Innovation value for money

David Jacobson22/06/2012

David Jacobson: In yesterday’s Irish Times (Business and Technology supplement) there is a good-news story about Science Foundation Ireland’s (SFI’s) funding of research projects. To illustrate, to quote the headline, that SFI’s “value for money approach pays off”, the journalist JJ Worrall reports on interviews with Principal Investigators of three projects. This note is not aimed at rejecting the argument that there is value for money in these investments in research; rather I want to show that it may or may not be value for money. Many additional questions have to be answered before a firm conclusion can be arrived at.

Let us focus on just one of the projects to illustrate some of the problems. The project is “Employing Artificial Intelligence to Make Constraint Programming Easier to Use for Decision Making” to which €3.3 million was allocated. This grant funded the establishment of the 4C research centre at UCC. Evidence of success comes under four headings.

1. Job creation, where “about 50 4C staff had their work funded or co-funded by the grant”.

2. Spin-off companies, in this case Keelvar which produces web-based software for financial traders and ThinkSmart, the focus of which is “location analytics”.

3. Agglomeration effects, or knowledge spillovers, the argument being that the presence of the research in 4C has attracted others to co-locate. According to 4C, it has helped IDA to attract such companies as United Technologies and Quest Software to Cork. In addition business data analysis company EMC has set up its Research Europe lab in Cork, working in partnership with 4C.

4. Research output, which for this project includes “about two dozen inventions, …about eight intellectual property licences and two patent applications”.

Answers to the following questions, under the same headings, would help to sharpen the focus, determine whether there is indeed value for money and ultimately help to evaluate the state agencies involved in innovation, the innovation policies of the government, and the processes of implementation of the policies by the agencies.

1. How permanent are the jobs, or are they specifically linked to the length of the project funding? How many of the people filling the jobs are likely to stay in Ireland at the completion of the project? In many cases the bottleneck in research in Ireland has been not funding but qualified staff and as a result PhD students and post-docs were imported from elsewhere, only to return home when the projects ended.

2. There is a history in Ireland of advanced tech SMEs being bought out by multinationals, resulting in their relocation to the home base of those multinationals. A small number of entrepreneurial professors may get rich from this, but it may not add much to industrial development in Ireland. How likely is this, rather negative, scenario to be replicated in this case? One of the other projects discussed in the article, Metropolis, has already had a spin-off company, Kore Virtual Machines, bought out by multinational games company, Havok “for an undisclosed amount”.

3. Agglomeration effects are very difficult to measure. Nevertheless there are strong arguments, and much qualitative evidence, in their favour. The main question here is the extent to which, if at all, United Technologies and Quest were attracted to Cork as a result of the grant. It may be impossible to separate IDA efforts and material support from SFI grants in terms of their impact on location in Cork, but these are clearly factors in the assessment of the results of the research grant. Might some of the research have been done anyway? EMC already had an R&D centre in Cork in 2008, before 4C had achieved anything; might it have collaborated with UCC academics in its new Research Europe lab even without 4C?

4. The intellectual output of R&D frequently has no impact on productivity because much of it never gets implemented. It is quite likely that more important than the specific outputs from the research is the “how-to” learning that was obtained in the process of doing the research. It is such learning that enhances the innovative capacity of firms and entire national systems of innovation. Competitors producing “copy-cat” products or processes that manage not to contravene patents will not get ahead if the dynamic capability arising from the learning enables the original firm or research centre to create new applications, and even new markets.

Such questions focus both on the detailed and on the general impacts of SFI’s grants. They suggest a need for a detailed examination of Ireland’s system of innovation, from the top, including relevant government departments, innovation agencies, universities and R&D companies, to the wide-ranging effects of culture and education, including primary education, on originality and creativity. The three projects described in the article may well be value for money, but what would be the impact on innovativeness in Ireland in 15 years if SFI’s funding was spent in its entirety on programmes to enhance originality and creativity in national schools?

Posted in: Fiscal policy

Tagged with: innovation

Professor David Jacobson     @davidjacobson48

David Jacobson

David Jacobson is Emeritus Professor of Economics at Dublin City University Business School. He is the Chair of Commission on Industrial Policy in TASC since 2011. He has written and lectured on various aspects of industrial policy and political economy in Ireland. In the 1990s he was an independent member of the National Economic and Social Council. He has also worked in many other countries, most recently Cyprus and China.



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