageininnovation.Howeverincreasinglevelsofinnovationisthebestmeansforthemtosurviveandprosper.TheintroductionofaninnovationauditforqualifyingSMEsisthereforestronglyrecommendedtoassistthesecompaniestoinnovate.Aspartoftheinnovationaudit,innovationpartnerscouldbeidentified(e.g.customers,consultants,suppliers,HEIs),aswellasappropriatesourcesofresearchfunding.

StudiesdemonstratethatSMEsgainthemostbenefitfromR&Dcollaborations.Furthermore,accesstoStatefundingforresearchhasbeenidentifiedbymanySMEsasakeybarriertoscaling(particularlyintheLifeSciencesarea).CurrentinitiativesshouldbereviewedtoensureincreasedinvolvementbySMEsinresearchactivities.

8.4 supportingrecommendationConsidermodificationstotheR&DTaxCreditregimewhichwouldbeofbenefittoSMEs,asoutlinedinAppendix6.2.

BuildingoncurrentStateinitiatives,introduceatargetedinnovationauditschemeforqualifyingSMEsbyJanuary2011,includingforthoseSMEsthatdonotengageinanyR&Datpresent.

Whenreviewingthecurrentresearchfundingschemes(seeRecommendation5.2),introduceinitiativestoencourage:

+ moreinvolvementbySMEsincollaborativeresearch,bothwithotherindigenouscompanies,withMNCsandwithIrishandnon-IrishHEIs;

+ moreR&Dcontractsbetweensmallcompaniesandcustomers.

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NEW PRODUCT DESIGN AND DEVELOPMENTProductdesignanddevelopmentisincreasinglyrecognisedasasourceofgrowthforexistingbusinesses.ForexampletheEuropeanCommissionpublishedastaffworkingpaperinthepastyear,titledDesign as a Driver of User-Centred Innovation41,inwhichitwasstated:“Theresultsarecompelling:companiesthatinvestindesigntendtobemoreinnovative,moreprofitableandgrowfasterthanthosewhodonot.Atamacro-economiclevel,thereisastrongpositivecorrelationbetweentheuseofdesignandnationalcompetitiveness.”

RecentcomparisonssuggestthatIrishfirmsaresubstantiallyunderperformingvisàvistheirEUcompetitorswhencomparedonthebasisofpercentageofannualrevenuesderivedfromnewproductintroductions42,bothforSMEsandlargeenterprises.

User-centeredproductdesign,prototyping,development,engineeringandmanagementshouldbeplacedatthecenterofIrishenterpriseandindustry.RecentadvancesindesignmethodsfromUSandothercountriesneedtobeintroducedmorerapidlyintopIrishHEIsandenterprises.WeneedtoimproveboththequalityandfrequencyofnewproductintroductionsbyIrishcompaniesandmakeitaprioritythatIrishenterprisesareleadersinproductdesign(seeexampleinTextbox8.2).

Box 8.2

Inishowen EngineeringInishowenEngineeringwastraditionallyasub-contractmanufacturerofprecisionsteelcomponents,structuralsteelandmarineandagri-relatedfabricatedproducts.Thecompanyalwayshadhightechnicalcapabilityandastrongflairforinnovation.

Anopportunitywasidentifiedinthemarineindustryforanimprovedlightingsystemforfishfarming.ThiswaslicensedtoInishowenEngineering(withsupportfromEnterpriseIreland’sTechTransferteam),whosuccessfullydevelopedtheconceptintoanovelpatentedproduct,namedtheAtlantisLight.

TheAtlantisLighthasanumberofuniquesellingpoints:

1. Lower110Vpowersupply,improvingoperatorsafetyandmaintenancedemands.

2. Thereducedvoltagealsosupportsconsiderableenergysaving.

3. Productdesignislesscomplexthanexistingproductsandend-usershaveindicatedthattheproductreducesmaintenanceactivityby90%.

4. Thepatentedproductisfarlighterthantheexistingstate-of-the-art;consequentlyit’seasiertoaccessandeasiertoposition.

ApartnershipwasformedbetweenInishowenEngineering,MarineHarvestLtd(MH)andtheUniversityofStirlinginScotlandtocarryoutafulllivetrialonaScottishfish-farm.ResultsofthecompletedtrialshowthattheAtlantisLighthasadditionalbenefitsoverthecurrentleadingsystemsforlightinginthisarea.Twosizesoftheproductarealreadyavailable,andInishowenEngineeringhascommencedthedevelopmentofathirdlightproductspecificallyforsalmonsmoltsatMarineHarvest’srequest,whoarethelargestfishfarmcompanyintheworld,with230seafishfarmsitesinfivecountries.Asaresult,thepotentialexistsforsignificantsalesoverthecomingyears.

InishowenEngineeringcurrentlyemploys56staffandisexpectingtoincreasethisnumberastheaboveandotheropportunitiesdevelop.

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Anumberofcurrentprogrammes,includingEI’sR&DActivityinEnterpriseProgramme,theCommercialisationProgramme,theInnovationVouchersProgrammeandtheInnovationPartnershipsProgrammecanbeusedtosupportproduct,serviceandprocessdevelopment.Thesecaninvolvehands-onandadvisory,aswellasfinancial,supporttocompaniesatthecuttingedgeofthemarketplace.

However,astrongerfoundationfornewproductdesignanddevelopmentexcellenceinIrelandshouldbedevelopedthroughclosecollaborationbetweenindustry,HEIsandprofessionalorganisationsaroundneedsassessment,rapidprototyping,teaching,research,executiveeducation,workforcedevelopmentandroadmapping.

Irelandshouldstrivetobecomeknownasaglobalcenterofexcellenceinproductdesignanddevelopmentinstrategicsectorssuchasmedicaldevices,energysystemsandsoftwaresystemsandservices.Indoingso,IrishinstitutionswillneedtoexpandtheirhorizonsandnetworkstoleadingdesignfirmsandengineeringandmedicalschoolsinEurope,NorthAmericaandAsia.Weshouldrecognise,celebrateandrewardproductdesignandengineeringteamsandteamleadersasrolemodelsforcreativity,inventionandtechnicalandmanagementexcellence.

Giventherelativelyspecialisednatureofthissubject,theTaskforcerecommendsthatadedicatedexercisebecarriedouttoaddressthefollowingissues:

+ toassessthequalityofproductandservicesdesignanddevelopmentpracticesinIrishenterprisesandindustrytoday,andbenchmarktheperformanceofIrishcompaniesagainsttheirinternationalcompetitors;

+ howtoembedproductdesignteachingandresearchinIreland’sengineeringschools;

+ howtoshiftdesigneducationinIrelandtoamodelwherecreativityandinnovationinproductdesignareencouraged;

+ whichGovernmentagency(ies)shouldhaveresponsibilityandoversightforthisproductdesignanddevelopmentinitiative;

+ howthisinitiativeshouldbecoordinatedacrosstherelevantagencies.

Membershipofthisadvisorygroupshouldincludeabroad-basedcollectionoforganisationsfromindustry,HEIs,professionalsocietiesandGovernment.

8.5 supportingrecommendationFormanindustry-HEIadvisorygrouponNewProductDesignandDevelopmenttoprovideaforumforIrishindustry,HEIs,professionalbodiesandGovernmenttoagreeanationalagendaandroadmapforproductdesignanddevelopment.

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CAPTURING OPPORTUNITIES IN FDI – A ‘TEAM IRELAND’ APPROACHWeverymuchwelcometherecentlypublishedIDAStrategy,‘Horizon 2020’.TheTaskforce’srecommendationsinarangeofareaswillhelptosupportIrelandtocompeteforFDIactivities,aswellassupportingtheongoingtransformationoftheexistingFDIbasehere.TheTextboxbelowsummariseskeytargetareasfortheIDA43.

Box 8.3

Foreign Direct Investment StrategyTheIDA’scurrentfocusisonsecuringhighvalueinvestmentforIrelandinthreekeyareas:

gloBalserViCes

GlobalBusinessServicescompaniesthatareglobalbynatureneedacoretheycanconsideras‘home’.Irelandisuniquelypositionedtodeliverontheirneeds.Today’sIrelandisalreadyathrivingcentreforthedeliveryofBusinessServicesacrossglobalbusinessnetworksasleadingcompaniesdeploytheirIrishBusinessServiceCentresasakeystrategictool,leveragingpeopleandresourcesaroundtheworldtomaximisecompetitiveadvantage.

ServicesInnovationplaysakeyroleinattractingandmaintainingservicesactivitiesinIreland.Notallexistingservicescompaniesareinnovation-activeandthereisanopportunitytoencouragemoreclientstobroadentheirmandateandundertakenewinvestmentbyenteringthisspace.

rd&i

RD&Iisbecomingincreasinglyinternationalised.FDI-derivedRD&Iinvestmentsarehighlyvaluedandgloballyarerelativelyfewinnumber.Therefore,thecompetitiontoattractthistypeofinvestmentisbecomingincreasinglyintense,particularlyindevelopedeconomies.Ireland’svibrantRD&Isectorexperienceda10%increaseinForeignDirectInvestmentin2009.Sectorgrowthisbeingdrivenbyexceptionalcollaborativeeffortsbyindustry,academia,Governmentagencies,regulatoryauthoritiesandfiscalpolicy–backedupbyastrongpro-businessGovernmentpolicy.

highendmanufaCturing

ManufacturingisthebedrockonwhichthegrowthinIreland’sFDIwasfounded.Historically,ithasbeenasignificantsegmentofourinvestmentportfolioanditwillcontinuetoremainsointothefuture.HighertechnologicalinvestmentandhighervalueproductswillbethehallmarkoffuturemanufacturingoperationsinIreland.Theseoperationswillbeknowledge-,capital-andskills-intensive,characterisedbyaparticipativeinnovativeculturewheremanagementandstaffcontinuouslycollaboratetodriveinnovation,productivity,agility,learningandadaptability.Theco-locationofproductionandR&Disakeyelementinsustainingexisting,andwinningnew,manufacturingFDI.

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PolicyareascoveredbythisReportwhichareofparticularimportancetofuturesuccessinclude:

+ tax:MaintainingalowcorporatetaxenvironmentisabsolutelycriticaltoourabilitytoattractandretainasignificantFDIpresenceinIreland.ItisworthnotingthatnocountryintheOECDincreaseditscorporationtaxrateinthepastsixyears,butinsteadthereisacontinuousmovetoreducecorporationtaxrates.

+ AnumberofrecentinitiativesinrelationtotheR&DTaxCreditandtaxationofIntellectualPropertyhavebeeninstrumentalinenhancingtheproductIrelandisofferingtoFDIclients.ItiscriticalthatIrelandcontinuestoenhanceitsofferinginthisareaasakeyelementofourportfolioofattractionsforFDI.(Taxationpolicyisdiscussedinmoredetailbelow).

+ infrastructure:Amoderntransport,telecom,energy,wasteandwaterinfrastructureiskeytotheongoingcompetitivenessoftheIrisheconomy.Inparticular,anadvancedbroadbandinfrastructureisbecomingabasicrequirementforadevelopedknowledge-ledeconomy.(seechapter11)

+ regulatoryenvironment‘fitforPurpose’:Wemustensurethatregulation,whereintroduced,improvesonexistingregulationwithoutbeingoverlyburdensomeonbusiness.Wemustalsolookatwaysthatregulation(e.g.inthecleantechsector)canactuallyservetoencourageinvestment.Reformmustbeachievedthroughdialoguebetweentheregulatoryauthorities,GovernmentDepartmentsandtheenterprisesoperatinginthesector.Wemuststriketherightbalancebetweenbusinessadvancementandcontrol,andestablisharegulatoryenvironmentthatis“fitforpurpose”.

+ incentives:TheongoingreductionsintheEUStateAidlimitsrestrictIreland’scapabilitytoprovidedirectsupportstoattractFDI.InthisrespectitisincreasinglyimportantthatweareinnovativeinhowwesupporthighvalueFDI.

+ skills&labourmarket:Favourabledemographicsandconsistentinvestmentineducationensureaplentifulsupplyofhighlyqualifiedandskilledworkerswithexcellenttechnical,languageandcustomerservicecapabilities,aswellasareputationforflexibilityandinnovation.WemustcontinuetobuildonthisadvantagebyensuringthatoureducationsystemrespondsflexiblytotheneedsoftheSmartEconomyandthatourlabourmarketremainsflexible.

+ research&development:FDIcompaniesaccountfornearlythreequartersofbusinessexpenditureonR&D44.CurrentlyIrelandattractsarangeofRD&Iinvestments,criticaltomeetingtheambitioustargetssetoutintheGovernment’sStrategy for Science Technology and Innovation.Globally,FDI-derivedR&Dinvestmentsarehighlyvaluedandrelativelyfewinnumber,therefore,thecompetitiontoattractthistypeofinvestment,isbecomingincreasinglyintense.

+ iPPolicy:ThecurrentsystemofIPdoesnotfacilitatesmoothcollaborationbetweenMNCsandHEIs.WestronglyadvocatethatIPshouldbeeasilyaccessibleandreadilyavailableandinChapter6wediscussedfurthertheneedforanationalIPpolicythatismoreconducivetotheneedsofMNCs,whileensuringtheeconomygetsareturnforitsR&Dinvestment.

ThereisincreasinglycomplementaritybetweenourstrategiesforFDIandindigenousindustrybasedaroundtheideaofmakingIrelandanInnovationHub.Thisneedstobereflectedinboththeevolutionofenterprisepolicyandthelevelsofco-operationbetweenagenciesinvolvedindifferentpartsoftheinnovationecosystem.

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8.6 supportingrecommendationWorktosupportthecontinuedgrowthandtransformationofIreland’sFDIbasewhilealsomaximisinglinkageswiththeindigenoussector,includingthroughflagshipprojects(Recommendation8.1),convergenceactivities(Recommendation8.2),improvedIParrangements(Recommendation6.4)andtheproposedEuropeanAcceleratorProgramme(Recommendation8.3).

SECTORAL ACTIONSTheTaskforcehasconsultedextensivelywithindustryrepresentativesfromawiderangeofexistingsectors,coveringbothMNCsandindigenousindustry.Thedetailsofthisconsultationprocess,whichincludedbothinterviewsandaquestionnaire,aresetoutinAppendices3to5.

Thepurposeofthisexercisewastwofold.FirstlywewantedtoidentifyhorizontalissueswhichwouldhelpinthetransformationrequiredinIrishenterpriseandtheseconsultationshaveinformedalltheTaskforce’srecommendations.

Secondly,wewantedtocapturespecificchallengesfacingfirmsatasectoralleveltosuggestsomeactionsinresponse.ThisexercisewasalsoinformedbytheexistingresearchofForfásandtheNationalCompetitivenessCouncil,anddrawsonanumberofdedicatedsectoralreportswhoserecommendationssupporttheobjectivesoftheTaskforce.

Thelistofsectorsandrecommendedactionsisnotintendedtobedefinitivebutinsteadhighlightskeyissuesemergingfromourconsultations.

foodseCtor

Themostsignificantchangeoccurringinthefoodanddrinksmarketistheincreasingconvergenceofthreemaintrends:healthandwellness;premium,indulgenceandconvenience,andtheemergenceofethicalsustainabilityconsiderations.

Theincreasedfocusonhealthandwellness,developmentsinenablingtechnologies,andincreasedknowledgeaboutthepharmacologiceffectsofcertainnutrientshasledtothedevelopmentoffunctionalfoodsandnutraceuticals(e.g.cholesterolreducingproducts).Irelandisideallyplacedtocapitaliseonthisopportunitygivenitsstrongbaseofresearchactivefoodandpharmacompaniesandwell-recognisedstrengthsinthisarea(probioticsinparticular).

Theissuestobeaddressedtorealisetheseopportunitiesare:

+ AddressfragmentationintheprimaryproductionandfoodprocessingindustriesanddiversifyintoEurozonemarkets;

+ AgencystructuresshouldbestreamlinedinordertoensurethatIrelandhasacoherentandintegratedstrategyforthesector;

+ IdentifyandemulatebestpracticeintheapplicationofEUlegislationbyotherMemberStates;

+ SupportincreasedR&DactivityamongIrish-ownedfirmsandHEIresearchgroupsinthesector.

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PharmaCeutiCals/BioPharmaCeutiCals

GlobaldevelopmentsintheLifeSciencessector-sectoralconvergence,downwardpricingpressuresfrompurchasersandtheshifttowardspersonalisedhealthcare–areleadingtoanincreasinglycomplexmanufacturingenvironmentforthesector.Theneedtobringproducts/treatmentstomarketasquicklyandcosteffectivelyaspossiblemustbemanagedinthecontextofrequirementsforefficiency,safetyandqualitycontrol.

Irelandisverywellplacedtoprovideleadingedgemanufacturingsolutionsthatmeettheevolvingneedsofthesector.

Thissectorneedstocontinueinvestmentintransformationalchangewithinmanufacturingfirms,buildingonIreland’sinternationalreputationformanufacturingandregulatoryexcellencebyincreasingthelevelofprocessR&Dactivity,increasingsupportsandopportunitiesforspecifictraining,andleveragingtheongoingresearchandinvestmentse.g.SFI’sSRCinInnovativeDrugDelivery(IDDN)andSolidStatePharmaceuticalscluster,BioPATandNiBRT.

mediCalteChnologiesanddeViCes

Convergentmedicalproducts,remotehealthcareanddiagnosticsrepresentmajoropportunitiesforthemedicaltechnologiessectorinIreland.Irelandhasastrongandgrowingbaseofmedicaltechnologiescompanies,anumberofwhichareengagedinin-firmR&D.ThisshouldbematchedbySFIinvestmentinaStrategicResearchCentreinthesector.

Theongoingrestructuringofthehealthservicealsooffersopportunities,forexampleAcademicMedicalCentrescanalignmedicalschoolsandhospitalstodeliverbetterpatientcare,betterclinicalresearchandsubstantiveenterpriseopportunities.

ThedevelopmentofaclinicaltrialsandresearchsystemiscriticalforthefurthergrowthanddevelopmentofthissectorinIreland(bothindigenousandMNCs),andtoensurethatweleverageinvestmentsinResearchandDevelopment-translatingresearchfrombenchtobedside.Thisrequiresaculturalshiftandcommitmenttoresearchwithinthehospitalenvironment,consistentwiththeobjectivesoftheHealthResearchActionPlan.

ApriorityistheneedtoconsolidatetheexistingethicsapprovalcommitteesforclinicalresearchthroughtheHealthInformationBillandthestreamliningofethicsapprovalprocesses.

internationallytradedserViCes

Advancesintechnology,togetherwithregulatoryreformandtradeliberalisation,hasfuelledtherapidgrowthofInternationallyTradedServices,andenabledtheremotedeliveryofservices.ThistrendisexpectedtoaccelerateincomingyearswiththeimplementationoftheEUServicesDirectiveandparalleldevelopmentsintheWorldTradeOrganisation.

ThechangingnatureofservicesinanincreasinglyglobalisedeconomypresentsIrishserviceproviderswithsignificantpotentialforgrowth.Itwillbeimportanttoidentify,developandimplementdedicatedbusinesssupportmeasurestopromoteR&Dandinnovationcapabilityinservicescompanies.Theestablishmentofaninternationally-ledcompetencecentreinServicesScienceInnovationinIrelandshouldalsoboostIrishcapacityandfocusinthisandtheICTarea.SeeTextboxbelowforanexampleofservicesinnovation.

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Box 8.4

PayPalPayPal,aneBaycompany,setitsEuropeanoperationscentreinDublinin2003,servingcustomersacrossEuropeincludinginItaly,France,Germany,Spain,UK,theNetherlandsandPoland.PayPalIrelandnowemployssome1,200full-timestaffinseveraldifferentfunctionsincludingcustomerservice,riskmanagementandmerchantsolutions.

TheDublincentreisPayPal’sfirstregionalcentreofexcellenceandthemodelforPayPal’sinternationaloperationsworldwide.AspartofPayPal’scommitmenttoEuropeancustomers,theDublincentreisre-engineeringPayPal’send-to-endcustomerexperiencethroughinnovativesolutionsinproduct,process,policyandtechnology.

internationalfinanCialserViCes

Overthelasttwodecades,Irelandhassuccessfullyestablisheditselfasanattractivelocationforinternationalfinancialservices.Irelandisrecognisedgloballyashavingstrongcompetenciesinanumberofkeyareassuchasbanking,fundmanagement,insuranceandleasing.RecentlythesehavebeencomplementedbytheestablishmentofanSFIStrategicResearchClusterforFinancialMathematics.

Arobustregulatoryenvironmentthatensureshighstandardsarecompliedwith,whileatthesametimeenablinginnovationofnewproductsandservices,isparamounttothesuccessofthissector.Ireland’sreputationhasbeendamagedbecauseofdomesticeventsinthesector,andregainingconfidenceintheglobalmarketplaceisessential.RebuildingthereputationofIreland’sInternationalFinancialServicessectorabroadmustbeafocusforthissectorintheshortandmediumterm.

Itisalsoimportanttocontinuetoaddresstrainingandeducationneeds(e.g.theFinuasInitiative)toensureanadequatesupplyofhighlyskilledpeopletoworkinfinancialservicesincludingtheareasofriskmanagement,treasurymanagementandderivatives,mathematicalandanalyticalskills,allofwhichhaveexperiencedskillsshortages.

informationandCommuniCationsteChnologies(iCt)

Theconvergenceofcomputing,communications,content,andconsumerelectronicsisanoverridingsignificantinfluenceontheglobalICTindustryandiscreatingmanyopportunitiesforgrowthinthesector.IrelandiswellplacedtotakeadvantageoftheconvergencetrendgivenitsexistingenterprisebaseofICT,electronicsandsoftwarecompanies.

TheemergenceofanumberofstrongsoftwareandITservicessub-sectorsinareassuchasfinancialmarkets,telecommunications(includingmobile)ande-LearningprovideopportunitiesforIrelandtodevelopitselfasacentreofexcellenceinsomeoftheseareas.

Inthissectortheenterpriseagenciesshoulddevelopa“holistic”supportpackagethatencouragesactivitiesacrossthevaluechainthroughResearch,Development,TechnicalSupportandLaboratoryServices.Thereisalsoanimperativetoensureavailabilityofanappropriatelyskilledlabourforce.

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CleanteChnology

Theglobalmarketforenvironmentalandenergygoodsandservicesisvastanditcontinuestogrowquickly.Irelandiswellplacedtocaptureasignificantshareofthisgrowingmarketinnicheareas.Wehavestrongcapabilitiesinkeyareassuchasrenewableenergy,electronics,software,andwasteandrecycling.Ourcommitmenttoresearchanddevelopmentandtheexportfocusofindigenousindustry,inadditiontoaconsiderabletrackrecordasabaseforoverseasinvestment,arekeytocapturingthepotentialofthissector.TheadditionofEnergytotheremitofSFIin2009willhelpconsolidateprogress.

WeneedtodevelopIreland’sgreenbrandandgreenclusterandtoaddresstechnical,regulatoryandplanningbarriersthataredelayingthedevelopmentofrenewableenergyprojects.

8.7 supportingrecommendationImplementmeasurestosupportincreasedinnovationandgrowthacrossbothMNCandindigenousenterprisesinkeystrategicsectorsforIreland,andinparticularthespecificproposalslistedabove.

TAx RECOMMENDATIONSImprovinganumberofexistingtaxprovisionscouldhelptosignificantlyboostinvestmentintheareasthatarekeytodevelopingahighly-innovative,export-ledenterprisesector.

ImportantchangesweremadeintheFinanceBill2010andwecommendmanyofthesewhichreflectissuesconsideredbytheTaskforce.Howeveranumberoffurtherchangesarestillrequired.Inaddition,theCommissiononTaxation,whichreportedin2009,madeanumberofsuggestionsonwhichwefeelitisappropriatetocomment.

Anumberofspecifictax-relatedrecommendationsrelevanttobusinessangelsandentrepreneursareincludedinChapter9.Taxissuesofabroaderapplicationacrossallsectorsofenterprise(includingstart-ups,SMEs,indigenousandMNCs)areincludedhere.Keytaxrecommendationsaresetoutbelow.SupportingrecommendationsandnecessarytechnicalchangesaresetoutinAppendix6.

Inthecurrentbudgetaryclimate,andgiventheincreasingawarenessofthecostoftaxexpenditures(forexamplethroughtheworkoftheCommissiononTaxation),theserecommendationswillneedtobecarefullyassessedintermsoftheircosttotheExchequerandotherimpacts.HoweverwealsoemphasisethatthisassessmentneedstofullyreflecttheeconomicandemploymentbenefitstoIrelandofincreasinglevelsofR&Dandinnovationaspartofasignificantlyimprovedinnovationecosystem.

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TAxATION OF INTELLECTUAL PROPERTY IrelandhasanopportunitytobecometheplaceofchoicewithinEMEAfromwhichtolicenseandexploitIP.ItisvitalthatourIntellectualPropertytaxregimeis,andremains,attractive.

OurregimeallowstaxpayerstosecureataxdeductionforthecostofacquiringIP.Broadlyspeaking,thedeductionislimitedto80%oftherelatedprofitinanyoneyear.Thatprofitisthentaxedatthe12.5%taxrate.

MostotherdevelopedjurisdictionsalsoallowataxdeductionforthecostofacquiringIP.Resultingprofitsarethentaxedatapplicabletaxrates.HistoricallythosetaxratesweretypicallyhigherthantheIrishtaxrate.HoweverthathaschangedsignificantlyinrecenttimesandanumberofEuropeancountrieshaveintroducedspecificregimeswhichprovidetargetedlowereffectivetaxratesonprofitsderivedfromtheexploitationofIP.

Irelandneedstore-evaluatewhetherourinternationaltaxofferingiscompetitiveenoughformobileIPintensivebusinesses.Specificallyweshouldconsiderwhetheran“InnovationBox”orsimilarregimeisappropriate.

Werecognisethatinreviewingourregimeandbringingforthchanges,itisofparamountimportancethatIrelandremainsconsistentinitsapproachtotaxpolicy,transparentinthewayinwhichweimplementourtaxlawsandabovereproach.Cognisantoftheserestrictions,wemustlookatthecompetitivenessofourtaxofferingtomobileIntellectualPropertyrichbusinesses.

8.8 KeyrecommendationUrgentlyreview,inconjunctionwithrelevantindustryrepresentatives,thecompetitivenessofourtaxofferingtomobileIntellectualPropertyrichbusinesses

THE R&D TAx CREDITTheR&DtaxcreditisareasonablygenerousallowancegrantedtocompaniesperformingqualifyingR&DintheEEA.EssentiallybusinessescarryingonqualifyingR&Dareentitledtoataxcreditof25%ontopoftaxdeductionsreceivedforqualifyingspend.Thiseffectivelyprovidesataxincentiveof37.5%towardsqualifyingR&Dspend.

Howeveroursystemisan“incremental”system,whichmeansthatthecreditisgenerallyonlyavailableforspendinexcessofspendincurredin2003.WhilethiswasrelaxedsomewhatinveryspecificcircumstancesinFinanceBill2010,webelieveitisnowtimetoremovetheincrementalbaserequirementacrosstheboard.

Werecognisethatthisrecommendationmayhaveseriouscostimplicationsandthattheremaybeanelementof“deadweightcost”associatedwiththeremovalofthebaseyear.However,webelieveitcouldhelptodeliverthestepchangerequiredinthelevelofR&DbeingundertakeninIreland.Ouraimshouldbetoencouragecompanies,bothdomesticallycontrolledandforeign,toundertakeextensiveR&DactivitiesinIreland.RetaininganincrementalbasedsystemcontinuestopenalisecompanieswhoundertookR&DinIrelandin2003.Instead,weshouldbeencouragingcompaniesperformingR&DtocontinuetodoitinIreland.Eachyearcompanieshavetore-evaluatetheirinvestmentdecisions.Weshouldhelpthemtoensurethatinthefaceofinternationalcompetition,theirnextR&DinvestmentismadeIreland.ThereisnobasisforthinkingthatjustbecauseacompanyundertookR&DinIrelandin2003,itwillcontinuetodoR&DinIrelandagain.Acompanymakinganinvestmentdecisionin2010shouldnotbepenalisedforperformingR&DinIrelandsevenyearsago.

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8.9 KeyrecommendationRemovetheincrementalspendrequirementfortheR&DTaxCreditentirely.

MAkING IRELAND AN ATTRACTIVE PLACE FOR MOBILE TALENT TO RESIDEInthecontextofbuildingandsustainingour‘SmartEconomy’,itisvitalthatthelimitedformofremittancebasisoftaxationisoverhauled.WenotethepositivechangesmadetobroadenthereliefinFinanceBill2010.HoweverchangeswerealsomadethatcouldmakeitlessattractiveforourforeignbasedDiasporatoreturntoIreland.

InourviewweneedaregimethatencouragesMNCstosendtheirexpatriatestoIrelandandactsasanincentiveforforeignbasedacademicandentrepreneurialtalenttocometoIreland.

Certainrestrictionsandsafeguardscouldbeplacedonanewregimeandthesewouldincludelimitinganindividual’sabilitytoclaimundertheregimetosayfiveyears,makingitskills-based,andlinkingittominimumsalarylevels.

Itisourviewthata“MobileTalentRegime”ifstructuredproperlycouldbeveryusefulinattractingtherighttalentintoIreland(employees,academicsandentrepreneurs).

8.10 KeyrecommendationDevelopanattractiveandcompetitivehighvalueMobileTalentRegime.

suPPortingtaxreCommendationsandComments

Wehavesetoutourkeytaxrelatedrecommendationsabove.InAppendix6wesetoutanumberofsupportingtaxrecommendationsandspecifictechnicalchangeswebelievearerequiredtoourexistingprovisionsinordertoensuretheyarefitforpurpose.

8.11 supportingrecommendationImplementthesupportingtaxrecommendationssetoutinAppendix 6.

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the innOVatiOn ‘Funnel’Onewaytoviewtheinnovationprocessisasafunnelwhichincludesaseriesofstagesasfollows:

1. BusinessConcept-theentrepreneurenvisagesamarketopportunitywhichthebusinessmaymeet;

2. investigation–gathersfurtherevidenceforthemarketopportunity,andassemblesthebasiccomponentsandtechnologieswhichwillconstitutethecoreofthecustomers’solution;

3. forming-theentrepreneurestablishesanewcompany,ornewbusinessunitorproductlinewithinanexistingcompany;securesseedorexploratorybudgetfinancing,andassemblestheinitialbusinessteamtogether;

4. firstformalfunding–obtainssufficientcapitalcommitmenttoachievekeycommercialandtechnicalmilestoneswhichcanverifytheviabilityofthenewoffering;

5. subsequentformalfunding–scalesthebusinesstobringthenewofferingtotheglobalmarket;

6. exit–shareholders–entrepreneurandinvestors-obtainanexitthroughapublicoffering(IPO),tradesale,ordividends;

7. recycling–theentrepreneurcreatesanewventureleveraginghis/herexperience,businessandindustrynetworks;thefinancialcapitalfromtheexitisrecycledbytheentrepreneursandinvestorsintothenexttechnologywaveandnewmarketopportunities.

Success in achieving our vision in Ireland as an Innovation Hub requires a dramatic increase in the number of start-ups with the potential and ambition to grow innovative, export-focussed companies.

9. Increasing Start-Ups

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Thisprocessisgraphicallydescribedbelow.

Itisimportanttonotethataprojectisunlikelytoproceedthroughthisfunnelinalinearfashion,butmaypotentiallyrequireadaptionandrestructuringandsomayre-startandre-enterinarevisedform.Afirmmayiterateseveraltimesbothwithinaparticularstage,andacrossaseriesofstages,beforefinallysucceeding.AprojectmayenterthefunnelinIrelandhavingcompletedearlierstageselsewhere.Timeframesalsodependonthebusinesssector(forexample,pharmarequiringamuchlongergestationperiodthansoftware).

figure9.1 theinnoVationfunnel

Businessconceptswillemergefrommanydifferentsources–includingfromresearchinahighereducationinstitutionorexistingcompany,aspin-outfromaMNCoranindividualfromIrelandorabroadwithanewbusinessidea.

thekeypointisthatsucceedinginourvisionrequiresadramaticincreaseinthenumberofstart-upswiththepotentialandambitiontogrowinnovative,export-focusedcompanies.

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Box 9.1

EIRGEN PHARMA LTD In2004PatsyCarneyandTomBrennanfoundedEirGenPharmaLtdwhichspecialisesinthedevelopment,registrationandmanufactureofhighpotencynichepharmaceuticalproductsforglobalmarketsusingisolationtechnology.Thistechnologyisusedspecificallyforworkoncancerandorgantransplantproducts.

EirGenPharma’sinnovativeisolationtechnologyisapurposebuilthighcontainmentfacility,whichallowsthehandlingofhighpotencyormoisturesensitiveproductsinanenvironmentwhichissafetoboththeuserandtheproduct.ThisisoneofonlythreesuchfacilitiesinEurope.Throughthismanufacturingtechnologytheysuccessfullyprovideflexiblepharmaceuticalsolutionsthatquickly,safelyandcosteffectivelyfacilitatetheircustomer’sroutetomarket.

EirGenwassupportedasanEnterpriseIrelandHighPotentialStart-upinMarch2005andthroughacommitmenttoinvestmentinworld-classR&Dcombinedwithstate-of-the-artmanufacturingpracticeshaspositioneditselfinternationallyasaknowledge-based,technologically-sophisticatedcompany.

EirGenPharmacommerciallylauncheditsearlystagebreastcancerdrugEir-012acrossEuropein2009.ThisisEirGen’sfirstpharmaceuticalproducttoreceivepanEuropeanapprovalandrepresentsasignificantmilestoneforthecompany.This,coupledwithasignificantpipelineofdrugswhicharedueforcommercialisationin2010andbeyond,allowsEirGentobeinapositiontosignificantlyincreasestafflevels.Thecompanycurrentlyemploys26high-skilledemployeesinWaterfordandexpectsemploymenttoincreaseto40withinthenexttwoyears.

In2009EirGensignedasignificantpartnershipagreementwithaleadingJapanesepharmaceuticalscompanytodevelopandcommerciallysupplythreecancerproductsfromtheirfacilityinWaterford.Havingspecialisedingenericdrugs,in2010EirGenhasbeguntoengagebigpharmacompaniesfortheirproductdevelopment.Eirgenisashiningexampleoftheinnovative,high-technologylifesciencescompaniesthataredevelopinginIreland.

ROLE OF ENTERPRISE IRELANDEnterpriseIreland’scoreobjectiveisincreasingexportsonthebasisthatsustainableemploymentintheeconomyismostablysupportedbyexportgrowth.Innovationacrossallaspectsofthebusinessiscentraltosecuringtheexportsrequiredtofueltheeconomy.Thecompaniesthatwilldeliverthisgrowthareatvaryingstagesofthebusinesscycle,betheyhigh-techstart-upcompaniesorlongestablishedfamilyownedbusinesses.

EnterpriseIrelandworkswithapproximately3,000+companiestogrowexportsales:

+ Thesecompaniesaccountedforover€14billioninexportsin2008withsomereductionexpectedin2009duetothedeclineininternationalmarkets;

+ AgrowingproportionofEIexportsarenowcontributedbysectorssuchasServices,SoftwareandLifesciences–dynamicsectorswhichwilldriveexportgrowthinthefuture;

+ EnterpriseIrelandclients’contributiontoemploymentandspendintheIrisheconomyissimilartothatofforeign-ownedenterprisesbasedhere,with134,000fulltimejobsandeconomyspendcloseto€20 billion.

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Inpursuingitsstrategytogrowexportsandexport-ledjobs,EIisfocusedon:

1) WinningExportSales

2) Innovation

3) Start-ups

4) Scaling

ThevastmajorityofEnterpriseIreland’scapitalfundingtocompaniesisfocusedontheStart-UpandSMEsectorwithover90%ofallinvestmentin2009inthesecompanies.

TheTaskforcerecognisestheessentialcontributionplayedbyEIinarangeofareas,manyofwhichareconsistentwiththeTaskforce’svisionofaninnovativeexportfocusedeconomy.TheTaskforcebelievesthatifwearetoachievetheinflectionpointinoureconomy,EIwillneedtobeabletoincreaseitsfocusandavailableresourcesforencouragingentrepreneurstofoundcompaniesandonnurturingearlystagecompanies.

9.1 KeyrecommendationWhileEnterpriseIrelandhasabroadagendatosupportexport-focusedIrishenterprise,itsmission,strategies,businessplansandexpenditureneedtoprioritisemoreclearly,andprovideleadershipin,theincreasinglyimportantareasofstart-upandearly-stageactivities.

InsufficientearlystagefundingiscurrentlyavailablethroughtheprivatesectorandEnterpriseIreland,despiteinvestmentbyEIof€31 millionintwosignificantseedfundsinconjunctionwiththemainbanks,leveragingatotalof€79 millionfortheprovisionofseedcapitaltonewandearlystagebusinessesinIreland.Giventheurgencyofgrowingthebaseofstart-upcompanies,weproposeanenhancedStateseedstagecapitalschemeintheshort-term(Recommendations9.2below).

Afterfiveyearsorso,wewouldhopethatbusinessangelnetworksandseedstageinvestors(Recommendation9.3)shouldbeabletosustainstart-upactivityinIreland,andthattheStatecouldthenretireitsseedstagecapitalscheme.

TheTaskforcerecognisesthatsomeofthefollowingrecommendationshavesubstantialresourceimplicationswhichcannotbemetfromEI’sexistingbudgetwithoutcancellingothersignificantprogrammes,whileotherswouldrequireachangeinGovernmentpolicyregardingtheprovisionofmatchingfunding.WeacknowledgetheextremepressuresontheExchequerandrecognisetherationaleforrequiringco-fundinginaschemeofthisnature.However,webelievethatthereisaclearmarketfailureatpresentwhichmaypreventworthwhilestart-upsproceeding.Forthatreason,someflexibilityinthisprovisionisproposed.

TheTaskforcealsobelievesthatStateseedstagefundingdecisionsshouldbedecidedonthebasisofrecommendationsfromprivatesectorreviewerswhohaverelevantexperience.Thereviewpanelshouldnotberemunerated(otherthanreasonableexpenses).

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9.2 KeyrecommendationIntroduceanewStateseedcapitalscheme(inadditiontoexistingEIsupports)which:

+ wouldfillthecurrentgapinprivateseedcapital,byprovidingmilestone-drivenfundingforeachapprovedproject(theleveloffundingwillvaryconsiderablybysectorbutwilltypicallybebetween€100,000 and€500,000);

+ introducesamoratoriumfortheimmediateperiodaheadonexistingrequirementsforco-investmentfromothersourceswhereappropriatetoenablestrongprospectstosucceed;

+ significantlyincreasesthenumberofprojectssecuringfundingofthislevel;

+ isevaluatedbymeasuringwideremploymentandeconomicimpacts,notjustthedirectreturnoncapitalinvested;

+ shouldbereviewedafterfiveyearsforeffectiveness,andannuallythereafterwithaviewtoultimatelywithdrawingfromthemarket;and

+ involvesaprivatesectorpanelwhichwouldmakerecommendationsonspecifictechnologysectorsandmarketsandonwhichprojectstofund.

ANGEL FUNDINGBusinessangels-successfulbusinesspeoplewhodeploytheirexcesscapitalintonewbusinesses–playavitalroleinseedingaSmartEconomy.Importantly,theygivenotonlytheirmoney,butalsotheirtimeandpersonalexperiencetothecompany,andthisknowledgetransferisasfundamentalasthecashtoentrepreneurs.

Aco-ordinatedapproachtoangelfundingishelpfulbothfortheinvestor,andfortheinnovatorseekingnewtalentandfinancing.Investorsbenefitfromaclearandefficientmechanismtoreceiveandevaluatenewopportunities,andformnetworkswiththeirpeersforstructuringco-investments.Innovatorsbenefitfromawell-definedandtransparentmechanismtopresenttheirproposals,intheknowledgethattheywillbeevaluatedbyinvestorswithrelevantexpertise,andasinceredesiretohelpgoodideassucceed.

DevelopmentoffundedBusinessPlanCompetitionscouldalsohelptoprovideseedfundingincertaininstances.

EI,inconjunctionwithInterTradeIreland,hassupportedtheestablishmentandexpansionofBusinessAngelNetworksandrecentlyappointedanewNationalDirectorfortheHaloBusinessAngelNetwork.

Todate,however,Ireland’sbusinessangelcommunityforSmartEconomycompanieshasremainedrelativelyweakanddoesnotseemtohaveoperatedtoasignificantdegreeasamechanismtorecyclethepersonalexpertiseandresourcesofpreviouslysuccessfulinnovators.

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However,theremaynowbeanopportunityforIrelandbecause:

(i) privateinvestmentcapital,whichinrecentyearshadbeenfocusedpredominantlyonthepropertymarket,maynowbelookingforalternativeopportunities;

(ii) investmentundertheSSTIinrecentyearsmeanswehaveagrowingbasefromwhichinnovativestart-upcompaniesmayemerge;

(iii) manypeoplewhohaverecentlylosttheirjobsduetotheeconomiccrisismightseeitasanopportunitytostartanewbusiness.

TheTaskforcethereforeproposesanumberofrecommendationstohelpdevelopastrongerbaseofbusinessangelnetworksandprivateseedstageinvestorsinIreland(Recommendation9.3below).

9.3 KeyrecommendationBuildontheworkofEI,InterTradeIrelandandotherstonurtureangelfundingby:

+ Formallyapprovinganationalportfolioofsector-specificBusinessAngelfundsandstartingtodosoduring2010;toqualifyforapprovaleachsuchfundshouldbesubstantiallycomposedofpreviouslysuccessfulinnovatorswhowishtoapplytheirexpertiseandresourcestohelpingnewstart-upcompaniessucceed;suchinnovatorsmaybefoundalsoamongsttheDiaspora;

+ Offeringdirectfinancingforadministrativesupportforuptotwoyearsatavalueof€50,000/yearforeachsuchnewapprovedBusinessAngelfund,afterwhichitisexpectedtobeselfsustainingwithrespecttoadministrationoverheads;

+ Implementa€10 millionfundtobemadeavailabletoapprovedBusinessAngelFundsonacompetitivebasisasaprimertohelpthesegroupsraisetheirinitialfunds.

TAx INCENTIVES IrelandneedstogrowacohortofbusinessangelsoperatinginIrelandwhorecycletheirpersonalexperienceandcapitalintonewstart-ups.Ifentrepreneurswhohavebuiltasuccessfulinnovation-based,export-focussed,highgrowthfirmsexit,itisinthenationalinterestthatthekeyinvestorsandentrepreneur(s)recycletheirpersonalexpertiseandcapitalintonewinnovativeventures.

WethusproposethatareducedeffectiverateofCapitalGainsTax,of12.5%,wouldariseonthesaleofsharesinaninnovation-basedexportledcompanywheretheproceedsondisposalofthosesharesarereinvestedinanotherqualifyingcompany.Totheextentthatproceedsarenotfullyreinvestedwithinarequiredtimeframe,thecurrentstandardrateof25%wouldapply.

A“qualifyingcompany”wouldbeanotherstart-upwhichisbasedoninnovationandhasclearexportopportunity.Thiswouldinclude,inparticular,companieswhichhavereceivedangelfundingeitherfromthe(temporary)StateSeedCapitalSchemeor/andfromanapprovedBusinessAngelfund–seeabove.

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9.4 supportingrecommendationIntroduceareducedeffectiverateofCGTarisingonthesaleofsharesinasuccessfulinnovationcompany,whereproceedsarereinvestedinanotherqualifyinginnovationcompanywithinareasonableperiod.

ASeedCapitalInvestmentSchemecurrentlyoperates(undertheBESprovisions)toallowindividuals,whosatisfycertaincriteria,tosecureincometaxreliefforinvestmentinanewlyincorporatedcompanywhichisengagedincertainactivities.Essentially,since1January2007,whereasumofupto€600,000issubscribedfornewordinarysharesinacompany,itcanberelievedagainsttotalincomeoftheindividualinanyofthesixyearsimmediatelyprecedingtheyearinwhichtheinvestmentismade.Themaximumreliefinanyonetaxyearis€100,000(forthetaxyear2007andbeyond).Previouslythiswaslimitedto€31,750perannum.

Itisacknowledgedthatthiscanbeaveryusefulreliefwhereitispossibletomeetallofthecriteriarequired.HoweverthereliefrequiresthetaxpayertohavepaidareasonableamountoftaxinIrelandinthepastsixyears.Thismeansthatthereliefwouldnotbeavailabletonewlyarrivedforeignentrepreneurs-whomIrelandneedstoattract.Italsoisofnoincentivetothoseoutsidethecurrenttaxnet(includingtheunemployedandthoseonlowincome).

Wethereforerecommendthatamoreforward-looking“EntrepreneurialTaxCredit”beintroduced.

Thisincentivewouldprovideataxcreditorrebatetoanentrepreneurinaqualifyingcompanywherenewjobsarecreatedbytheircompany.By“qualifyingcompany”,wemeanastart-upwhichisbasedoninnovationandhasclearexportopportunity.Thiswouldincludeinparticularcompanieswhichhavereceivedangelfundingeitherfromthe(temporary)StateSeedCapitalschemeor/andfromanapprovedBusinessAngelfund.

FortheEntrepreneurialTaxCreditrelief/rebate,ifanentrepreneurwastostartacompanythenforeveryfivejobscreated,inadditiontotheirown,theywouldbeentitledtoarebateofthetaxpaidontheirsalaryineachofthefirstthreeyears,cappedat€100,000.

Theschememightbeavailableonlyonceduringthelifeofanentrepreneur,soastopreventserialstart-upsoccurringsolelytoavailoftheincentive.Onlyasinglecompanycouldbeacceptedas“qualifying”.Therebate/reliefmightbeobtainedafullyearafterthesubmissionofapersonaltaxreturn,inordertomitigateagainstacompanybeingdeliberatelyfoldedafterthetaxreliefwerereceived.

9.5 supportingrecommendationIntroduceanEntrepreneurialTaxCreditbasedontheapproachoutlinedabove.

Difficultiesarecausedbythedifferenceintaxtreatmentapplyingtothesaleofsharesandtheexerciseofunapprovedshareoptions.

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ThesaleofsharesissubjecttoCGT,currentlytaxedatarateof25%.However,inthecaseofunapprovedshareoptions(whichinpracticecoversthevastmajorityofshareoptions),thegainarisingonexercisingtheoptionsistaxedundertheincometaxprovisionsataratethatcouldexceed45%assumingamarginalrateof41%pluslevies.Iftheshareholderholdsshareoptionsbeyondexercise(whichisrarelythecaseastheyarerequiredtosellsharestomeettheirtaxliabilityarisingfromtheseshareoptions),thenCGTatthecurrentrateofjust25%arisesonanygainarisingabovetheexerciseprice.

Itisacknowledgedthatwhereventurecapitalisusedasamechanismtofinancecompanies,intheabsenceofremedialmeasures,thelevelofequityheldbyoriginalfoundersandentrepreneurscanbedilutedsignificantlyastheyengageinsubsequentventurefundingrounds.Howeveritisalsoacknowledgedbytheventureinvestorsthatitisessentialtokeeptheentrepreneurandoriginalfoundermotivatedinscalingthebusiness.Thus,inordertodealwiththedilutionwhichwouldotherwisebecausedbysubsequentventurefundingrounds,itusuallybecomesprudentfortheventureinvestorto“re-flate”theentrepreneurandfounderwithshareoptions.Butthen,aswenotedabove,thetaxduecurrentlyarisingundertheIrishtaxcodeonexercisingshareoptionscouldbetwicethatarisinghadthesharesbeendirectlyowned.

Itisnotdesirableforentrepreneursandfounderstobesqueezedoutoftheequityholdingsintheirowncompanies.Thiswillhappenmorewherecompaniesareventure-funded.“Re-flation”usingshareoptionsiscurrentlyunattractivebecauseofthetaxcostarising(c.45%vs.25%).Wethereforerecommendthatoptionswhicharespecificallyissuedtore-flatefounderentrepreneurs,beaffordedCGTtreatment.Wedesignatesuchoptionsas“FounderShareOptions”.ThenewFounderShareOptionswouldbeexplicitlylinkedtotheoriginalsharesheldbythefounder(s)andentrepreneur(s).CGTtreatmentwouldthenapplyonanysubsequentsaleofthese“linked”options.

Allotheroptionsgrantedtootheremployeeswouldbetreatedasinthecurrenttaxcode–theschemewouldbelimitedonlytoentrepreneurfounders.Theterm‘EntrepreneurFounders’wouldbetightlydefinedandwouldonlyapplytoinvestmentinqualifyingcompaniesasdefined,(i.e.innovationled,exportfocussed,VentureCapitaland/orPrivateEquityfundedcompanies).

9.6 supportingrecommendationIntroduce“FounderShareOptions”whichareeligibleonlyforCGTtreatment.

BES AND SEED CAPITAL RELIEFSTheavailabilityofreliefssuchasBESandSeedCapitalwillbevitaltotheIrisheconomyoverthenextnumberofyearsastheyprovideincentiveandsupporttothoseentrepreneurslookingtoself-financeprojects.Thesereliefsareneedednowmorethaneversincetheywillhelptoprovideequitycapitalwhichisnototherwiseavailable.

Howevertheyneedtobemademoreaccessibletoinvestors.

Whilethecurrentcapof€2milliononthelevelofBESfundingwhichcanbeclaimedbycompanies,hasbeenincreasedsignificantlyinrecentyears,itwouldbeworthexploringincreasingthereliefavailableto,say,€5million.

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Wewouldsuggestthatthisschemeshouldbemadeavailabletoallmicro,smallandmedium-sizedcompanies,asdefinedbyEULegislation,assumingthebusinessactivitiesareconsistentwithoursmarteconomyagenda.

Wewouldalsosuggestthatthecurrentgeographiclimitsberemovedtoallow“mediumsized”enterprises,asdefined,locatedinallareasofthecountrytoqualifyforBESandSeedCapitalfunding.WeappreciatethattheseconditionshavebeensetatEUlevelbutgiventheverychangedeconomicenvironment,webelievethatthesereliefsshouldnowbemadeavailabletoallSmartEconomycompaniesnationwide.

Inorderforthevaluetoberealisedfromthesereliefs,thequalificationcriteriaforBESandSeedCapitalReliefmustbemadelessburdensomefromanadministrativeperspective.Qualificationcouldcentreonthepriorapprovalofabusinessplanwithrealisticambitiontomaintainorincreaseemploymentlevelswithinaspecifiedperiodoftime.

Inaddition,thereshouldbesomeincentiveintherelieftogetinvolvedormentorthecompanywherethisisappropriate.Insteadthecurrentrestrictionsessentiallymakeitverydifficultforsomeonewithagenuineinterestorsignificantshareholdinginthecompany(30%plus)toavailoftherelief.

9.7 supportingrecommendationReviewtheBESandSeedCapitalRelieflegislationwithaviewtomakingiteasierforentrepreneurstoutilisetheseschemes.

ATTRACT ENTREPRENEURS TO IRELANDGiventhescaleofourambitionsformakingIrelandaEuropeanInnovationandCommercialisationhub,weneedtoproactivelyattractpeopletoIrelandtostartupinnovativecompaniesandaugmenttheindigenousbaseofpotentialentrepreneurs.Thereareanumberofwaysinwhichthiscanbeachieved:

+ Firstly,andmostimportantly,byprovidingthebestpossibleinnovationeco-systemforthosewishingtostartaninnovativecompany,inparticulartheavailabilityoffinance.AlltheTaskforce’srecommendationsarecentredonthisobjective;

+ Secondly,byattractinghighqualitystudentsandresearchersintotheIrishsystemandencouragingthemtoremaininIrelandtoexploittheoutcomesoftheirresearch;

+ Thirdly,bytargetingpeopleoutsideIrelandwhoareinterestinginstartingacompanyandproactivelyseekingtoencouragethemtocomehere.

IrelandhasbenefittedfromforeignentrepreneursestablishingtheirenterprisesinIreland,andcreatingjobs.Today,Irelandneedstoencouragefurtherentrepreneurs,includingfromamongsttheIrishDiaspora,torelocatetoIrelandtofoundandheadquartertheirbusinesses.Theremayalsobenon-nationalsemployedbytheMNCsinIrelandwhomayseeanopportunityforanewventure,butwhoareconcernedfortheirresidencystatusshouldtheyleavetheircurrentemploymenttofoundastart-up.

Astreamlined,fast-tracked,immigrationandresidencyprocedureshouldbeavailabletoentrepreneurswhocandemonstratethattheyhaveareasonableandsoundbusinessplanforanewinnovation-led,export-orientedcompany,andeitherhaveaverifiabletrackrecordinestablishinganinnovativecompany,orcandemonstrateappropriateexperiencewithinacompanyoperatingwithintheindustrysectorinwhichoneintendstostartanewventure.

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Currently,anynon-EEANationalwishingtoestablishabusinessinIrelandmustnotonlyseekthepermissionoftheMinJELRtodosobutalsocommittotransferringcapitalofatleast€300,000toIreland.Webelievethatthisrestrictionmaynotbeinthenationalinterestandthecriteriashouldberelaxedforthosefromoverseaswhohaveanappropriatetrackrecordinbuildinginnovativecompanies,orwhoareofsufficientcredibilitytoattractcommittedfundingfromoneofourapprovedBusinessAngelfunds.

Dedicatedsupportsshouldbeavailableforstart-upsledbyoverseasentrepreneurswhore-locatehere.WerecommendthatEIinitiatemarketingprogrammesinatleastthreeforeignjurisdictionstopromoteIrelandasanexcellentlocationforstartinginnovativeexport-orientedcompanies.ThiscouldincludesuggestedoverseasroadshowstopromoteIrelandasalocationforentrepreneurs.

AfurthermechanismtoencourageseasonedforeignentrepreneurstoIrelandisviaan“entrepreneurinresidence”programme,inthecontextofcatalysingthecommercialisationofStatesponsoredR&DinourHEIs(seeRecommendation6.3).

FundedBusinessPlancompetitionscouldalsoplayaroleinattractingoverseasstart-upstolocateinIreland(seepage68).

9.8 KeyrecommendationLaunch a marketing campaign, initially on a pilot basis, to promote Ireland as an excellent location for starting innovative export-oriented companies.

9.9 supportingrecommendations+ Introducenewarrangementstofast-trackspecialresidencypermitsfor

appropriatequalifiedentrepreneurs,andtheirimmediatefamilies(includingaworkpermitforspouses);

+ Therequirementfornon-EEAnationalstocommittotransferringcapitalofatleast€300,000iftheywishtostartabusinessinIrelandshouldbewaivedwherealternativecriteriaaremet(forexampleacceptancebyanapprovedAngelFund);

+ AdedicatedsupportpackageshouldbeprovidedbyEIand/orIDA,toassistearlystageoverseasprojectswhichlocatehere.

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FEASIBILITY & PRODUCT INVESTIGATIONEntrepreneursneedtobeabletorapidlyinvestigatewhethertheyhavecorrectlyidentifiedamarketopportunity.EnterpriseIrelandofferanumberoffeasibilitygrantsasfollows:

+ AtypicalHPSUapplicantmaybeapprovedafeasibilitygrantofupto€15,000(subjecttomatchingfunds)tosupportthedevelopmentofabusinessplantobepresentedtopotentialinvestors.Thiscanbefollowedbyfurtherassistanceintheformofconvertiblepreferencesharesmatchedbytheinvestmentbythepromoterand/orbusinessangels,familyetc.,priortoaformalfundinground–typicalEIinvestmentcanbeintherangefrom€50,000to€150,000.

+ ParticipantsontheEnterprisePlatformProgrammesmaybesupportedthroughCORDgrants(upto€30,000foroneyear)whiletheyparticipateontheProgramme.

+ Potentialuniversityspinoutsaresupportedthroughtechnologydevelopmentandproofofconceptgrantstodevelopprototypes,preparebusinessplans,undertakemarketresearchetc.Supportlevelscanvaryupto€300,000dependingonthetechnologyareaetc.

Tosignificantlyincreasethenumberofcompaniesenteringthe“InnovationFunnel”,itisessentialthatadequatefundingsupportsarereadilyavailabletoassessbusinessviabilityatanearlystage.

9.10 supportingrecommendationEnhancedfundingandothersupportsshouldbeputinplacefor“projectinvestigation”,ofupto€50,000pernewproject,foritsentrepreneurpromotertoconfirm,orotherwise,amarketopportunity,possiblybyofferingloans(repayablefromfutureprofits)ratherthangrantsasatpresent.

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10. Supporting the EntrepreneurEffective Enterprise Agency support, increased interest in, and awareness of, innovation and entrepreneurship, an optimised IP regime and a tolerance of failure are all required to provide a supportive environment for the entrepreneur.

ENTERPRISE AGENCIESGiventhededicatednature,organisationallyspeaking,ofouragencystructurestosupportenterprise,effectiveandproductiveco-ordinationisessentialiftheambitiousgoalssetoutinthisReportaretobeachieved.

InitiativestofurtherstrengthenworkingrelationshipsbetweenEIandIDAhavebeendevelopedbythe“EnhancedAgencyCollaborationGroup”establishedinNovember2008.ArangeofspecificinitiativesarisingfromthefindingsofthisGrouphasbeenimplementedincluding:

+ Apilotprojecttostimulatecross-agencysectoralengagement(e-learningandMedtech)tomaximisethebenefitsforIreland;

+ AframeworkhasbeendevelopedtomanageaccesstoEnterpriseIrelandsupportbynon-EIcompanies.Revisedprocedureshavebeenagreedandimplementedtofacilitateinter-agencytransferofcompanies;and

+ Closeworkingrelationshipsinoverseasnetworkshavebeenstrengthened,particularlyinrelationtooverseasvisitsandmissions.

TechnologyIrelandalsooperatesunderthedirectionoftheInterDepartmentalCommitteeonSTIandbringstogetherForfás,theIDAandEnterpriseIrelandalongwithScienceFoundationIrelandandtheHigherEducationAuthoritywithamandatetoensuremaximumcohesion,complementaritiesandsynergiesbetweentheseagencies.

TheTaskforcealsonotesthattheRenewed Programme for Government(October 2009)containsacommitmenttoa“reviewoftheeffectivenessofStateagencysupportforenterprise,includingtheinteractionbetweentheIDA,EnterpriseIrelandandCountyEnterpriseBoards”.

BearinginmindtheheightenedfocusonentrepreneurshipandinnovativeenterprisesinthisreportandthesetofrecommendationstoaddthisprioritytotheexistingfocusoftheenterpriseagenciestheTaskforcebelievesthatitwouldbeappropriatetoreviewthecurrentconfiguration

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ofenterpriseagenciesinthenewagendaforreformsetoutinthisreportandelsewhereincludingtheneedtoattractearlierstagecompaniesandentrepreneurstoIreland,havinganintegratedpresenceinasmanyinternationalbusinesslocationsaspossible,betterlinkagebetweenMNCsandindigenouscompaniesandtheneedforgreaterfocusonstart-upandseedcapitalstages.

10.1 KeyrecommendationThereshouldbeanindependentreviewofthecurrentconfigurationofenterprisesupportagenciesandprogrammestoreflectthechangingenterprisechallengeoutlinedinthisreportincludingincreasedfocusonlinkagesbetweenMNCsandindigenousfirms.

DEVELOPING THE ENTERPRISE COMPETENCE OF PUBLIC SERVANTSRelativelyfewpublicservantsworkingonpolicyhavedirectpersonalexperienceofworkingininnovativeenterprises.SuchdirectexperiencewouldhelpindeliveryoftheambitiousgoalsunderBuilding Ireland’s Smart Economy.

10.2 supportingrecommendationIntroduceaschemetoenableanumberofpublicservantseachyeartobeplacedintoinnovativehighgrowthcompanies,atnoexpensetothesecompanieswhilststillmeetingthenormalremunerationandemploymentbenefitsofthepublicservantsconcerned.

INCREASING INTEREST IN, AND AWARENESS OF, INNOVATION AND ENTREPRENEURSHIP Nurturingasocietalinterestininnovationandentrepreneurshipisabroadchallenge.Thereisprobablynosingleactionwhichonitsowncansignificantlyacceleratethepublicinterestininnovation.Recommendations5.3and5.4relatingtoScienceandMathsinschoolwillhavearoletoplay.

TherearearangeofnationalawardschemesandcompetitionswhichexplicitlyfocusoninnovationandentrepreneurshipincludingtheStudentEnterpriseAwards,theannualEngineersIrelandInnovationAwards,theBTYoungScientistcompetition,theIrishPatentOffice’sJuniorInventoroftheYearandtheErnstandYoungEntrepreneuroftheYear.ItisimportantthattheTaoiseach,TánaisteandothermembersoftheGovernmentcontinuetosupportandendorsetheseschemes.

ExhibitionsandeventswhichshowcaseinnovationinIrelandshouldalsobeencouragedandendorsedandtheTaskforceparticularlywelcomestherecentInnovationDublinweekwhichshowcasedDublinbusinesses,HEIs,localauthoritiesandculturalinstitutions.DublinwillalsobeEuropeanCityofSciencein2012whiletheScienceGalleryintendtobringtheWorldInnovationForumtoDublinin2012,aneventwhichhasneverpreviouslybeenheldoutsideofNewYork.

AsreferencedinRecommendation5.9above,thereisaneedtopromotelifelonglearningacrosssocietytoensureanopennesstonewideasandtodevelopthecapabilitieswithintheworkforceforthetypeofinnovativeeconomyweaspireto.AnationalContinuingProfessionalDevelopment(CPD)schemefocussingoninnovation,technology,andtheprocessofformingandmanagingan

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entrepreneurialfirmcouldbevaluable.ItcouldbeofferedinconjunctionwithappropriateHEIs,withaccreditationwherenecessary.

Thereisalsoscopeforculturalcreativityandsciencetoworktogethertore-positiontechnologyandinnovationininnovativenewwaysinthepublicmind,andhelpre-positionartists,cultureandcreativemindsintothecentreofinnovativebusinesses.Cleverlyundertaken,suchinitiativescanalsohelppositionIrelandinternationallyasaninnovativebrand-seechapter12below.

10.3 supportingrecommendations+ Publicservicebroadcastersshouldbeencouragedtodevotebroadcasttimeto

topicsofnationalstrategicinterestininnovation,entrepreneurshipandthesmarteconomy;

+ Aspartofawiderefforttopromotelifelonglearningacrosstheworkforce,anationalContinuingProfessionalDevelopment(CPD)schemetochampionandpromoteinnovationtothegeneralworkforceshouldbedeveloped.

INTELLECTUAL PROPERTY, EDUCATION AND RELATED SUPPORTS InenablingtheSmartEconomy,IPwillplayacriticalrole.IPcomesinmanydifferentformsandismorethanjustpatents(e.g.copyright;know-how).DifferentindustriesrelytoagreaterorlesserextentondifferentIPrightsforcommercialisation.Itisestimatedthat70%ofatypicalcompany’svalueliesinitsintangibleassets,upfromaround40%intheearly1980s45.AnunderstandingoftheimportanceofIP,itsvalueandcommercialpotentialshouldbestronglycultivatedinthebusinesscommunityandIrishsocietyatlarge.

10.4 supportingrecommendations+ IntroducenationalinitiativestoincreasethepublicawarenessofIPissues(e.g.

throughtheBTYoungScientistexhibition);

+ IntroduceaprogrammefromtheIrishPatentOfficetopromoteandeducatebothindustryandstudentsaboutallaspectsofIP(similartothatrunbytheUKIPOffice);

+ Developamoreco-ordinatedapproachbythevariousagenciesthatrunIPtrainingseminarsandinitiativesforindustry.

ManySMEsfindthehighcostsofproperlegalandIPadviceprohibitive,andappearnottotakeaproactivestrategicpositioninrespectofIPissues.

Properlegaladviceattheearlystageofallcompaniesiskey(e.g.thetermsofafirstfundingroundcouldcausedifficultiestoacompanyinsecuringfollow-onfunding).Whereacompany’scoreassetisIP,itsfirstIPlicenceorpatentfilingcouldhaveasubstantialimpactonitsabilitytoproperlycommercialisethatIPgoingforward.TheimportanceofSMEsobtainingproperlegalandIPadvice,includingIPaudits,hasbeenrecognisedinternationally46.

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10.5 supportingrecommendationExaminewaysinwhichqualifyinginnovativeexport-orientatedcompaniescanhaveconvenientaccesstolow-cost,highqualitylegal,patentandtaxadvice(includingIPaudits).Ideallythisshouldtaketheformofatendertotheprivatesectortoestablishacost-effectiveandpro-activesupportfunctionfortheseservices.

INNOVATION PORTALCurrentlythereisabroadandchangingrangeofR&DandcommercialisationschemesavailablefromdifferentDepartmentsandAgencies.EnterprisesandentrepreneurshavenosinglesourceofaccurateandcurrentinformationonR&DfundingavailableinIreland.

Wehavemadeanumberofrecommendationstothedesignanddeliveryofresearchandenterprisesupports.

Inaddition,webelievethatthereshouldbeasinglewebsiteprovidinganaccesspointtoinformationonallrelevantschemesavailablefromEnterpriseAgenciesandotherresearchfunders.Inadditiontoactingasaninformationregistry,theportalshouldassistcollaborationbetweenHEIsandenterprises,forexamplethroughhubstolinkenterprisesandresearchers.ItcouldalsoprovideinformationonIP,forexampletheIPProtocolproposedinRecommendation6.4.

10.6 supportingrecommendationEstablishanationalonestopshopwebsiteprovidinginformationonallresearchexpertise,innovation,enterpriseandotherrelevantsupportsavailabletobusiness.

BANkRUPTCY LEGISLATIONInnovationandentrepreneurshipinvolverisk,andoccasionallyresultinfailure.Ifaventureisultimatelygoingtobeunsuccessful,itisclearlybetterifthisisrecognisedasearlyaspossibleandtheventurecloseddown.Theexperienceandlearningfromafailedbusinessventurecanoftenbeanimportantingredientoffuturesuccess.Ifwearetosucceedinbuildinganeconomywithhighlevelsofinnovativecompaniesweneedtoseeashiftinsocietalattitudeswhichacknowledgesthisreality.

Importantly,legalarrangementsforbusinessfailureneedtoavoidanysenseofstigmafromafailedbusinessventure,whilenotfacilitatingrecklessbehaviourorinappropriaterisk-taking.Inparticular,theTaskforcebelievesthatIreland’spersonalbankruptcylegislationneedstobereformedandtheLawReformCommissioniscurrentlycompletingaconsultationprocessonmeasureswhichwouldmoderniseIreland’slegislationinthisarea,ashastakenplaceintheUKandothercountries.

10.7 KeyrecommendationIreland’sbankruptcylegislationshouldbemodernisedfollowingtheconclusionoftheLawReformCommission’scurrentconsultationprocessonPersonalDebtManagementandDebtEnforcement.

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11. Providing the InfrastructureHigh quality physical infrastructure is an important ingredient in building a successful and innovative economy, making Ireland an attractive location for investment and for people to work and live. In particular, cities play an important role as drivers of national and regional growth, and as a magnet for investment and mobile skilled workers and entrepreneurs.

TheTaskforcehasnotattemptedafullreviewofphysicalinfrastructureinvestmentpriorities,but(inaccordancewithourfifthprinciple)hasidentifiedtwospecificprioritieswhicharecentraltodeliveryofourvision.

BROADBAND INFRASTRUCTURETheavailabilityofhighqualitybroadbandisstrategicallyimportanttoenablingandexploitinginnovation.AdvancedbroadbandservicesareessentialtothesuccessoftheSmartEconomy-particularlyforservicesfirmstodevelopandcapturenewbusinessopportunities.Opportunitieswillbedrivenbyexistingcommunications-intensivesectorssuchassoftwaredevelopment,medicaldevicesandfinancialservicesandemergingsectorssuchasrenewableenergy,energyefficiency,cloudcomputingandpersonalisedhealthcare.4GnetworksandWiMaxwillbecriticalasmovestowardsawirelesssocietyaccelerate.TheavailabilityofhighqualitybroadbandisessentialtoimprovingourstatusasanattractivelocationforFDIandenablingexistingandstart-upIrishfirmstocompeteininternationalmarkets.

“Next Generation Broadband: Gateway to a Knowledge Ireland47”,publishedinJune2009,setsoutthestrategicpolicyframeworkforinvestmentinhighspeedbroadband.Acentralcommitmentisthattherewillbeuniversalaccesstobroadbandby2010andthatby2012ourbroadbandspeedswillbeequalorexceedthoseincomparatorEUregions.

Irelandhasmadesignificantprogressintherolloutanduptakeofbroadband.However,Irelandstilloccupiesmid-tablepositionsinmanyinternationalcomparisons.TheNationalBroadbandSchemeiscurrentlyfacilitatingbroadbandrolloutinremoteareas.

TheTaskforcebelievesthatasignificantimprovementinthequalityofbroadbandisessential48.Theapplicationsofthefuture(e.g.cloudcomputing)willdemandmuchhigherspeeds,symmetricservices(similaruploadanddownloadspeeds),lowlatency(speedofresponseofthesystemtotheuser)anduncontendedaccess(userdoesnothavetosharebandwidthwithotherusersduetonetworkconstraints).

Thisrequiressignificantinvestment.Investmentbyoperatorsinupgradingthelocalaccessnetworks(fromthenetworkbackbonestocustomerpremises)iscurrentlydisappointing.

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Topromotegreaterinvestment,regulationmayneedtoallowforhigherratesofreturn.Potentialalsoexiststouseregulationtosupportco-investmentwherethehighcostofcivilconstructionworksissharedamonganumberofoperators,buteachoperatesitsownnetworkanddefinesitsownservicesandprices.Theimpactoncompetitorsandretailpriceswouldneedtobeassessedcarefully.

11.1 KeyrecommendationGiven the critical need for advanced broadband services in building a highly innovative enterprise sector, the nationwide roll-out of Next Generation Network (NGN) services, for bandwidth up to and surpassing 1Gbps, should be prioritised.

11.2 supportingrecommendations+ Extendbuildingregulationstofacilitatetheprovisionofhighspeedbroadband;

+ EnsurethattheprovisionofbroadbandinfrastructureisintrinsicinallStateinvestmentplans(e.g.roads,waterdistributionandmeters,drainageworks,smartelectricitymeters,etc.),includingLocalAuthorityplans;

+ Reducethecostsofprovidingtelecomsandbroadbandservicesbyreviewingplanningrules,reducingcharges,anddevelopingconsistentchargesandprocessesacrosslocalauthorities;

+ Facilitateprovisionofaccesstopublicductinginfrastructurebyestablishingtheplanned“onestopshop”;

+ Ensureaclear,predictableandtechnologyneutral,regulatoryapproachtoNGN;

+ Governmentprocurementshouldbeusedwhereappropriatetostimulatetheprovisionofhighqualitysymmetricbroadband(e.g.eSchools,eHealthandeGovernmentinitiatives).

LABORATORY FACILITIESTheState,undertheaegisofEIandSFI,expendsconsiderableresourcesonfundingfocussedresearchanddevelopmentprojectsintheareasofICT,LifesciencesandGreenTechnology,andareasinwhichthesedisciplinesconverge.

However,thereiscurrentlyashortageofkeylaboratoryspaceinIrelandnecessaryforspin-outandothercompaniestocommerciallydevelopandexploittheoutputsofthehundredsofmillionsbeinginvestedeveryyearbytheStateinresearchprojects,asoutlinedbythereportfromBiGGAREconomics.49

11.3 Keyrecommendation Ensure that:

+ At least one wet laboratory facility of scale is made available for post-incubation life-science start-ups;

+ A laboratory incubator space is established for microelectronics start-ups.

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12. Marketing ‘Innovation Ireland’Our ambition to make Ireland an international hub for innovation and commercialisation will require effective marketing to ensure that potential investors, entrepreneurs, highly-skilled labour and researchers are attracted here to help strengthen our innovation ecosystem.

INTERNATIONAL INNOVATION SERVICES CENTRETheTaskforcebelievesthat,providedtherightstructuresandincentivesareputinplace,thereisanopportunityforIrelandtodevelopandmarketitselfasaglobalcentreofchoiceforthemanagement,licensingandtradingofIP–patents,copyrights,designrightsandtrademarks.

CompanieswithvaluableIPrecognisetheimportanceofdevelopingapropermanagementandcommercialisationstrategywithrespecttotheirIP.ThisincludesthemanagementoflargeportfoliosofpatentsandotherIPregistrations,maintainingthosejustifiedbycostandriskanalysis;determiningwhichshouldbeallowedtolapse;determininglicensingopportunities;and,whereappropriate,thepursuitofinfringementactions.WhilstwerecognisethatsomecompaniesmaychoosetomanagetheirIPportfoliosclosetoHeadOffice,andthatcertainadministrativeIPfunctionsarecurrentlyoutsourcedtolow-costjurisdictions,IrelandhasanadvantageofbeingthelocationofmanyMNCactivities,isclosetoEurope,isEnglishspeaking,andhasanattractiveIPandtaxenvironment.Developmentofcapabilityinsupport/advisoryservicesacrossotherEuropeancountriescouldbeanaddedattractionoftheIISC.

Whilsttheseactivitiesarecurrentlybeingcarriedoutfromothercountries,webelievethatIrelandhasstrengthswhichcanprovidethebasisforthedevelopmentandmarketingofIrelandasaglobalcentreofchoicefromwhichtheseIPactivitiescouldbecarriedout.Thesestrengthsinclude:

+ throughtheIFSCwehaveestablishedabaseofrelevantskillsandsupportservices

+ alargenumberofUSMNCsalreadyhaveoperationsinIreland

+ amodernstatutoryframeworkforIP

+ arecentlyupdatedIPtaxationregime

+ weprovideanEnglishlanguagelocationwithintheEU

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Implementingtherecommendationsinchapter6(IParisingfromState-sponsoredR&DinHEIs)wouldfurtherstrengthenIreland’sattractivenessasthelocationofchoiceinwhichtocarryoutresearchandmanageandcommercialisetheresultingIPandreinforceotheraspectsofourvisionforIrelandasaEuropeaninnovationhub.

12.1 Keyrecommendation Develop and market Ireland as an International Innovation Services Centre offering

a location for global IP management, licensing and IP trading services.

STRENGTHEN IRELAND’S POSITION AS A LOCATION FOR RESEARCH & COMMERCIALISING IPIreland’sIPlegislationisuptodate,andfollowsEUlegislationandotherinternationalIPtreaties.Itthereforehasanelementofconsistencyandpredictabilitywhichmakesitanattractivelocationinwhichtocarryoutresearch,andfromwhichtocommercialiseIP.

Irelandalsohastheaddedadvantageofbeingacommonlawjurisdiction,butwhichisgroundedinawrittenConstitution(liketheUSA),andalsohasafullunderstandingandrecognitionofEUlegislationandthegeneralEUregulatoryenvironment.ItisthereforeanidealgatewayfromwhichUScompaniescanoperateinEurope,andfromwheretheycanmanagetheirEuropeanoperations,assomanycurrentlydo.Inaddition,IrelandcouldalsoserveasagatewaytoGlobalmarketsforIndianandAsianheadquarteredcompanies.

IrelandalsocomparesfavourablywithotherjurisdictionsintermsofIPprotectionandenforcement,andisrankedatthetopofinternationaltables50.Thisisparticularlywelcomeasitbothencouragesinwardinvestment,andprovidesIrishcompanieswithastrongplatformforprotectingtheirownIPrights.Ontheenforcementside,theintroductionoftheCommercialCourtin2004hassubstantiallyfast-trackedtheresolutionofIPdisputes,anditisalreadytheforumofchoiceformostIPdisputesinIreland.

AdditionalinitiativescouldfurtherstrengthenIreland’sattractivenessasanInternationalInnovationServicesCentrefromwhichtocreateandcommercialiseitsIP.

12.2 supportingrecommendations+ ImplementchangesattheIrishPatentOfficetobringitmoreinlinewith

patentofficesinternationally(seeAppendix7formoredetails);

+ SupportinitiativestopositionIrelandasanattractiveforumfortheresolutionofinternationalIPdisputesthroughmediationandotherformsofdisputeresolution;

+ ContinueinitiativestofurtherreducethetimeframesandcostofresolutionofIPdisputesinIrishcourts;

+ WorktoharmoniseIPregulationsatEUlevel(seeAppendix7formoredetails).

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MARkETING AND PROMOTIONOneactionoutlinedinBuilding Ireland’s Smart Economy: a Framework for Sustainable Economic RenewalisthattheenterprisedevelopmentagencieswouldjointlymarketandbrandIrelandasaleadinginnovationlocationanddestinationofchoiceforEuropeanandotheroverseasinvestors.

TheenterpriseagenciesareintheprocessofdesigninganddevelopingacommonbrandforthenationalenterpriseandresearchagendathatisalignedwiththeGovernment’sframework;thatiscompelling,futurefocused,andwillgenerateawarenessofIrelandathomeandabroadasavibrant,innovation-led,modernenterpriseeconomy.ThefirststageinthisprocesswascompletedbyDecember2009.ThebrandingwillshortlyberolledoutandusedacrossarangeofcommunicationsmaterialsinsupportofthevariouscommunicationsstrategiesoftheenterpriseagenciesandotherstakeholdersinvolvedinbrandingIreland.

TheartsandthecreativesectoralsocanplayaninnovativeroleinpositioningIrelandinanewway,particularlywhenscienceandartsarebroughttogethertoutilisetechnologyininsightfulandoriginalways.TheenterpriseagenciescoulddeveloptheirbrandingworkaccordinglyandsoreinforceIreland’suniqueposition.

TheInnovationPortal(Recommendation 10.6)canalsoactasanimportantmarketingtooloutsideofIreland.

12.3 supportingrecommendation+ BuildontheexistingIDAinternationalmarketingcampaignwithaviewto

attractinginternationalentrepreneurstoIreland,increasingR&DintensiveinvestmentbyMNCsandraisingthelevelofawarenessofthebenefitsofinnovationtotheIrishpublic;

+ Asinglenationalbrandidentitybasedontheconceptofinnovationshouldbeconsistentlyusedinkeyinternationalmedia,tradeshowsandnetworkeventsbyallrelevantagencies.

ApriorityatthemomentistoreinforceIreland’sreputationthroughaconsistentfocusonourpathwaytoeconomicrecoverybasedontheSmartEconomyconceptandourre-brandingastheInnovationIsland.

Allopportunitiesneedtobetakentoassimilate,deliverandreinforcethismessage,includingviaseniorpoliticiansandseniorpublicservantswhoarethefaceofIrelandtotheinternationalbusinessandpoliticalcommunities.Thisrequiresahighdegreeofprofessionalisationintheplanningandexecutionofinternationalengagements,atalllevelsandinallappropriatesettings.

WestronglybelievethatallofusshouldexpectourseniorpoliticiansandseniorpublicservantstotraveloverseasperiodicallytopromoteIreland’sstrategicinterests,andbeabletoengageinternationalinvestorsandpolicyinfluencersinanappropriatefashion.

WhileSt.Patrick’sDayisaparticularlyimportantandvaluablepromotionalopportunityforIreland,thispromotionalprogrammeshouldbesustainedthroughouttheyear,andimportantandemergingmarketsshouldhaveaco-ordinatedcalendarofvisitsbyaselectionofseniorpoliticiansandseniorpublicservants.

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12.4 KeyrecommendationAn organised programme of visits and other activities should be put in place whereby Ministers, Departments and State Agencies and other relevant stakeholders (for example industry associations) convey a consistent, positive message about Ireland as a centre of excellence for innovation.

LINkS WITH ASIA AND OTHER EMERGING MARkETSIrelandneedstostrengthenitsengagementwithChina,IndiaandotherAsiamarketstoreflecttheirgrowingeconomicandtradesignificance.AswellasAsiatherewillalsobeexportopportunitiesinemergingeconomiesinSouthandCentralAmerica,theMiddleEastandelsewhere.

TheseGlobaltrendswillbereflectedovertimeintheimportanceofthesemarketsasadestinationforexports,aplacewhereinnovationhappensandapotentialsourceofinvestment.

Irelandmuststrategicallytargetourlimitedresourcestomaximiseimpact.TheAsiaStrategyhasnowbeenconcludedandistobereplacedbyanewTradeandInvestmentStrategywhichwillidentifyfutureprioritiesfordeploymentofnationalresourcesandefforts.Thisneedstotakeaccountofchangesinworldtradeandinvestmentpatterns,andthelikelyfuturetrajectoryofIrisheconomicdevelopment.

ThisStrategyshouldencompassthefullrangeofeconomic,political,educationalandculturalleversavailabletostrengthenourprofileandpresenceinthesemarkets.Itshouldincludethelocationoftheoverseasofficesoftheenterpriseagencies,howthesecanworkcohesivelytogetherandwithourembassies,political,educationalandculturalvisitsandexchanges,andmarketingcampaigns.ConsiderationalsoneedstobegiventoissuessuchastheteachingofAsianandotherlanguagesinIreland.

12.5 supportingrecommendationAnewTradeandInvestmentStrategyshouldbedevelopedandimplementedtostrategicallyfocusournationalresourcesandefforts.ThisStrategyshouldincludespecificinitiativestotargetopportunitiesinemergingeconomies.

LINkS WITH THE DIASPORATheIrishDiasporaisarelativelyunder-utilisednationalresourcewhichcouldbemobilisedinsupportofour‘InnovationIreland’ambition.Itisestimatedtoincludeasmanyas70millionpeople,whichisanextraordinaryresourceforanislandwhere5millionpeoplelive.However,itcouldbestronglyarguedthatthepotentialoftheIrishDiasporahasnotbeenfullyengagedasaresourcetosupportnationaleconomicandinternationalbusinessdevelopment.

TheinauguralGlobalIrishEconomicForumhostedbytheGovernmentinSeptember2009inFarmleighwasconvenedwithtwobroadobjectives:toexplorehowtheIrishathomeandabroad,andthosewithastronginterestinIreland,couldworktogetherandcontributetoouroveralleffortsateconomicrecovery;andtoexaminewaysinwhichIrelandanditsglobalcommunitycoulddevelopamorestrategicrelationshipwitheachother,particularlyintheeconomicsector.

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ThereportoftheForumisavailableonline51anditoffersstrongsupportfortheGovernment’sambitionstobuildaSmartEconomyandassociatedinvestmentsandstrategiesinsupportofresearchandinnovation.

TheGovernmentispursuingtherecommendationsemergingfromtheeventacrossarangeofareasrelevanttoinnovationandareportonprogressisbeingpublishedshortly.

OneoftheearlydeliverablesfromtheForumistheestablishmentofthenewGlobalIrishNetworkmadeupofthoseinvitedtotheForumandotherleadingmembersoftheGlobalIrishcommunity.ThisNetworkwillbeanadditionalresourceforpromotingIreland’skeymessagesabroadandwillfacilitategreaterstrategicandpracticalinteractionbetweenIrelandandleadingbusinessfiguresintheDiaspora.

TheForumalsorecommendedplacingagreatervalueonthe“affinityDiaspora”-foreignnationalswhohavelivedinIreland,butnowreturnedtotheircountriesoforigin.Furthermore,theForumalsorecommendedestablishmentofaglobalIrishYouthForum,toengagewithyoungermembersoftheDiasporaandthisisbeingtakenforwardasaproposednewFarmleighOverseasGraduateProgramme.

Inaddition,acertificateofIrishancestrywasamongtherecommendationscontainedintherecent‘StrategicReviewofIreland-USRelations’,andtheMinisterforForeignAffairshasconfirmedthatthisisbeingputintoeffect.

WeendorsetheseactionswhichcanstrengthenthepracticalsupportwhichtheIrishDiasporacanprovide,forexample,assistinginintroductionsforfinancing,customeracquisition,andoutsourcing;marketintelligence;mentoringofseniormanagementteams;andbusinesspartnering.

12.6 supportingrecommendationTheStrategyforengagingwiththeDiasporafollowingtheGlobalEconomicForuminFarmleighshouldincludespecificobjectivestosupportIreland’sambitiontobeanInternationalInnovationHub.

NORTH-SOUTH CO-OPERATION TheTaskforcerecognisesthatthereissignificantpotentialinstrengthenedNorth-Southco-operationtohelpinimplementingthevisionandmanyoftherecommendationssetoutinthisreport.TheNordicmodelofresearchandinnovationco-operation52whichaimstodismantlebarrierstothedevelopmentofanopeninnovationsystemintheregiontothemutualbenefitofeachoftheNordiccountriesshowsthebenefitsofastrategic,policy-ledapproach.

SignificantNorth-Southco-operationisalreadyunderway,asshownforexamplebyInterTradeIreland’sMappingStudyofResearch&TechnologicalDevelopmentCentresontheIslandofIrelandandtheInterTradeIrelandINNOVA,FUSIONandInnovationConnectionsProgrammes.

OthersignificantareasofNorth-Southco-operationandcollaborationincludetheInnovationVoucherProgramme,theCompetenceCentreProgramme,theUS-IrelandResearchandDevelopmentPartnershipandthejointapproachtoattractingEUFP7funding(theSeventhEUFrameworkProgrammeforResearchandTechnologicalDevelopment).

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Thesuccessoftheseinitiativesdemonstratesthattherearesignificantopportunitiesinbuildingcriticalmassinareaswheretheislandcancompeteinternationally,leveragingworld-classrecognitionandresearchfunding.TherearealsoopportunitiesinaNorth-Southcontexttoenhancetheinternationalmarketingandbrandingof‘InnovationIreland.’

12.7 supportingrecommendationTheTaskforcerecognisesthepotentialtoexpandNorth-Southco-operationasasteptowardsdevelopingtheislandintoaleadingregionforresearchandinnovationbygeneratingvaluablesynergies;expandingthecriticalmassofresearchcapacity;increasingparticipationininternationalfundingprogrammes;promotinginternationallytheinnovativecapacityoftheisland;andenhancinginternationalcompetitiveness.

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EMPLOYMENT OBjECTIVESChapterTwoofthisreportoutlinedthescaleofthechallengeweface.Inthissectionweconsiderwhatmightbeachievablegoalsforjobcreationifwedeliveronourvision.Itisnottheintentiontoprovidedefinitiveforecastsofemploymentgrowth-inpartbecauselabourforecastingisnotoriouslydifficulttoachieveinanaccuratemanner(andforecastinginsuchavolatileeconomicperiodaswearecurrentlyexperiencingaddstotheproblem),andinpartbecauseatasectorallevel,thehigh-technologysectorisnotsufficientlyseparatedfromtherestoftheeconomytofacilitatesuchanexercise.

However,implementationoftherecommendationsinthisReportcombinedwithotheractionsovertheperiodaheadaspoliciesevolve,willmakeasignificantcontributiontothedevelopmentoftheSmartEconomyandwillhaveapositiveimpactintermsofemployment.

Thissection,therefore,considersthetypeofemploymentgrowththatmayflowfromimplementingtherecommendationsinthisReportwhichwillleadtoimprovedinnovationandcontributetotherealisationoftheSmartEconomy.TheTaskforcebelievethattheimplementationoftherecommendationsintheReport,supportedbyafavourableeconomiccontext,hasthepotentialtocontributetonetjobcreationinhigh-techfirmsoftheorderofbetween117,000and215,000betweennowand202053.Thisexcludesthecreationofadditionaljobsthroughthemultipliereffect(i.e.everyjobcreatedwillhavespinoffjobcreationthroughincreasedcompanyandindividualexpenditureongoodsandservices).ThisrangeisbasedonexperiencesinothereconomiesthathavealreadyachievedthetypeofdevelopmenttowhichIrelandaspires.Thisrangeshouldbeviewedasanaspirationratherthanadefinitivenumericalforecast.

13. Measuring SuccessGiven the scale of the transformation required to achieve our vision for a highly innovative Irish economy, and the imperative to achieve an inflection point in the jobs it supports, we need clear targets against which progress can be measured, and mechanisms for doing so. Clarity about the progress being achieved, and the returns delivered by public investments made, will also help build and sustain public support for the strategy.

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ItisinstructivetoconsidertheexampleofSiliconValley54.TheSiliconValleyareahasapopulationofapproximately2.5millionandanemploymentpoolof1.4million(bywayofcomparison,totalemploymentinIrelandisapproximately2.1millionoutofapopulationof4.5million).Itisestimatedthat320,000peopleareemployedin5,500hightechnologyfirms.

TheaveragenumberofjobsperhightechnologyfirminSiliconValley,atabout60,clearlymasksawiderangeofjobspercompany-thesefiguresincludedirectemployeesatalloccupationlevelsrangingfromunskilledmanualworkersuptoassociateprofessionalandprofessionalemployees.Thesefiguresalsoincludeallfirmsizes-bothoneortwopersonstart-upsandMNCgiantssuchasOracle,CiscoorGoogle.ItisalsoworthnotingthatlargercompanieswillalsohaveemploymentoutsideofSiliconValley(andIreland),suchasregionalsalesofficesanddevelopmentcentres.

WebelievethatSiliconValley,astherecognisedworldleaderinhightechnology,shouldserveasanaspirationorobjectiveforIrelandtostrivetowards.Itisworthnoting,however,thatemploymentintheBayArea(whichishometoSiliconValleyandmanyoftheoutcroppingsfromthatcluster)hasactuallydeclinedbymorethan360,000overthelast10years,andoveralonger20yeartimehorizon,employmentgrowthhasremainedquitemodest.ThistrendparallelsrecenttrendsinIrelandsuggestingthatagencysupportedemploymenthasremainedrelativelyconstant-inthiscontext,thefactthatagencysupportedemploymentinIrelandhasbeenmaintainedoverrecentyearsrepresentsasignificantachievement.

Further,SiliconValleyisquiteuniqueinglobaltermsgiventhesheervolumeofworldclassresearchinstitutions,hugehistoricalinvestmentinresearchfromStateandFederalsourcesincludingdefenceandmedicine,andthepresenceofkeypioneeringindustriessuchasthesemiconductorsindustrysincethe1950sand1960s.GiventhebasefromwhichIrelandisstartingfrom,therefore,theremaybemoreappropriatebenchmarksforIrelandtocompareitselfwithoverthemediumterm.

AccordingtoEurostat55,in2007,morethan2millionpeoplewereemployedinhigh-techmanufacturingintheEU-27(1.1%oftotalEUemployment).Another12million(5.6%)wereemployedinmedium-high-techmanufacturingand7million(3.3%)wereemployedinhigh-techknowledgeintensiveservices.Atregionallevel,theleadingregionforhigh-techemploymentwasBerkshire,BuckinghamshireandOxfordshire(UK),withhigh-techsectorsaccountingfor10.7%oftotalemployment.Aregionsuchasthismayprovideamorerealisticshort-termmodelforIreland.

Atpresent,itisestimatedthatapproximately6.2%ofworkersinIrelandareengagedinhigh-techemployment56.BasedonthemostrecentlypublishedESRIMediumTermReview57,employmentin2020isforecasttobearound2.3million.WereIrelandtoincreaseitsshareofemploymentinhigh-technologyfirmsfromthecurrentlevelto10.7%,thiswouldseeemploymentinhigh-techfirmsincreasefromapproximately131,000in2008to248,000in2020,anetincreaseof117,000.Obviouslythismasksthefactthatmoreemploymentwillhavetobecreatedtoarriveatanetpositivefigureasinevitablytherewillbesignificantjobchurnoverthesameperiod.

WereIrelandtoachievelevelsofemploymentinhigh-techfirmscomparablewithSiliconValley,thenumberswouldincreasesubstantially.Morerealistically,IrelandmightaspiretobealeaderinEuropeandaimtohave15%ofemploymentconcentratedinhigh-techfirms.Thiswouldresultinalmost346,000peoplebeingemployedinhigh-techfirmsby2020–anetincreaseof215,000jobsovertheperiod.

TheTaskforcebelievethatadditionalhigh-techemploymentcreationcanhaveanevenmoresignificantsecondaryeffect–thehigherproductivitylevelsinherentinhigh-techemploymentmayresultinahighermultipliereffect,producinginturn,evenmoresecondaryemployment.Itshouldbenoted,however,thatthefiguresfornetemploymentcreationalreadycaptureanimplicitelementofthesecondaryemploymenteffects.

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SOURCE OF jOBSTheTaskforcehaveconsideredtheavenuesofgrowththroughwhichhigh-techemploymentcanbecreated.Itisimportanttonotethatwhileasignificantproportionofhigh-techemploymentislikelytobeconcentratedintheagencysupportedsectorsoftheeconomy,thehigh-techeconomyextendsbeyondtheremitoftheenterpriseagencies.Allsectorshavethepotentialtocreatehigh-techemployment.

AttheheartofourReportisasignificantstrengtheningoftheinnovationecosystem,andcentringitaroundtheentrepreneurandenterprise,whichcandeliverthesubstantialincreaseinemploymentdesired.

Withintheoverallecosystem,anumberofdifferentcomponentsofjobcreationintheSmartEconomywereidentified.

Intheshort-term,leveragingemerginginnovationfromoutsideEurope,and,inparticular,establishingtheEuropeanarmoftoptierVCbackedhighgrowthcompaniesviaaEuropeanAcceleratorProgramme,asreferencedinRecommendation 8.3,isanactionwhichcouldcreatejobs,althoughitwillnotultimatelybetheprimarysourceofgrowth.

TransformingtheoperationsofestablishedcompaniesinIreland,includingtheMNCs,towardsmoreinnovation-intensiveactivities,aswediscussedinChapter 8willnotonlyprotectjobsintheshort-term,butwillincreaseemploymentintothefuture.

Cultivatingandgrowingastrongindigenousinnovationsector,forexample,throughasignificantincreaseinthenumberofnewstart-upsandeffectivelyscalingthemwillbeasignificantsourceofemploymentgrowthifwedeliverourgoals.

PromotingIrelandasalocationforresearchandcommercialisingIP,forexampleasreferredtoinRecommendation 12.1,hasthepotentialtocreateamodestnumberofjobsintheshort-term,althoughthismayincreasesignificantlyovertime.

POSITIVE FEEDBACk LOOPCentraltotheTaskforce’swholeapproachistheneedtofoster‘positivefeedbackloops’.Asmorecompaniesexit,andasthenationalaveragevalueoftheseexitsincrease,thenthepositivefeedbackloopacceleratestheengineoftheSmartEconomy:there-cyclingoftalentandofcapital;theattractionofIrelandforoverseasbasedventuresandentrepreneurs;andtheincreasedmomentumbehindasmallnumberofemergingglobalchampionsastheybulkupwithappropriateacquisitions.Furthermore,iftheaverageageofcompaniesastheyexitremainsstableandmodest,thenthevibrancyoftheSmartEconomycanbemonitored:bycontrast,stagnantcompanies,withlittlechanceofexitorgrowth,lockupbothtalentandcapital.

Foreverysuccessfulnewfirm,othersmayfail.However,eveninthecaseofinitialfailure,itistobeexpectedthatmanyentrepreneurswilltryagain–thisre-cyclingeffectwillresultinapositivefeedbackloopthatcanbefurtheraugmentedthroughsuccessfulcompaniescreatingnewcompanyspin-outs.Thuscompanyfailuresareoffsetbypositivefeedbackasfoundersandseniormanagerstryagainandsuccessfulcompaniesbreedfurthernewstart-ups(whichinturnmaysucceedorfail).

ThepositivefeedbackloopisabsolutelycriticaltothesuccessoftheInnovationProcessindrivingjobcreation.Undercertainconditions,entirelynewstart-ups‘seed’theInnovationProcess‘engine’,andthepositivefeedbackloopresultsinmanymoresuccessfulcompaniesbeingcreated,thanarebeing‘fed’intotheengineasentirelynewstart-ups.

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Thisanalysisconsidersjustwhatmightbeachievableifthere-cyclingofventure-capitalandentrepreneurialexpertiseenvisagedbytheTaskforcewastobecomeareality.

Metrics/targetsTheTaskforcebelievesthatthereneedstobeclearmetricsformeasuringoutcomesfromStateinvestmentsandotherinterventions.

Arangeofrelevantdataisalreadycollected,mainlybyForfásortheCSO.MuchofthedatacollectediscompatiblewiththeFrascatiManual(theOECDmethodology)ortheOsloManual(theOECDmethodologyforinnovation).Theseareessentialbasesforinternationalcomparabilityandbenchmarking.

Asetof47performanceindicatorshasbeendevelopedfortheStrategyforScience,TechnologyandInnovationandtheseareupdatedonarollingbasis,byForfás.OtherrelevantdatasourcesaretheCommunityInnovationSurvey,theAnnualBusinessSurveyofEconomicImpact(ABSEI)andtheAnnualEmploymentSurvey.

Theannualreportsoftherelevantagenciesarealsousefulsourcesofdata,althoughasageneralruletheTaskforcebelievesthatindicatorsshouldbecapableofvalidationindependentlyofthoseimplementingthatparticularactivityorintervention.Self-measurement-thatiswhereanagencyordepartmentchargedwithdeliveringaparticularinitiativeorprogrammeassertsitsownoutputs–isinsufficientonitsown,andindependentmeasurementorvalidationisessential.

Therearecertaininnovationandentrepreneur-relatedannualstatisticsinrelationtoangelfundingandventurecapital,acquisitionsetc,aswellasonfirst-timeandrepeatentrepreneurswhichtheTaskforcebelievesisimportantifwearetomeasureprogressandreturnsforinvestmentinthisarea.

Noexistingsurveycollectsthisdataatpresent.WeconsiderthattheCSOisinthebestpositiontofillthesedatagapswithitsstatisticalexpertiseandaccesstothefullbusinessregisterwhichwouldalsocaptureverysmallfirmsnotcapturedinotherregisters.Itisproposed,therefore,thatanewsurveybelaunchedbytheCSOtocollectthisdatawhichshouldthenbeanalysedandmonitoredasanevidencebaseforbuildingpolicymakinginthisspace.

Areaswhichadditionalindicatormetricsmightcoverincludetechnologyadoptionandcreativitybythepublicatlarge(e.g.thenumberofIrishusersofsocialnetworkingsiteslikeTwitterandFacebook;thenumberofFacebook,DroidoriPhoneapplicationsdevelopedfortheglobalmarketfromIreland).

Aswellasmeasuringacademicresearchactivity,(e.g.papercitations,graduationnumbers,andpatentfilings)akeythemeshouldbetransferoftechnologyknowledgeandcompetencefromsuchacademicresearchintocommercialsuccess(e.g.thenumberandvalueofacademic-industrycollaborations;theaveragenumberofyearsofindustryexperiencewhichacademicshaveobtained;thenumberandlifetimeofacademicspin-outcompanies;thenumberofnewproductsdevelopedthroughindustry-HEIcollaborations).

Giventheemphasisweplaceontherolethatcompanyexitsplayincreatingapositivereinforcementloop,thesemetricsneedtocapturethenumberof,andaveragevalueof,companyexits.

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Theseindicatorsmustalsobecommunicatedinawaywhichisusefultopolicy-makersinre-definingprioritiesinlightofprogress,aswellasbeingunderstandablebythegeneralpublic.

13.1 Keyrecommendation+ A transparent and objective process, overseen by the High Level

Implementation Committee (see recommendation 14.1), should define and regularly publish metrics which report progress on all aspects of the innovation ecosystem, including the impact of State-funded research projects, as well as the specific job creation objectives outlined above;

+ This should include metrics on angel funding, venture capital investments, IPOs and other exits by venture-backed companies. A new survey for the collection of this material should be devised by the CSO.

MEASURING RETURNS ON STATE SUPPORTED R&DAparticularconcernwhichhasarisenduringthecourseoftheTaskforce’sworkistheneedtodevelopamoresophisticatedunderstandingofthereturnsfrompublicinvestmentinR&DtotheIrisheconomy,howthatdiffersbetweendifferenttypesandsectorsofinvestment,howboththedirectandindirectreturnsovertimecanbemeasured,andhowreturnsarisefromsynergieswithotheraspectsoftheinnovationecosystem.

WhiletheTaskforcestronglyendorsestheneedforincreasedpublicinvestmentinallaspectsoftheinnovationecosystem,giventheseriousresourceconstraintsfacingtheIrishExchequer,abetterunderstandingofthisissuewillhelpensureinformeddecisionsonprioritieswithintheoverallinvestmentenvelopeandthatthoseinvestmentprioritiescomplementeachotherandsupporttheoverallthrustofpublicinvestment.

13.2 supportingrecommendationAstudyshouldbeundertakentoidentifyamodelformeasuringdirectandindirecteconomicreturnsfrompublicinvestmentinR&DinIrelandtoinformdecision-makingoninvestmentprioritiesandrefinetheframeworkofperformanceindicatorsforSTIinvestments.

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WebelievethattherecommendationssetoutinthisReport,ifimplementedinacoherentanddeterminedfashion,candelivertheinflectionpointinperformancewhichisrequired.

Atable(pages94to106)hasbeenpreparedsettingouteachofourrecommendationswithassociatedestimatesoftimelinesandcosts,aswellasassigningresponsibilityforimplementation.

WeproposethatregularreportsonprogressinimplementationoftheserecommendationsshouldbepreparedforconsiderationbytheGovernmentandpublished.

Werecognisethatsomeoftherecommendationshavesignificantresourceimplications,atatimeofseverebudgetarypressure,whileotherswillrequireare-alignmentofprioritieswithinDepartmentsandAgencies.

Wealsorecognisethatimplementationwillrequireasustainedeffortovertime,asnewopportunitiesemergeandnewchallengesrequirearesponse.WealsonotethatgreaterNorth-SouthCo-operationhasthepotentialtocontributetoprogressinmanyareas.

TheTaskforcebelievesthatasustainedpartnershipapproachbetweenpublicandprivatesectorsisnowrequired.IfIrelandistorecoverandenteranewphaseofsustainablegrowth,allpartsoftheinnovationecosystemwillhavetoplaytheirpart,bydemonstratingawillingnesstochangeandadapt.Onestrengthofasmallcountryisthecapacitytoaligntheeffortsofeachorganisationandsector–andsupportofbroadersocietalandpoliticalcommunities-inamajornationaleffort.Thatiswhatisnowrequired.

WebelievethereisaneedforstrongerrelationshipsbetweentheGovernmentDepartments,AgenciesandtheHEIsectortooptimisetheeffectivenessoftheinnovationecosystem.

14. Implementing the Report

The Taskforce believes that Ireland needs to restructure its economy towards export-led sectors and a revival of productivity growth to build a Smart Economy if it is to deliver continued economic growth and a rising standard of living for all its citizens; in fact, we believe that Ireland has no strategic choice but to do so.

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WerecognisethatanumberofoversightstructuresalreadyexistinrelationtotheStrategyforScience,TechnologyandInnovation,includingtheCabinetCommitteesonEconomicRenewalandScience,TechnologyandInnovation,theInterdepartmentalGrouponSTI,theAdvisoryCouncilonScienceandTechnologyandtheEnterpriseFeedbackGroup.

However,webelievethatthereisaneedforastronghighlevelfocusontheoverallinnovationagendawhichensuresthatitisdrivenforwardwithenergyinlinewithourvision.Equally,itwillbeimportanttoestablishthisinawaywhichavoidsunnecessaryduplicationandoverlapwithexistingstructures.

14.1 KeyrecommendationEstablish a High Level Implementation Committee, taking account of existing structures, which reports to the Taoiseach and the Cabinet Committee on Economic Renewal, and which includes representatives from the public and private sectors. We suggest its mandate include:

+ monitoring implementation of this Report;

+ identifying any further high level policy measures required in light of developments and progress;

+ ensuring that the structures are in place to facilitate stronger networking between Government Departments, Agencies, the HEI sectors and other stakeholders;

+ acting as a focal point for efforts to promote innovation across the economy;

+ publicly reporting on progress at regular intervals.

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iMpleMentatiOn table

Atimelineof‘immediately’impliesactionshouldbetakenwithinthreemonths.Short-termreferstoanimplementationperiodoflessthanayear,medium-termofonetotwoyearsandlongtermofovertwoyears.Therecommendationsareclassifiedbroadlyascostneutral,low-costandhigh-cost.ItshouldbenotedthatcostestimatesareindicativeandrelatetodirectExchequercostsratherthannetcoststakingaccountofpotentialExchequerrevenuesandtheneteconomicbenefitsthatmightarise.

KeyreCommendations leadactor/s indicativeexchequercost

timeline

5.1DeliverontheinvestmentframeworksetoutintheStrategyforScience,TechnologyandInnovation(SSTI)2006-13andachievethegoalintherenewedProgrammeforGovernmentofinvesting3%ofGDPinR&DbycommittingtoinvestmentinanupdatedSSTIforthe2014-2020period.

GovernmentM/ETE

HighCost LongTerm

5.2BuildingontheannouncementinBudget2010,thecurrentstructuresfordeliveryofresearchfundingshouldbereformedwiththegoalofimplementingthefollowingchanges:

+ consolidatefundingstreamsandenhanceco-ordinationtodeliveroptimumvalueformoney;

+ ensurethatfundedresearchhasanidentifiedfundingpathwayandsingleleadresponsibleagencyunderpinnedbycommercialisationsupports;

+ aswebuildtowardsourgoalofinvesting3%ofGDPinR&D,commitgreaterresourcestofundingappliedresearchthatisfocusedonidentifiedpriorityopportunitiesforindustryinIreland.

M/ETEM/STICabinetCommitteeonSTI

CostNeutral ShortTerm

5.3Introduceadditionalmeasurestopromotethetake-upofhigherlevelmaths,includingpossibleincentivessuchastheawardingbyHEIsofCAObonuspointsonapilotbasisstartingwithLeavingCertificate(LC)2012,sothatthisyear’sLCcohortcanmakeinformedsubjectchoicesoncommencingFifthYear.

M/ESHEIs

LowCost Immediate

6.4DevelopandpublishanationalIPProtocolwhichestablishes“groundrules”whichmustbefollowedwhenagreeingtermsaroundownershipofandaccesstoallStatesupportedIP.

AdoptmoremeaningfulmetricsbywhichHEIsandTTOsaremeasured,toreflecttheIPProtocol.

LinkaproportionofStatefundingfortheHEIstonationalmetricsoninnovationandcommercialisation.

M/ETE

M/ETE

M/ETEM/ES

LowCost

LowCost

CostNeutral

ShortTerm

MediumTerm

ShortTerm

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KeyreCommendations leadactor/s indicativeexchequercost

timeline

6.7ConveneanexpertgroupofrepresentativesfromIndustry,theVCsector,HEIs,thelegalprofession,andthepublicsector,whoareinformedbyTTstructuresinternationally,torecommend,bySeptember2010,themostappropriatestructurethatwouldachievethefollowing:

+ anationalofficethathasknowledgeaboutcurrentresearchprojectsandaccesstoallIPcreatedthroughouttheHEIsystemaswellasthemandatetobundle,marketandfacilitatespeedycommercialisationofIPfromallHEIsinaccordancewiththeIPProtocol;

+ inthatoffice,asinglepointofaccess,andpointofcontact,fortheentrepreneur,toallIPthathasbeengeneratedacrosstheentireHEIsystem;

+ mechanismsputinplacetoensurefullsupportoftheactivitiesofthisofficebytheHEIs/TTOs.

M/ETE Lowcost Immediate

7.1Attractingtop-tierventurepartnersfromabroadtoIrelandisapriorityandcanbestbeachievedthroughimplementationassoonaspossibleoftheInnovationFund-Ireland,envisagedinBuilding Ireland’s Smart Economy.

M/FinM/ETETaoiseach

HighCost ShortTerm

8.1TheGovernmentshouldidentifyasuitableprocurementmodelandthenpilotanumberofFlagshipprojectswherepublicprocurementtomeetspecificpublicneedswouldstimulatethedevelopmentofinnovativesolutionswithexportpotentialthroughcollaborationbetweenMNCs,SMEsandHEIs.

M/ETEM/FinwithrelevantMinisters

Tobedetermined

ShortTerm

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KeyreCommendations leadactor/s indicativeexchequercost

timeline

8.2Establishateamdrawnfromtherelevantagencieswithresponsibilityforensuringinter-firmcollaborationstotakeadvantageofconvergenceopportunities.Itshouldbringforwardand,asappropriate,implementactionsinthefollowingareas:

+ supportforprioritisedareasofconvergenceopportunitythroughexistingornewpublicfundingschemes;

+ publicfundingschemeswhichincentiviseinter-firmcollaborationsinrespectofconvergingtechnologies;

+ ensurethattheregulatoryenvironment(andhowitisappliedorinterpreted)issupportiveofconvergence,e.g.combinationmedicalproducts;

+ educationandtrainingprogrammesthatprovidethemulti-disciplinarycapabilitiesrequiredtosupportcrosstechnologyandcrosssectoralconvergence;

+ establishmentofanindustry-ledconvergenttechnologiesnetworktofacilitatecollaborationbetweencompanies,academicsandmedicalpractitionersacrosstheformerlydiscretesectorsofpharma,bio,medtech,ICTandengineering,and

+ marketingIreland’sadvantagesasalocationforconvergencefocusedactivities.

IndustryincludingMNCslocatedinIrelandshouldalsobeaskedtoidentifyspecificareasofopportunitywheretheywouldbeinterestedinparticipatinginconvergence-relatedactivities.

M/ETE,EIIDASFI

CostNeutral Immediate

8.3TheIDAandEIshouldjointlydevelopandimplementa“EuropeanAccelerator”Programmewiththeinitialgoalofattracting20companiesfromwithintheportfoliosoftoptierventurecapitalfundstoopentheirEuropeanheadquartersinIrelandintheimmediatefuture;andaimingtogrowthisnumbertenfoldwithinthenextfiveyears.

M/ETEIDAEI

HighCost ShortTerm

8.8Urgentlyreview,inconjunctionwithrelevantindustryrepresentatives,thecompetitivenessofourtaxofferingtomobileintellectualpropertyrichbusinesses.

M/Fin Costneutral MediumTerm

8.9RemovetheincrementalspendrequirementfortheR&DTaxCreditentirely.

M/Fin HighCost MediumTerm

8.10DevelopanattractiveandcompetitivehighvalueMobileTalentRegime. M/Fin HighCost MediumTerm

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KeyreCommendations leadactor/s indicativeexchequercost

timeline

9.1WhileEnterpriseIrelandhasabroadagendatosupportexport-focusedIrishenterprise,itsmission,strategies,businessplansandexpenditureneedtoprioritisemoreclearly,andprovideleadershipin,theincreasinglyimportantareasofstart-upandearly-stageactivities.

M/ETEEI

Highcost ShortTerm

9.2IntroduceanewStateseedcapitalscheme(inadditiontoexistingEIsupports)which:

+ wouldfillthecurrentgapinprivateseedcapital,byprovidingmilestone-drivenfundingforeachapprovedproject(theleveloffundingwillvaryconsiderablybysectorbutwilltypicallybebetween€100,000and€500,000);

+ introducesamoratoriumfortheimmediateperiodaheadonexistingrequirementsforco-investmentfromothersourceswhereappropriatetoenablestrongprospectstoproceed;

+ significantlyincreasesthenumberofprojectssecuringfundingofthislevel;

+ isevaluatedbymeasuringwideremploymentandeconomicimpacts,notjustthedirectreturnoncapitalinvested;

+ shouldbereviewedafterfiveyearsforeffectiveness,andannuallythereafterwithaviewtoultimatelywithdrawingfromthemarket;

+ involvesaprivatesectorpanelwhichwouldmakerecommendationsonspecifictechnologysectorsandmarketsandonwhichprojectstofund.

M/ETEEI

HighCost ShortTerm

9.3BuildontheworkofEI,InterTradeIrelandandotherstonurtureangelfundingby:

+ formallyapprovinganationalportfolioofsector-specificBusinessAngelfundsandstartingtodosoduring2010;toqualifyforapprovaleachsuchfundshouldbesubstantiallycomposedofpreviouslysuccessfulinnovatorswhowishtoapplytheirexpertiseandresourcestohelpingnewstart-upcompaniessucceed;suchinnovatorsmaybefoundalsoamongsttheDiaspora;

+ offeringdirectfinancingforadministrativesupportforuptotwoyearsatavalueof€50,000/yearforeachsuchnewapprovedBusinessAngelfund,afterwhichitisexpectedtobeselfsustainingwithrespecttoadministrationoverheads;

+ Implementa€10 millionfundtobemadeavailabletoapprovedBusinessAngelfundsonacompetitivebasisasaprimertohelpthesegroupsraisetheirinitialfunds.

M/ETEEIIntertradeIreland

HighCost MediumTerm

698

KeyreCommendations leadactor/s indicativeexchequercost

timeline

9.8Launchamarketingcampaign,initiallyonapilotbasis,topromoteIrelandasanexcellentlocationforstartinginnovativeexport-orientedcompanies.

M/ETEEIIDA

LowCost Immediate

10.1Thereshouldbeanindependentreviewofthecurrentconfigurationofenterprisesupportagenciesandprogrammestoreflectthechangingenterprisechallengeoutlinedinthisreport,includingincreasedfocusonlinkagesbetweenMNCsandindigenousfirms.

M/ETE LowCost MediumTerm

10.7Ireland’sbankruptcylegislationshouldbemodernisedfollowingtheconclusionoftheLawReformCommission’scurrentconsultationprocesson Personal Debt Management and Debt Enforcement.

M/JELR CostNeutral MediumTerm

11.1Giventhecriticalneedforadvancedbroadbandservicesinbuildingahighlyinnovativeenterprisesector,thenationwideroll-outofNextGenerationNetwork(NGN)services,forbandwidthuptoandsurpassing1Gbps,shouldbeprioritised.

M/CENR HighCost LongTerm

11.3Ensurethat:

+ atleastonewetlaboratoryfacilityofscaleismadeavailableforpost-incubationlife-sciencestart-ups;

+ alaboratoryincubatorspaceisestablishedformicroelectronicsstart-ups.

M/ETEEI

HighCost MediumTerm

12.1DevelopandmarketIrelandasanInternationalInnovationServicesCentreofferingalocationforglobalIPmanagement,licensingandIPtradingservices.

M/ETEIDAM/Finance

LowCost ShortTerm

12.4AnorganisedprogrammeofvisitsandotheractivitiesshouldbeputinplacewherebyMinisters,DepartmentsandStateAgenciesandotherrelevantstakeholders(forexampleindustryassociations)conveyaconsistent,positivemessageaboutIrelandasacentreofexcellenceforinnovation.

M/FAM/ETE

LowCost Immediate

13.1Atransparentandobjectiveprocess,overseenbytheHighLevelImplementationCommittee(see14.1below),shoulddefineandregularlypublishmetricswhichreportprogressonallaspectsoftheinnovationecosystemincludingtheimpactofState-fundedresearchprojects,aswellasthespecificjobcreationobjectivesoutlined.

Thisshouldincludemetricsonangelfunding,venturecapitalinvestments,IPOsandotherexitsbyventure-backedcompanies.AnewsurveyforthecollectionofthismaterialshouldbedevisedbytheCSO.

TaoiseachM/ETECSOForfás

LowCost MediumTerm

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KeyreCommendations leadactor/s indicativeexchequercost

timeline

14.1 EstablishaHighLevelImplementationCommittee,takingaccountofexistingstructures,whichreportstotheTaoiseachandCabinetCommitteeonEconomicRenewalandwhichincludesrepresentativesfromthepublicandprivatesectors.Wesuggestitsmandateinclude:

+ monitoringimplementationofthisReport;

+ identifyinganyfurtherhighlevelpolicymeasuresrequiredinlightofdevelopmentsandprogress;

+ ensuringthatthestructuresareinplacetofacilitatestrongernetworkingbetweenGovernmentDepartments,Agencies,theHEIsectorsandotherstakeholders;

+ actingasafocalpointforeffortstopromoteinnovationacrosstheeconomy;

+ publiclyreportingonprogressatregularintervals.

Taoiseach CostNeutral Immediate

suPPortingreCommendations leadactor/s indicativeexchequercost

timeline

5.4Increaseinvestmentinintensivetrainingformathematicsteachersandthefullrolloutofprojectmaths.

ImplementthenewsyllabusesinLeavingCertificateBiology,PhysicsandChemistry.Implementnewapproachestoassessmentbasedontheexperienceofthecurrenttrialinschools.

Introduceanewmentoringprogrammeforteachersandtalentedstudents,involvingexperiencedmathematicians,engineersandscientistswhoarekeentomakeawidercontributiontoadvancingthequalityofteachingandlearningintheirdiscipline.

M/ES

M/ES

M/ESIndustry

HighCost

HighCost

LowCost

MediumTerm

LongTerm

ShortTerm

5.5 DrawingontheexampleoftheTCD-UCDInnovationAllianceandthemorerecentNUIG-ULStrategicAlliance,wesupportfurthercollaboration,alliancesandrationalisationofprovisionbetweenHEIsaswellasnewmodelsofHEI-industrycollaborations.

HEIsHEStrategyGroup

CostNeutral MediumTerm

5.6 PromotethecontributionofAHSStotheinnovationecosystemand,inparticular,seektoincreasesynergiesbetweendifferentdisciplineswithinAHSSandSETdisciplines.

M/ESM/STIHEIsSFI/HEA

CostNeutral MediumTerm

6100

KeyreCommendations leadactor/s indicativeexchequercost

timeline

5.7AllHEIsshouldintroduceinitiativestocultivateinnovationandentrepreneurshipatbothundergraduateandpostgraduatelevel,drawingwhereappropriateonthemodelproposedbytheTCD-UCDAlliance.Thiscouldincludebusinessplancompetitionswithfundedprizes.

HEIs LowCost MediumTerm

5.8 IntroduceaProgrammetoincentiviseparticipationincertainpostgraduatecoursesintheworld’stoptenEngineering,ScienceandBusinessSchoolsbyindividualswhowouldthenreturntoworkinIreland.Oneapproachwouldbealimitedtaxrelief‘futures’schemewhichwouldallowsuccessfulgraduatesavailofapersonaltaxrelieftooffsettheirtaxliabilitiesarisingfromemploymentwithintheState.Analternativewouldbeatwo-waymobilityprogrammebetweenIrelandandinternationalHEIs.

M/ESM/Fin

LowCost MediumTerm

5.9 EnsureeffectivestreamlinedimmigrationarrangementsforSSTI-relatedPhDstudents,postdoctoralresearchersandtheirfamiliesre-locatingtoIreland.

Introducefast-trackresidencystatusforPhDgraduatesemployedbyIrish-basedbusinesses.

IncreasethecurrentsixmonthextensionduringwhichaPhDgraduatecanstayinIrelandtoseekanotherjobto12months.

M/JELR

M/JELR

M/JELR

CostNeutral

CostNeutral

CostNeutral

ShortTerm

ShortTerm

Immediate

5.10Thereshouldbeapolicyshifttowardslife-longlearningwithinourHigherEducation,FurtherEducationandTrainingsystem.HEIs,FÁSandotherpublicagencies,aswellasemployers,needtobetteraligntheirrespectiverolesinthisregard.

M/ESM/ETEHEIsFÁS

Tobedetermined

LongTerm

6.1Introduceaschemesimilartothe“KnowledgeTransferPartnershipProgramme”intheUKbyplacingrecentgraduatesincompaniestofacilitatethetransferofhightechnologyskillsandexpertise.

AspartofthecurrentWorkPlacementProgrammeintroduceatargetedstrandforSTEMgraduateswiththeassistanceofindustryrepresentativebodies.

EstablishanationalundergraduateinternshipprogrammewhichbuildsonexistingHEIinitiativesbuthasamoreconcertedinvolvementofindustry,especiallyasregardsconsistencyintheavailabilityofplaces.Thismayrequireanelementofsubsidisationfortheparticipatingfirms.

M/ETEHEIsIndustry

M/ETEIndustry

M/ETEHEIsIndustry

LowCost

CostNeutral

Tobedetermined

MediumTerm

ShortTerm

MediumTerm

suPPortingreCommendations

101

KeyreCommendations leadactor/s indicativeexchequercost

timeline

6.2 ImplementanewsuiteofHRandperformancemanagementpoliciesintheHEIstoincentiviseandrewardinnovationandcommercialisation.Theseshouldinclude:

+ Facilitationofstaffwhowishtoprovidetheirexpertisetoinnovativecompaniesthroughfull-timeorpart-timesecondments.ThefillingofanyvacanciesarisingfromsuchsecondmentsshouldbeexemptfromanyrestrictionsrelatingtotheEmploymentControlFramework;

+ Seektoensurethatacademicswhotakeleaveofabsence/sabbaticalstogainindustryexperience,arenotpenalisedintheiracademiccareer;

+ Ensurethatcareeradvancementisbasedonvaluingcommercialisationworkaswellasresearchandteachingperformance.

ResearcherswhodeveloptechnologythatistransferredtoacompanythroughalicenceorothermechanismshouldbeinvitedtoapplyforspecificStateresearchfundingtofurthersupportthebasicresearchprogramsbeingconductedinthatresearcher’slaboratories(e.g.similartotheUKROPARealising Our Potential AwardsScheme).

M/ESHEStrategyGroupHEIs

ResearchFundingBodies

Lowcost

Lowcost

MediumTerm

Shortterm

6.3IntroduceaschemetoallowaccessbyindustrytoHEIspecialistequipmentandlaboratories.

Significantlyincreasetheplacementof“entrepreneursinresidence”intorelevantR&DlaboratoriesandcentresoftheHEIs.

HEIs

HEIsResearchFundingAgencies

CostNeutral

LowCost

ShortTerm

ShortTerm

6.5EnsureallfundingagenciesadoptandpublishstandardisedrequirementsforthemanagementofIPwithinHEIs,inaccordancewiththeIPProtocol.

Developaframeworktoensurethat,whenfundingcollaborativeprojects,alltermsareagreedbetweencollaboratorsbeforetherelatedfundingisdrawndownandthatthosetermsarealignedwiththeIPProtocol.

M/ETE,CabinetCommitteeonEconomicRenewalResearchFundingAgencies

M/ETEResearchFundingAgencies

CostNeutral

CostNeutral

MediumTerm

MediumTerm

suPPortingreCommendations

6102

KeyreCommendations leadactor/s indicativeexchequercost

timeline

6.6EnsuretheIPmanagementpoliciesandprocedureswithinallHEIsarebestinclass,inparticulartoavoidinadvertentIPleakageorinadvertentexposuretocommercialliability,andthatthesepoliciesandproceduresarestandardisedacrossallHEIsasfaraspossible.

Ensurethat,withtheassistanceoffundingagencies,researcherswithinHEIsareappropriatelyincentivisedtoproperlymanagetheirIP.

EnsurethatagreementsbetweenHEIsareinplacetoenablespeedylicensingofIPfrommultipleHEIsinaccordancewiththeIPProtocol,withasinglecommerciallead.

EnsurethatanexpertgroupofrepresentativesfromtheHEIsandtheprivatesectorisappointedtodevelopmodelcontracts,inlinewiththeIPprotocol,forallactivitiesattheHEI/Industryinterface,tobeusedbyallHEIsattheoptionoftheentrepreneur/company(i.e.nondisclosureagreements,materialtransferagreements,licenceagreements,etc.)(internationallyacceptedmodelcontractstobeusedasastartingpoint).

M/ESHEIs

ResearchFundingAgenciesHEIs

M/ESM/ETEEIHEIs

M/ESM/ETEEIHEIs

CostNeutral

CostNeutral

CostNeutral

CostNeutral

ShortTerm

Immediate

MediumTerm

ShortTerm

7.2InadditiontoimplementingInnovationFund-Ireland,mechanismsshouldbeexploredwhichwouldutilisethefollowingopportunitiestoenhancetheavailabilityofVentureCapitalinIreland:

+ existingMNCslocatedinIrelandshouldbeinvitedtosuggestmeansbywhichtheywouldbewillingtoassignsomeoftheirtreasuryfundsintoIrishbasedinnovativecompaniesorventurecapitalists;

+ facilitatingtheIrishDiasporawhowishtoinvestinriskcapitalforIrishbasedinnovativecompanies;

+ creatingaprogrammetoaccessventuredebt(acommercialinstrument,particularlyfrominternationalprivateequityfirms)forlaterstagecompaniesbasedinIreland.

Investmentshouldalsocontinueindevelopingasustainable,forward–lookingandhighqualityIrishVentureCapitalIndustry,complementingtheInnovationFund-Ireland.

M/FinM/ETEEI

Tobedetermined

MediumTerm

7.3Inordertosupportandincentivisethescalingofinnovativeindigenouscompanies:

+ introduceaScalingIncentiveScheme(SIS)toacknowledgesuccessfulscaling,whilstcontinuingtogrowacompany;

+ inimplementingtheInnovationFund-Ireland(seeabove)endeavourtoensuretheprogrammeincludesmanagerswhichspecialiseininvestinginfastgrowingexistingcompanies.

M/FinM/ETEEI

HighCost MediumTerm

suPPortingreCommendations

103

KeyreCommendations leadactor/s indicativeexchequercost

timeline

7.4BuildonthesuccesstodateoftheLeadershipForGrowth(L4G)programmeby:

+ continuingtheexistingL4GprogrammeanddevelopingadditionalprogrammeswhichexposeseniorexecutivesoperatingfromIrelandtobestpractice,casestudiesandpersonalface-to-facecontactwiththeexecutivesandfoundersofsuccessfulinnovativecompanies;

+ placinganimmediatefocusondevelopingtheskillsetsandexperienceofCFOs,andCEOs,intheareaofraisinginternationalfinancefromIrelandtoscalecompanies;

+ strengtheningtraininganddevelopmentprovisionintheareasofinternationalmarketingandsales.

M/ETEEI

HighCost MediumTerm

8.4ConsidermodificationstotheR&DTaxCreditRegimewhichwouldbeofbenefittoSMEs,asoutlinedinAppendix6.2.

BuildingoncurrentStateinitiatives,introduceatargetedinnovationauditschemeforqualifyingSMEsbyJanuary2011,includingforthoseSMEsthatdonotengageinanyR&Datpresent.

Whenreviewingthecurrentresearchfundingschemes(seeRecommendation5.2),introduceinitiativestoencourage:

+ moreinvolvementbySMEsincollaborativeresearch,bothwithotherindigenouscompanies,withMNCsandwithIrishandnon-IrishHEIs,

+ moreR&Dcontractsbetweensmallcompaniesandcustomers.

M/Fin

M/ETEEI

M/ETEEISFI

Highcost

Highcost

Lowcost

Mediumterm

MediumTerm

MediumTerm

8.5Formanindustry-HEIadvisorygrouponNew Product Design and Development,toprovideaforumforIrishindustry,HEIs,ProfessionalBodiesandGovernmenttoagreeanationalagendaandroadmapforproductdesignanddevelopment.

M/ETEM/ESIBECIUA

CostNeutral ShortTerm

8.6WorktosupportthecontinuedgrowthandtransformationofIreland’sFDIbasewhilealsomaximisinglinkageswiththeindigenoussector,includingthroughFlagshipprojects(Recommendation8.1),convergenceactivities(Recommendation8.2),improvedIParrangements(Recommendation6.4)andtheproposedEuropeanAcceleratorProgramme(Recommendation8.3).

M/ETEIDAEI

Tobedetermined

Immediate

8.7ImplementmeasurestosupportincreasedinnovationandgrowthacrossbothMNCandindigenousenterprisesinkeystrategicsectorsforIreland,andinparticularthespecificproposalslistedinpages58 to61above.

IDAEI

HighCost Immediate

8.11ImplementthesupportingtaxrecommendationssetoutinAppendix6. M/Fin Tobedetermined

MediumTerm

suPPortingreCommendations

6104

KeyreCommendations leadactor/s indicativeexchequercost

timeline

9.4IntroduceareducedeffectiverateofCGTarisingonthesaleofsharesinasuccessfulinnovationcompany,whereproceedsarereinvestedinanotherqualifyinginnovationcompanywithinareasonableperiod.

M/Fin HighCost MediumTerm

9.5IntroduceanEntrepreneurialTaxCredit. M/Fin HighCost MediumTerm

9.6Introduce“FounderShareOptions”whichareeligibleonlyforCGTtreatment.

M/Fin HighCost MediumTerm

9.7ReviewtheBESandSeedCapitalRelieflegislationwithaviewtomakingiteasierforentrepreneurstoutilisetheseschemes.

M/Fin Tobedetermined

MediumTerm

9.9Introducenewarrangementstofast-trackspecialresidencypermitsforappropriatequalifiedentrepreneurs,andtheirimmediatefamilies(includingaworkpermitforspouses).

Therequirementfornon-EEAnationalstocommittotransferringcapitalofatleast€300,000iftheywishtostartabusinessinIrelandshouldbewaivedwherealternativecriteriaaremet(forexampleacceptancebyanapprovedAngelFund).

AdedicatedsupportpackageshouldbeprovidedbyEIand/orIDAtoassistearlystageoverseasprojectswhichlocatehere.

M/JELR

M/JELR

M/ETEEIIDA

CostNeutral

CostNeutral

MediumCost

ShortTerm

ShortTerm

ShortTerm

9.10Enhancedfundingandothersupportsshouldbeputinplacefor“projectinvestigation”ofupto€50,000pernewprojectforitsentrepreneurpromotertoconfirmorotherwiseamarketopportunity,possiblybyofferingloans(repayablefromfutureprofits)ratherthangrantsasatpresent.

M/ETEEI

LowCost MediumTerm

10.2Introduceaschemetoenableanumberofpublicservantseachyeartobeplacedintoinnovativehighgrowthcompanies,atnoexpensetothesecompanies,whilststillmeetingthenormalremunerationandemploymentbenefitsofthepublicservantsconcerned.

M/FinM/ETE

LowCost MediumTerm

10.3Publicservicebroadcastingshouldbeencouragedtodevotebroadcasttimetotopicsofnationalstrategicinterestininnovation,entrepreneurshipandthesmarteconomy.

Aspartofawiderefforttopromotelifelonglearningacrosstheworkforce,anationalContinuingProfessionalDevelopment(CPD)schemetochampionandpromoteinnovationtothegeneralworkforceshouldbedeveloped.

M/CENR

M/ESM/ETE

CostNeutral

HighCost

Immediate

LongTerm

suPPortingreCommendations

105

KeyreCommendations leadactor/s indicativeexchequercost

timeline

10.4IntroducenationalinitiativestoincreasethepublicawarenessofIPissues(e.g.throughtheBTYoungScientistsexhibition).

IntroduceaprogrammefromtheIrishPatentOfficetopromoteandeducatebothindustryandstudentsaboutallaspectsofIP(similartothatrunbytheUKIPOffice).

Developamoreco-ordinatedapproachbetweenthevariousagenciesthatalreadyrunIPtrainingseminarsandinitiativesforindustry.

M/ETEM/ES

M/ETE

M/ETE

LowCost

LowCost

CostNeutral

ShortTerm

MediumTerm

ShortTerm

10.5Examinewaysinwhichqualifyinginnovativeexport-orientedcompaniescanhaveconvenientaccesstolow-cost,highqualitylegal,patent,andtaxadvice(includingIPaudits).Ideally,thisinitiativeshouldtaketheformofatendertotheprivatesectortoestablishacost-effectiveandproactivesupportfunctionfortheseservices.

M/ETE Tobedetermined

ShortTerm

10.6Establishanationalonestopshopwebsiteprovidinginformationonallresearchexpertise,innovation,enterpriseandotherrelevantsupportsavailabletobusiness.

M/ETEM/ES

LowCost MediumTerm

11.2Extendbuildingregulationstofacilitatetheprovisionofhighspeedbroadband.

EnsurethattheprovisionofbroadbandinfrastructureisintrinsicinallStateinvestmentplans(e.g.roads,waterdistributionandmeters,drainageworks,smartelectricitymeters,etc.)includingLocalAuthorityplans.

Reducethecostsofbuildingaccessnetworksbyreviewingplanningrules,reducingcharges,anddevelopingconsistentchargesandprocessesacrosslocalauthorities.

Facilitateprovisionofaccesstopublicductinginfrastructurebyestablishingtheplanned“onestopshop”.

Ensureaclear,predictableandtechnologyneutralregulatoryapproachtoNextGenerationNetworks.

Governmentprocurementshouldbeusedwhereappropriatetostimulatetheprovisionofhighqualitysymmetricbroadband(e.g.eSchools,eHealthandeGovernmentinitiatives).

M/EHLG

M/CENRM/EHLG

M/EHLGM/CENR

M/CENR

M/CENR

M/FinM/ESM/HC

CostNeutral

LowCost

CostNeutral

LowCost

CostNeutral

CostNeutral

ShortTerm

MediumTerm

MediumTerm

ShortTerm

ShortTerm

MediumTerm

suPPortingreCommendations

6106

KeyreCommendations leadactor/s indicativeexchequercost

timeline

12.2ImplementchangesattheIrishPatentOfficetobringitmoreinlinewithpatentofficesinternationally(seeAppendix7formoredetails).

SupportinitiativestopositionIrelandasanattractiveforumfortheresolutionofinternationalIPdisputesthroughmediationandotherformsofdisputeresolution.

ContinueinitiativestofurtherreducethetimeframesandcostofresolutionofIPdisputesinIrishcourts.

WorktoharmoniseIPregulationsatEUlevel(seeAppendix7formoredetails).

M/ETE

M/ETEIDAM/JELR

M/JELR

M/ETE

HighCost

LowCost

CostNeutral

CostNeutral

MediumTerm

LongTerm

MediumTerm

MediumTerm

12.3BuildontheexistingIDAinternationalmarketingcampaignwithaviewtoattractinginternationalentrepreneurstoIreland,increasingR&DintensiveinvestmentbyMNCsandraisingthelevelofawarenessofthebenefitsofinnovationtotheIrishpublic.

Asinglenationalbrandidentitybasedontheconceptofinnovationshouldbeconsistentlyusedinkeyinternationalmedia,tradeshowsandnetworkeventsbyallrelevantagencies.

IDAEI

IDAEISFI

LowCost

CostNeutral

MediumTerm

MediumTerm

12.5AnewTradeandInvestmentStrategyshouldbedevelopedandimplementedtostrategicallyfocusournationalresourcesandefforts.ThisStrategyshouldincludespecificinitiativestotargetopportunitiesinemergingeconomies.

M/ETEM/FA

CostNeutral MediumTerm

12.6TheStrategyforengagingwiththeDiasporafollowingtheGlobalEconomicForuminFarmleighshouldincludespecificobjectivestosupportIreland’sambitiontobeanInternationalInnovationHub.

M/FA CostNeutral ShortTerm

12.7TheTaskforcerecognisesthepotentialtoexpandNorth-Southcooperationasasteptowardsdevelopingtheislandintoaleadingregionforresearchandinnovationbygeneratingvaluablesynergies;expandingthecriticalmassofresearchcapacity;increasingparticipationininternationalfundingprogrammes;promotinginternationallytheinnovativecapacityoftheisland;andenhancinginternationalcompetitiveness.

TaoiseachM/FAM/ETE

CostNeutral ShortTerm

13.2AstudyshouldbeundertakentoidentifyamodelformeasuringdirectandindirecteconomicreturnsfrompublicinvestmentinR&DinIrelandtoinformdecision-makingoninvestmentprioritiesandrefinetheframeworkofperformanceindicatorsforSTIinvestments.

M/ETE LowCost ShortTerm

suPPortingreCommendations

APPEndIx 1: MEMBERSHIP OF THE INNOVATION TASkFORCE

mr.dermotmcCarthy(Chair)

SecretaryGeneral,DepartmentoftheTaoiseach

mr.lionelalexander Vice-PresidentandGeneralManager,HewlettPackard(Manufacturing)Ltd.

ProfessordonBarry President,UniversityofLimerick

dr.hughBrady President,UniversityCollegeDublin

mr.damienCallaghan InvestmentDirector,IntelCapital

mr.michaelCarmody President,InstituteofTechnology,Tralee

dr.stevenCollins Co-Founder&ChiefExecutiveOfficer,KoreVirtualMachines

mr.nedCostello ChiefExecutive,IrishUniversitiesAssociation

Professorfrankgannon DirectorGeneral,ScienceFoundationIreland

mr.seángorman SecretaryGeneral,DepartmentofEnterprise,Trade&Employment

mr.Joeharford ChairoftheHighLevelActionGrouponGreenEnterprise

dr.Johnhegarty Provost,TrinityCollegeDublin

dr.Chrishorn Co-founder&formerChiefExecutiveOfficer,IonaTechnologies

dr.BrianKelly Founder&ChiefExecutiveOfficer,CelticCatalysts

mr.michaelKelly Chairman,HigherEducationAuthority

dr.Burtonlee Director,EuropeanEntrepreneurshipandInnovationProgramme,StanfordUniversitySchoolofEngineering;ManagingPartnerinInnovariumVentures

mr.Johnlynch ChiefExecutiveOfficer,MerrionPharmaceuticalsLtd.

ms.taramacmahon IPLawyer

mr.danmacsweeney ChiefExecutiveOfficer,Carbery

ms.Brigidmcmanus SecretaryGeneral,DepartmentofEducationandScience

mr.Bryanmohally VicePresident,SupplyChainOperationsEurope,Johnson&Johnson

mr.Jimo’Brien SecondSecretaryGeneral,DepartmentofFinance

mr.marko’donovan Director,RaglanCapital

mr.Barryo’leary ChiefExecutiveOfficer,IDAIreland

mr.Barryo’sullivan SeniorVice-President,CiscoSystems

dr.Paulroben President,CelticConsulting

mr.frankryan ChiefExecutive,EnterpriseIreland

ms.annascally Partner,KPMG

thesecretariatforthetaskforcewasprovidedbythedepartmentofthetaoiseachassistedbycolleaguesinforfásandthedepartmentofenterprise,tradeandemployment.

107

6108

APPEndIx 2: GLOSSARY OF ACRONYMS AND ABBREVIATIONSaHss Arts,HumanitiesandSocialSciences

Bes BusinessExpansionScheme

BioPat BiopharmaceuticalProcessAnalyticalTechnology:industry-ledresearchnetworksupportedbyEI.

cao CentralApplicationsOffice

cat CapitalAcquisitionTax

cGt CapitalGainsTax

corD CommercialisationofResearchandDevelopment

cPD ContinuingProfessionalDevelopment

cset CentreforScience,EngineeringandTechnology:Partnershipswhichlinkscientistsandengineersacrossacademiaandindustrytoaddresscrucialresearchquestions.

cso CentralStatisticsOffice

Des DepartmentofEducationandScience

Dse DiscoverScienceandEngineering:DSEisaGovernmentinitiativethataimstoincreaseinterestinscience,technology,innovationandengineeringamongstudents,teachersandmembersofthepublic.

ecDL EuropeanComputerDrivingLicense

eea EuropeanEconomicArea

eec EuropeanEconomicCommunity

eerP EuropeanEconomicRecoveryPlan

eI EnterpriseIreland

ePa EnvironmentalProtectionAgency

eMea Europe,MiddleEastandAfrica

esrI EconomicandSocialResearchInstitute

eU EuropeanUnion

eurostat EuropeanStatisticalAgency

fÁs TrainingandEmploymentAuthority

fDI ForeignDirectInvestment

forfás Thenationalpolicyadvisorybodyforenterpriseandscience.

GDP GrossDomesticProduct

GnP GrossNationalProduct

Hea HigherEducationAuthority

109

Heanet ProvidescuttingedgeInternetServicestoEducationalandResearchInstitutions&OrganisationsthroughoutIreland.

HeI HigherEducationInstitutes

HPsU High-PotentialStart-Up

HrB HealthResearchBoard

IBec IrishBusinessandEmployersConfederation

Ict InformationandCommunicationTechnology

IDa IndustrialandDevelopmentAgency

IDDn IrishDrugDeliveryNetwork

Ifsc InternationalFinancialServicesCentre

Iots InstitutesofTechnology

IP IntellectualProperty

IrcHss IrishResearchCouncilforHumanitiesandSocialSciences

Ircset IrishResearchCouncilforScience,EngineeringandTechnology

M/es MinisterforEducation&Science

M/ete MinisterforEnterprise,Trade&Employment

M/fin MinisterforFinance

M/Hc MinisterforHealth&Children

M/cenr MinisterforCommunications,Energy&NaturalResources

M/eHLG MinisterforEnvironment,Heritage&LocalGovernment

M/stI MinisterofStateforScience,TechnologyandInnovation

M/fa MinisterforForeignAffairs

M/JeLr MinisterforJustice,EqualityandLawReform

Mnc Multi-NationalCorporations

ncca NationalCouncilforCurriculumandAssessment

ncPP NationalCentreforPartnershipandPerformance

nesc NationalEconomicandSocialCouncil

nDP NationalDevelopmentPlan

nGn NextGenerationNetwork

niBrt NationalInstituteforBioprocessingResearchandTraining

nPrf NationalPensionReserveFund

nsaI NationalStandardsAuthorityofIreland

ntMa NationalTreasuryManagementAgency

nUIG NationalUniversityofIreland,Galway

oecD OrganisationforEconomicCo-operationandDevelopment

6110

PaYe PayAsYouEarn

PrtLI ProgrammeforResearchinThirdLevelInstitutions

r&D ResearchandDevelopment

rD&I Research,DevelopmentandInnovation

rfID RadioFrequencyIdentification

roPa RealiseOurPotentialAwards

seI SustainableEnergyIreland

sfI ScienceFoundationIreland

sIf StrategicInnovationFund

sIs ScalingIncentiveScheme

sMes SmallandMediumEnterprises

src StrategicResearchCluster

sstI StrategyforScience,TechnologyandInnovation

steM Science,Technology,EngineeringandMaths

stI Science,TechnologyandInnovation

tcD TrinityCollegeDublin

teagasc Thenationalbodyprovidingintegratedresearch,advisoryandtrainingservicestoagricultureandthefoodindustry.

tssG TechnologySoftwareandSystemsGroup

tto TechnologyTransferOffice

UcD UniversityCollegeDublin

UL UniversityofLimerick

vc VentureCapital

111

APPEndIx 3: CONSULTATION PROCESS AND SUBMISSIONS RECEIVED

MostofthosewhomadewrittensubmissionstotheTaskforceagreedtothepublicationoftheirsubmissionstofacilitatedebateandraiseawarenessinrelationtotheworkoftheTaskforce.Asummarydocumentwhichexploresthekeyproposalsandthemescontainedinthesesubmissionswasalsoprepared.ThepublishedsubmissionsandsummarycanbefoundontheInnovationTaskforcewebsiteatwww.innovationtaskforce.ie.

TheInnovationTaskforcewouldliketothankallthosewhotookthetimetomakeasubmission.Alistofrespondents*isbelow.

a&lgoodbody americanChamberofCommerceireland

Bmwregionalassembly Brandon,gerard

Brazil,ProfessorthomasJ. Brophy,david;Curley,donnacha;lane,Cathal

Bt Callaghan,dr.James;woods,dr.margaret

Carr,alan CeltCentreforenvironmentallivingandtraining

CentreforinnovationandstructuralChange,nuigalway.

Centreforsoftwareengineering,dCu

Chambersireland CmCConsulting

Comreg Coyle,Pearse

datta,dr.shoumen dawson,ProfessorKenneth

designtwentyfirstCentury devitt,dr.frank

digitalmediaforum dublinlocalauthorities

ducrée,Jens eircom

environmentalProtectionagency etPireland

firstKlassfamilyfun fountainhealthcarePartners

freuder,ProfessoreugeneC. gallagher,Professorwilliam

glass,dr.alistairm. globalstandards1(ireland)ltd.

grimes,Professorseamus healthresearchBoard

herrera,frederic highereducationauthority

hussey,ProfessorConlethd. iBmirelandltd.

iCtireland/irishsoftwareassociation idalifesciences

innovator institutesoftechnologyireland

intertradeireland iPmlogic

irishBioindustryassociation irishBusinessandemployersConfederation(iBeC)

irishmanagementinstitute(imi) irishVentureCapitalassociation

itsligo Kelleher,Professordermot

6112

Kelly,dr.Brian Kelly,martin

Kumar,damini,europeanambassadorforCreativityandinnovation

lane,tim

líonra loftus,ProfessorBrendan

lowe,liam macranafeirme

macsuibhne,seamus mahon,Kieran

marineinstitute mcCarthy,sean

mcdonnell,dr.Kevin mcgrath,declan

mcmanamon,Peter microelectronicsindustrydesignassociation(midas),ireland

milner,Professorrichardg molloy,edmond

moore,Cormac murray,martin

nationalCentreforPartnershipandPerformance(nCPP)

nationaldigitalresearchCentre

nationalstandardsauthorityofireland(nsai)

nationaluniversityofirelandgalway

nationaluniversityofireland,maynooth

nationaluniversityofirelandmaynooth,innovationeconomyforum

neri,fillippo noonan,Kevin

o'dowd,Colm ÓhÓbáin,lorcán

o’mahony,Professordonal o'neill,Padraic

o’neill,sean rath,dr.myles

reenPower reynolds,Joe

riordan,Catherine robinson,dr.JamesC.

royalirishacademy sciencefoundationireland

sciencegallery scott,Professormike

scott,toby&leadbeater,Charles shannondevelopment

smartBayworkinggroup spillane,ProfessorCharles

spiritofireland stillPointProductions

stokes,richard taylor,Professordavid

teagasc telecommunicationsandinternetfederation

telecommunicationssoftwareandsystemsgroup,(tssg)

templeBarCulturaltrust,Businesstoarts&thesciencegallery

tol,richard tradefacilitateltd.

universityCollegeCork Visualartistsireland

Vladatu,dr.liviu wafer,Brendan(CirCagroup)

westerndevelopmentCommission whatmore,Professorroger

wheatley,Joseph whelan,dr.John

wicklowCountyCampus womenintechnologyandscience(wits)

* Not all respondents wished to be included in this list.

113

APPEndIx 4: WORkING METHODSTheInnovationTaskforcemetinfulldayplenarysessionsinGovernmentBuildingson17July,25September,30October,14Decemberand29January.Inaddition,aconsultationmeetingwasheldwithinterestedpartieson19October.

TheTaskforceissuedapubliccallforsubmissions(formoreinformationonsubmissionsseeAppendix3).Inaddition,theTaskforceconsultedextensivelythroughformalandinformalnetworksandthroughmeetingswiththesmallerWorkingGroupswhichwereformedtoaddressspecificaspectsoftheTermsofReference.

worKinggrouPs

GiventhepotentiallylargeagendafacingtheGroup,therelativelylimitedreportingtimeframeofsixmonthsandthesignificantexpertiseandexperienceofmembers,itwasdecidedthatthebestwaytoprogresstheTermsofReferencewasthroughtheestablishmentofanumberoffocussedWorkingGroupstoconsidercertainaspectsoftheWorkProgramme.SomeoftheseWorkingGroupsco-optedadditionalmemberstoassistwiththeirwork.

workinggroup1:incentives,intellectualpropertyandventurecapital:identifyingmeasurestoincreaseinnovation,commercialisationandentrepreneurshipincludingchangestoincentives,venturecapitalarrangementsandiPstrategies.

membership:AnnaScally(Chair),TaraMacMahon,BrianKelly,DamienCallaghan,BarryO’Sullivan,FrankGannon.

workinggroup2:Commercialisation,technologytransferandconvergingtechnologiesincludingexamininginstitutionalstructuresforr&dfundingdelivery,howtomaximisecommercialisationofresearch,increasetechnologytransferandpromoteinnovationinconvergingtechnologies.

membership:MarkO’Donovan(Chair),ChrisHorn,PaulRoben,DanMacSweeney,MichaelCarmody,NedCostello.

workinggroup3:achievingtheinnovationisland-howtopositionandpromoteirelandastheinnovationislandincludingattractingentrepreneurs,fdi,internationalstart-upsandprivatesectorr&dinvestment.

membership:BryanMohally(Chair),JohnLynch,JoeHarford,DonBarry,MichaelKelly,FrankRyan,BarryO’Leary.Co-optedmembers:BillKearneyIBM,AidanGoughInterTradeIreland,ElizabethHarveyForfás.

workinggroup4:internationalinnovationdevelopmenthub(dublin):supportingthedevelopmentofthetCd/uCdallianceincludingidentifyingnecessarysupportingpolicymeasures.

membership:StevenCollins(Chair),BurtonLee,HughBrady,JohnHegarty.Co-optedmembers:DesFitzgeraldUCD,DavidLloydTCD,BrianKelly,JohnTierneyDublinCityManager,GinaQuinnDublinChamberofCommerce,ShayGarveyDeltaPartners.

TheGroupsmetonanumberofoccasionsaswellascorrespondingonlineandthroughconferencecalls.Theymetwithanumberofrelevantindividualsandstakeholderorganisations.WorkingGroup3alsoconductedonanonlinesurveyofstakeholdersaspartofitsconsultationprocess(seeAppendix5.)RegularupdatesweremadebyeachWorkingGroupatPlenarymeetingsandthefinaloutcomesfromtheWorkingGroupshavesignificantlyshapedthecontentofthisReport.

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APPEndIx 5:SUMMARY OF STAkEHOLDER SURVEY RESULTS

workinggroup3conductedasurveyofrelevantstakeholdersaspartoftheirexaminationofoptionsfor‘achievingtheinnovationisland’.

ThesurveyquestionspresentedaseriesofstatementshighlightinganumberofaspectsthattheGroupconsideredtobeessentialinpositioningandpromotingIrelandasanInnovationIsland(takingaccountofthesignificantpotentialofferedbyanall-Islandapproach).Itaskedrespondentstocommentonwhetherthesestatementswerecurrentlytrueoraspirational.Wherestatementsweredeemedaspirational,itaskedrespondentstosuggestproposalstomakethestatementstrue.Italsoaskedrespondentstoidentifythefiveelements/aspectstheyviewedasmostsignificantforpositioningandpromotingIrelandasanInnovationIsland.

Thesurveywasissuedtomorethan300stakeholders(suggestedbymembersandthereforeintendedasastatisticallyrepresentativesample)andover200responseswerereceived:67%ofrespondentswerefromindustry,20%fromeducation,justunder9%fromstatebodiesand4%werefromotherareas.Oftheindustryrespondents,67%werefromMNCs,27%fromSMEsand6%fromstart-ups.

Theaspectshighlightedasmostimportantaresummarisedbelowinorderofimportance.

ValuinginnoVation

WevalueinnovationandR&Dasthekeyfoundationsofoureconomicgrowthforthefuture.Thisisreflectedin:

+ Theemphasisthatweputon‘developingtheinnovativemind’,ingraduateandpostgraduatestudiesofalldisciplines;

+ Thehighpriorityaffordedtothestatusandpromotionofresearchanddevelopmentasacareerofchoice;

+ ThemanytypesofsupportthataregiventoPublicandPrivatesectorentitiesengaginginInnovative,andR&Dactivities.

Mostrespondentsconsideredthefirsttwoitemstobeaspirational(only30%consideredthefirststatementtobetruewhile22%foundthesecondtobetrue).Respondentswerepositiveaboutthetypesofsupportprovidedforinnovation(nearly69%agreedthatthiswastrue.)

Policyproposalssuggestedbyrespondentsinresponsetothisquestionincluded:compulsoryinnovationmodulesinall4thLevelCourses,moreuseofinternshipsorplacementsinindustryforpostgraduatetraining,moreinterdisciplinaryprogrammes,employmentofmoreengineersandscientistsinschools,reintroducebonuspointsformathsandincentivisetopstudentstotakescienceandtechnologycoursesthroughbursaries,careermentoringetc.

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inCentiVes

Asignificantmajority(nearly80%)agreedwiththestatementthatwehaveahighlyattractiverangeoffinancialincentives.

Policyproposalsinthisregardincluded:morescalingincentives,taxbreaksforsecondmentsofindustryscientistsandengineersbacktoR&DprogrammeswithinHEIs,incentivestoencourageMNCstoworkwithIrishSMEs,incentivisemoredevelopmentactivityinadditiontoresearchandallowR&Dtaxcreditstobeappliedabovetheline.

alignmentofnationalinnoVationsystem/releVantagenCies

Thereweretwoquestionsinrelationtothelevelofalignmentandlevelofintegrationofthecomponentsofthenationalinnovationsystem(Agencies,HEIs,GovernmentDepartments,PublicResearchBodies,TechnologyTransferOfficesetc.)bothgenerallyandinrelationtoattractingnewenterpriseandsupportingentrepreneurs.Bothwereidentifiedasamongstthetopfivemostimportantareasinthesurvey.Alargemajorityofrespondentstobothquestionsconsideredfullalignmentwasstillanaspiration.

Proposalstoincreaseintegrationincludeaone-stopshop,aSteeringGrouporregularforums,alignedstrategies,objectivesandmetricsoranagencytooverseeallrelevantbodiesincludingthedevelopmentofanalignedstrategyframework.

talentstoBringateChnologyfrominCePtiontomarKetdeliVery

AmajorityofrespondentstothesurveyagreedthatwehadtherequiredHighQualityTechnicalandManagerialR&Dskills,TechnologyTransferskills,ManufacturingskillsandCreativity,FlexibilityandEntrepreneurialskills.Commercialisation(47.5%)andmarketing(52.8%)weretheareasofdeficitmosthighlightedbyrespondents.

Policyproposalsincluded:dedicatedreallifeexperiencedpersonnelforareassuchasfinancing,IPexploitationandmarketing,tobeavailableinvirtualofficeswithinIDA/EIwherenewcompanystaffcanborrowthemfordedicatedtimeperiods,incentivesthatallowandattractseniorinternationalmanagerstobebasedinIrelandsothatwecanlearnfromthem,developmechanismstobuildlinksbetweenexperiencedprofessionalsandpeoplewhomayhavesolidideasbutdon’tknowhowtoprogressthem.

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APPEndIx 6: SUPPORTING TAx RECOMMENDATIONS AND COMMENTS

a6.1deduCtionforintelleCtualProPerty

WehaverecommendedinthebodyofthereportthattheDepartmentofFinance,togetherwithrelevantIndustryrepresentatives,reviewthecompetitivenessofourtaxregimeforinternationallymobileIPrichbusinesses.Thisiskey.

Inthiscontext,specificchangesarerequiredtothecapitalallowancesbasedregimethatwehaveinordertoensurethatitiscompetitive.

TheFinanceBill2010madeanumberofwelcomechanges.Specifically,amongthechanges,itrevisedthedefinitionofknow-how,shortenedthe‘clawback’periodto10years,andclarifiedthetreatmentofassetimpairments.Howeverwesuggestthatthefollowingchangesarestillrequired:

(a) afurtherreductionintheholdingPeriodtofiveyears:atpresentthiscanserveasadeterrenttocompaniesmovingiPtoireland.

Havingaclawbackeffectivelyplacesaformofexitchargeoncompanies.Whilemostwillnotleave,ifourregimeisnotattractiveenoughwewillfailtoattractcompaniestoIreland.IfwefailtoattractcompaniestoIrelandwewilllosetheabilitytobenefitfromthosecompanies,thejobstheycreate,theexperiencetheyprovidemanypotentialemployeeswithandthespinoffwealthandotherbenefitsderivedbythecommunitiestheyestablishin.ItisessentialthatthepotentialforclawbackisnotusedasanexcuseagainstbringingvaluableIPintoIrelandinthefirstinstance.

ManyofIreland’scompetitorsforinternationallymobileIPinvestmentdonothavesimilarclawbackprovision.Werecommendthattheholdingperiodberemovedorreducedsubstantiallytofiveyears.

(b) separatetradeandlossesforward-Complications Ascurrentlydrafted,thelegislationrequiresactivitiesthatrelatetomanaging,developingor

exploitingspecifiedintangibleassetsonwhichallowanceshavebeenclaimed,toberegardedasaseparatetradingactivity(‘RelevantTrade’).Inaddition,companiesinvolvedinthesaleofgoodsandserviceswherepartoftheirprofitsderivedfromintellectualpropertyarerequiredtosegregatetheiractivitiesfortaxpurposes.Thiscanleadtosignificantcomplicationsanduncertainties.WhileamendmentsweremadeintheFinanceBill2010tomakethisalittlemoreworkable.Wewouldadvisethatthissectionisrevisited.

a6.2r&dtaxCreditregime

Inthebodyofthereport,werecommendremovingtheIncrementalBaserequirement.Thisiskey.

However,twofurthermattersrequirefurtherconsiderationinrelationtotheR&Dregime.Theyare(a)thepermittedlevelofoutsourcingand(b)levelofcreditforSMEs.

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(a) levelofoutsourcing Itisourviewthatthelevelofpermissibleoutsourcingislow.Whileweunderstandthehistoric

rationaleforthis,inanenvironmentwherecollaborationissocriticalwerecommendrevisitingthis.

Alsothecurrentoutsourcinglimitsdonotrecognisespecificsectoralconcernsthatarise.Forexample,forpharmaceuticalcompanies,clinicaltrialsmustbeoutsourcedandtheyareasignificantpartoftheR&Dcost.

ToencouragemorecollaborationbetweenMNCs,indigenousIrishcompaniesandUniversities,thecurrentcaponoutsourcingshouldbeincreasedto25%.

(b) levelofCreditforsmes TheR&Dcreditiscurrentlysetat25%butwerecommendinvestigatingthepossibilityof

introducinganimprovedtaxcreditforqualifyingSMEs,takingintoaccountanyimpactthismayhaveonothersupportsavailabletoSMEsunderStateAidrules.

a6.3CarriedinterestProVisions

TheintroductionofCarriedInterestprovisionson1January2009wasawelcomemoveintryingtobuildtheSmartEconomyandpavethewayfortoptierVChousestocometoIreland.

Wewouldhoweversuggestasmallnumberoftechnicalchangestotheregimeinordertoensureitiscapableofworkingasintended.

Theseinclude:

(a) amendingthedefinitionof“relevantinvestment” Atpresentthedefinitionof‘relevantinvestment’appliesonlyto‘startup’companies.Giventhe

lengthoftimenecessaryforstart-upstogetestablishedandthekeyrolethathighpotentialgrowthcompanieshaveinprovidingemployment,inourview,itisnecessarytoapplythereliefto“investmentsmade”onorafter1January2009.Thiswouldencourageinvestmentstobemadeinalreadyestablishedcompanieswhichareonlynowinapositiontosecurefunding.

(b) holdingperiod: Currentlythereliefrequiresasixyearholdingperiodwhichseverelylimitstheincentiveto

makeinvestmentsinearlystagecompanies.Thereliefwouldbemoreaccessibletofundinghousesifitwerereducedtothreeyearsasthiswouldreflecttypicalinvestmentsmadeinearlystagecompanies.

(c) natureofinvestments: Thecurrentdraftingofthelegislationiscouchedsolelyintermsofindividualinvestments,

applyingtoan‘an amount of carried interest which is not greater than 20% of the total profits from the relevant investment’.Consequentlyinpracticeitisdifficulttointerprethowitshouldworkforamulti-investmentscenario,whichwouldbecommonlyusedbyfundinghouses.Webelievethatthelegislationshouldbere-draftedtoreflecttherealitythatcarryusuallycomesfromanamalgamofdifferentprofitsandlossesfromunderlyinginvestments.Basedonthecurrentwordinginplace,itisdifficulttoseehowthereliefwouldinpracticeoperate.

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a6.4Poolingforeigntaxessufferedonroyalties

WewelcometheFinanceBill2010changesinrelationtounilateralcreditreliefforforeignwithholdingtaxes(WHTs)onroyaltiesanditsextensiontoallcompanies.Howeveritisimperativethatwenowmovetoanoverallpoolingsystemforforeignwithholdingtaxonroyaltyreceipts.WeappreciateconcernsraisedbytheDepartmentofFinanceinrelationtothecostofaddressingthisissue.HoweverwebelievereformisrequiredinorderforIrelandtobeabletocompeteforinternationallymobileIPlicensingbusinesses.Wealsorecommendthatinanyassessmentofthecostofchangingthecurrentpositiontakesintoaccounttheadditionalbenefitswhichmayarisefromtheintroductionofsuchachange.

a6.5withholdingtaxonPatents

WhileanumberofwelcomechangesweremadetothepatentwithholdingtaxprovisionsinFinanceBill2010,furtherchangesarestillrequired.ItisimportantthatfurtherchangesinthisareacontinuetorecognisetheimportanceofexistingandpotentialfutureforeignmultinationalbusinesstothecontinueddevelopmentoftheSmartEconomy.

a6.6thePatentinComeexemPtion

WenotethattheCommissiononTaxationwhichreportedin2009,proposedthediscontinuanceofthetaxexemptionforpatentroyalties58.WeacknowledgetheexcellentworkoftheCommission.HoweverinthecontextofBuilding Ireland’s Smart Economy,wewouldnotbeinagreementwiththisrecommendation.

WebelievethatthepatentexemptionhasplayedanimportantroleindevelopingIreland’ssmarteconomytodate.

Theexemptionforpatentroyaltieshasalreadybeensignificantlycurtailed.Itwould,inourview,becounter-productivetoremovethe(nowmorerestricted)patentincomeexemptionconcurrentlywithstimulatingthesmarteconomy.

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APPEndIx 7: ADDITIONAL PROPOSALS TO SUPPORT MARkETING IRELAND AS A LOCATION FOR RESEARCH AND COMMERCIALISING IP

ChangesattheIrishPatentOfficetobringitmoreintolinewithpatentofficesinternationally:

+ IntroducesubstantiveexaminationofpatentapplicationsbytheIrishPatentOffice59,thusrestoringoneofitscorefunctionsandincreasingIPexpertise;

+ MaketheIrishPatentOfficemoreuser-friendly(includingelectronicandafter-hoursfilings);

+ OtherinitiativestobringtheIrishPatentOfficeintolinewithservicesofferedbytheUKIPOfficeandotherinternationalpatentofficesshouldbeconsidered,includingplayinganimportantroleintrainingandawarenessinrespectofIPissues,andprovidingsupporttoindustry.

InitiativesreharmonisationofIPregulationsatEUlevel:

+ RapidratificationoftheLondonAgreementtosignificantlyreducethetranslationalcostsofpatentfilings60;

+ SupporttheestablishmentofasingleEUcourttoadjudicatecross-borderIPdisputesbypromotingtheEuropeanPatentLitigationAgreement61,andtothenproposeIrelandasavenueforthisnewCourtsystem;

+ ContinuetosupportandexpeditetheestablishmentofasingleCommunityPatentthroughnegotiationsinEurope;

+ ComplementtheUK’simplementationoftherecommendationsinGower’sReviewofIntellectualProperty62intheUK,withrelatedIrishinitiativesdevelopingfromthisreview(e.g.rethepatent“experimentaluse”exception).

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notes and References1 OECD(2009)Interim Report on the OECD Innovation Strategy.Paris:OECDp.4.

2 NCPP(2010)National Workplace Survey 2009: Employer Survey.Forthcoming,Dublin:NCPP.

3 NCPP(2010)The Changing Workplace in 2009: The NCPP-ESRI National Workplace Survey of Employees.Forthcoming,Dublin:NCPP.

4 NESDO(2009)Ireland At Another Turning Point Reviving Development, Reforming Institutions and Liberating Capabilities.NESDOReportNo1Dublin:NESDO.

5 CSODatabaseDirect(2010)showsemploymentincreasingfromapproximately1.1 millionin1988to2.1 millionin2008.Availablefrom:http://www.cso.ie/px/pxeirestat/database/eirestat/eirestat.asp

6 OECD(2010)Source OECDOnline Database.[Online]Availablefrom:http://stats.oecd.org/Index.aspx?DataSetCode=CSP2009

7 OECD(2010)Source OECD Online Database.[Online]Availablefrom:http://stats.oecd.org/Index.aspx?DataSetCode=CSP2009

8 Forfás(2009)R&D Statistics in Ireland 2009 at a glance.Dublin:Forfásp.10.

9 Ibid.p.23.

10 Ibid.pp.24-25.

11 TimesHigherEducation/QS(2009)World University Rankings.London:QS

12 Forfás/HEA(2009)Research Strengths in Ireland: a bibliometric study of the public research base in Ireland.Leeds:EvidenceLtdp.1.

13 Ibid.p.1.

14 Ibid.p.5.

15 FiguressuppliedbyIDA2010.

16 CentralStatisticsOffice(2009)Community Innovation Survey 2008.Cork:CentralStatisticsOfficep.1.

17 Griffith,R.Redding,S.andVanReenen,J.(2004),Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries, The Review of Economics and Statisticsvol.86(4):pp.883-895.

18 Dowrick,S.(2003)A Review of the Evidence on Science, R&D and Productivity.ANU,PaperpreparedfortheDepartmentofEducation,ScienceandTraining,AustralianGovernment.SeealsoAustralianGovernment(2008)Venturous Australia - building strength in innovation.Melbourne:AustralianGovernment-Annex 4 -Evidence on the economic impact or research and development.

19 AllbulletsfromGovernmentofIreland(2008)Building Ireland’s Smart Economy.Dublin:GovernmentStationeryOfficepp.29-30unlessstatedotherwise.

20 Ernest&Young/EconomistIntelligenceUnit(2009)Redrawing the Map: Globalisation and the changing face of business.London:ErnestandYoungp.20.

21 DepartmentofFinance(2010)The Irish Economy in PerspectiveJanuary2010.Dublin:DepartmentofFinancep.12.

22 Ibid.p.4.

121

23 Ibid.p.16.

24 Ibid.p.6.

25 Ibid.p.19.

26 CentralStatisticsOffice(2009)Quarterly National Household SurveyQuarter32009.Cork:CentralStatisticsOfficep.8.

27 DepartmentofFinance(2010)The Irish Economy in PerspectiveJanuary2010.Dublin:DepartmentofFinancep.18.

28 OECD(2009)2009Interim Report on the OECD Innovation Strategy.Paris:OECDp.4.

29 Kristensen,P.H.,Lilja,lK.Eds.(2009)New Modes of Globalising: Experimentalist Forms of Economic Organisation and Enabling Welfare Institutions - Lessons from the Nordic Countries and Slovenia.AaltoUniversitySchoolofEconomics.

30 NESC(2008).The Irish Economy in the Early 21st Century.NESCReport117Dublin:NESC.

31 Lerner,Josh(2009)Boulevard of Broken Dreams.Princeton:PrincetonUniversityPresspp.58-61.

32 Forfás(2008)Annual Employment Survey 2008.Dublin:ForfásandCentralStatisticsOffice(2008)Quarterly National Household SurveyCork:CSO.

33 ScienceFoundationIreland(2009)SFI Annual Report & Accounts2008.Dublin:SFIp.12.

34 Forfás(2008)Expert Group on Future Skills Needs, Statement on Raising National Mathematical Achievement.Dublin:Forfás.

35 Forfás(2009)National Competitiveness Council, Statement on Education and Training.Dublin:Forfás.

36 Source:HEAForthcoming.

37 OECD(2010)Education at a Glance 2009Paris:OECD-TableA1.3A.

38 TheKTPProgrammeAnnualReportstatesthat73%ofplacedgraduatesareofferedfulltimeemploymentbytheircompanies.TechnologyStrategyBoard(2009)KTP Annual Report 08/09.DidcotUK:TechnologyStrategyBoardp.7.

39 FiguressuppliedbyEnterpriseIreland2010.

40 DepartmentofEnterprise,Trade&Employment(2009)Buying Innovation: The Ten Step Guide to SMART Procurement and SME Access to Public Contracts.Dublin:DepartmentEnterprise,Trade&Employment

41 EuropeanCommissionStaffWorkingDocument(2009)Design as a Driver of User-Centred Innovation.Brussels:EUCommission

42 OECD(2008)Science, Technology and Industry Outlook.Paris:OECD[Online]Availablefrom:http://dx.doi.org/10.1787/450834182743

43 FurtherdetailissetoutinIDA(2010)Horizon 2020 - IDA Ireland Strategy.Dublin:IDA.

44 Ibid.p.4.

45 HMTreasury(2006)Gowers Review of Intellectual PropertyDecember2006.London:HerMajesty’sStationeryOfficep.30.citing“IdentifyingandManagingIntellectualPropertyRiskandtheUseofInsuranceasaRiskManagementTool”,CauthornK.,FordhamAnnualConference2006.

46 Forexamplethe‘IPGenesisScheme’attheFrenchIPOfficeoffersafreeIPaudittoSMEswhoarenotusingtheIPsystem.

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47 DepartmentofCommunications,EnergyandNaturalResources(2009)Next generation Broadband: Gateway to a Knowledge Island.Dublin:DepartmentCommunications,EnergyandNaturalResources

48 InIreland,5percentofbroadbandconnectionsareabove10Mb/s.TheEU-24averageis15.5percentofconnectionsabove10Mb/s.(EU-27minusAustria,FranceandNetherlandswheredataisunavailable).Forfás(2010)Broadband Benchmarking Report.Dublin:Forfás

49 BiGGAREconomics(2007)Study of Laboratory Space Requirements in Ireland and Potential Strategies for its Provision.Dublin:EnterpriseIreland/IDA

50 Forexamplethe2009TaylorWessingGlobalIntellectualPropertyIndexrankedIrelandseventhinareviewoftwentyfourkeyjurisdictions,despiteonlybeingaddedtothesurveythisyear.AmongtheEUcountriesIrelandrankedfourthoverall,behindonlytheUK,GermanyandtheNetherlands.ThisIndexranks24oftheworld’sleadingeconomiesforprotectionandenforcementofpatents,trademarks,copyright,anddomainnames.TaylorWessing(2009)Global Intellectual Property Index.London:TaylorWessingp.3.

51 Seehttp://www.globalirishforum.ie/

52 Forfurtherinformationseewww.nordicinnovation.net

53 Notethatthesefiguresonlyrefertoemploymentinhigh-techfirms.Theprocessusedtoestimatethesefiguresdoesnottakeaccountofwider,macroeconomictrends,noroftheoveralllevelofemploymentintheeconomy.Theremaybesomelevelofeconomicrestructuringoccurringaswellasemploymentcreation(i.e.theproportionofemploymentinhigh-techfirmsmayincreaseregardlessofchangesinoverallemploymentandvice-versa).

54 SeetheIndexofSiliconValleyforusefulfigures.JointVenture:SiliconValleyNetwork(2010)Index of Silicon Valley.SanFrancisco:JointVenture:SiliconValleyNetwork.

55 EuropeanCommission(2009),Science, Technology and Innovation in Europe,EurostatPocketbooks,2009edition.Luxembourg:OfficeforOfficialPublicationsoftheEuropeanCommunities

56 Ibid.

57 Fitzgerald,J.,etal(2008),Medium Term Review 2008-2015. No.11Dublin:ESRI

58 CommissiononTaxation(2009)Commission on Taxation ReportDublin:GovernmentStationeryOfficepp277/278

59 ThatisasubstantiveexaminationofsearchreportsfromtheUK,sothatitcanrefusetograntapatentapplicationonsubstantivegrounds(e.g.lackofnoveltyoraninventivestep).

60 Thecountriespartytotheagreementhaveagreedtowaive-entirelyorlargely-therequirementfortranslationsofalreadygrantedpatentsintheirnationallanguage.

61 Aunifiedsystemwithadedicatedpatentcourtwhichwouldmakepatentlitigationmorepredictable,faster,andlessexpensive.

62 HMTreasury(2006)Gowers Review of Intellectual Property.London:HerMajesty’sStationeryOffice.

www.innovationtaskforce.ieDepartment of the Taoiseach

March 2010