Making Ireland Grow Again:
Characterising, Measuring, Coordinating, and
Fostering Innovation Capabilities at the
Enterprise, Sector and National Levels
June 9, 2010
Michael Best
Professor Emeritus
University of Massachusetts
Fellow, Judge Business School, University of
Cambridge
Visited plants in :
•
•
•
•
•
•
•
•
•
Greater London*
Germany
Slovenia*
Cyprus*
Massachusetts/NH*
Italy
Jamaica*
Canada
Colombia
•
•
•
•
•
•
•
•
Northern Ireland*
Malaysia*
Indonesia
Honduras*
India*
Moldova*
Estonia
Albania
* Conducted enterprise/cluster
modernization analysis
Where does Ireland fit in the global
economy?
• Past: “IDA model”
• Future aspirations: smart economy,
knowledge economy, innovation hub…
• Assessment from Capabilities Perspective
Ireland’s Strategic Assessment:
(what the IDA saw and acted on)
• The triumph of neo-liberalism and the
opening of global markets (EU, Eastern
Europe, ex-USSR, China, India, Brazil)
Inter-determinant with:
• Emergence of high-tech ‘industrial
districts’ in US (3000 companies in MA,
Silicon Valley, Austin) serially ‘spawning’
new sectors
Evolution of Industrial Structure
PS 5
Knowledge intensive
(systems integration)
information, communication, instruments
future
PS 3,4
Complex-assembly intensive
(flow)
auto, consumer electronics
PS 2
Material-intensive
(flow)
steel, plastic
food processing
present
(Principle of production)
PS 1
Low technology, labour intensive
(interchangeability)
apparel, toys, furniture
M.Best, NCA
West Pole: Diffusion of Irish Model
• 13 countries grown 7% annually for 25
years (www.growthcommission.org)
• Manufacturing exports of 4 tigers
increased from $5 billion in 1962 to $715
billion in 2004
• New ‘growth machine’
Government Strategy: transition to
high tech economy
•
•
•
•
•
Smart economy
Knowledge economy
International innovation hub
Innovation hub for Europe
Green economy
High-tech Job Growth Aspirations:
High Estimate
• 215,000 by 2020to match SV’s 15% of labor
force
“Were Ireland to achieve levels of employment in
high-tech firms comparable with Silicon Valley,
the numbers would increase substantially. More
realistically, Ireland might aspire to be a leader
in Europe and aim to have 15% of employment
concentrated in high-tech firms. This would
result in almost 346,000 people being
employed in high-tech firms by 2020 – a net
increase of 215,000 jobs over the period.”
Innovation Ireland, Innovation Task Force, p. 88
Low Estimate: Best in Europe
• 117,000 by 2020 to match highest concentration
in Europe
“At regional level, the leading region for hightech employment [in EU-27] was Berkshire,
Buckinghamshire and Oxfordshire (UK), with
high-tech sectors accounting for 10.7 % of total
employment. A region such as this may provide
a more realistic short-term model for Ireland.
Were Ireland to increase its share of
employment in high-technology firms from
the current level to 10.7%, this would see
employment in high-tech firms increase from
approximately 131,000 in 2008 to 248,000 in
2020, a net increase of 117,000.
Is there room at the top?
• Where are the drivers of growth and innovation
to achieve the targets?
• Issue: low Gross Expenditure on R&D (GERD)
to GNP in Ireland.
• Why? Lack of fast-growing mid-size to large
firms with new product development (NPD) and
technology management (TM) capabilities and
any evidence-based analysis of how to develop
them in the Ireland context.
High-tech definition
• “Owns proprietary technology or
proprietary IP that contributes to a
significant portion of the company’s
operating revenues or devotes a
significant proportion of its operating
revenues to R&D of technology. Using
other companies technology or IP in a
unique way does not qualify” Deloitte
Technology Fast 500 eligibility criteria.
Indicators of New Technology Development
R&D Intensity
Patent intensity
Ireland
1.2
2
Massachusetts
5.3
14
Finland
3.4
9
R&D intensity = R&D to GSP/GDP, 2003
Patent intensity = USPTO patents awarded GSP/GDP, av erage of 1999, 2001, 2003
Source: The John Adams Innovation Institute
Table R&D EU Scoreboard Companies and Employment Impact, 2008 **
Companies
Population
million
R&D Investment
Emillion
Employees
% of LF*
Finland
Sweden
Netherlands
Denmark
Belgium
Spain
Ireland
Greece
58
70
53
47
30
21
12
4
5.3
9.2
16.4
5.5
10.7
45.3
4.4
11.2
6787
6952
9703
3418
2558
1471
532
53
534,814
834,151
1,003,566
310,776
570,200
485,379
60,602
6,281
25
23
15
14
13
2.8
3.4
0.13
Non EU***
Switz.
Taiwan
38
41
7.6
23.1
17468
5125
950,875
562,611
32
6.1
* Percentage of labor force derived by assuming labor force equal to 40% of a country's population.
** The EU Industrial R&D Investment Scoreboard is a compilation of the top 1000 European headquartered companies by R&D investment.
*** The EU Industrial R&D Investment Scoreboard has a separate scorecard for the top 1000 non-EU companies.
Table Irish Companies in Top 1000 EU R&D Investment Scorecard
R&D Investment
No
Company
Rank
Employees
Market Capitalisation
2008
2008
Change 08/07
€m
#
€m
%
531.72
60,602
10,725
-41.0
ICB Sector NACE Sector Code 2008
Ireland
1
Elan
80
Pharmaceuticals (4577)
227.92
1,683
2,574
-30.1
2
Kerry
118
Food producers (357)
147.46
22,312
3,184
-10.6
3
Bank of Ireland
247
Banks (835)
56.00
15,868
2,248
-66.1
4
SkillSoft
322
Software (9537)
35.86
1,124
588
5
Trinity Biotech
638
Health care equipment & services (453)
11.49
757
6
AGI Therapeutics
640
Pharmaceuticals (4577)
11.47
9
7
-89.4
7
Glanbia
688
Food producers (357)
10.13
3,400
742
-46.3
8
Norkom
773
Software (9537)
7.78
304
99
-22.6
9
Kingspan
799
Construction & materials (235)
7.10
6,692
958
-23.6
10
Greencore
823
Food producers (357)
6.74
8,066
282
-34.7
11
Datalex
903
Computer services (9533)
5.40
164
19
-33.3
12
Trintech
997
Software (9537)
4.37
223
25
12.9
Source: The 2009 EU Industrial R&D Investment Scorecard, European Commission.
Table Danish Companies in Top 1000 EU R&D Investment Scorecard
No
Company
Rank
ICB Sector
NACE Sector Code
Denmark
R&D Investment
Employees
Market Capitalisation
2008
2008
2008
€m
#
€m
%
3,418.24
310,776
82,302
-19.7
Change 08/07
1
Novo Nordisk
27
Pharmaceuticals (4577)
994.94
26,069
22,453
-4.6
2
Lundbeck
68
Pharmaceuticals (4577)
300.07
5,208
2,889
-18.4
3
Vestas Wind Systems
81
Alternative energy (58)
223.00
17,924
11,022
-32.3
4
Genmab
94
Biotechnology (4573)
191.16
565
1,314
-37.3
5
Danfoss
108
Industrial machinery (2757)
159.35
27,386
6
DONG Energy
113
Oil & gas producers (53)
154.65
5,347
7
Grundfos
117
Industrial machinery (2757)
149.12
17,482
8
Novozymes
134
Biotechnology (4573)
133.69
4,993
3,397
-10.4
9
Danisco
171
Food producers (357)
96.61
8,986
1,673
-28.8
10
Danske Bank
192
Banks (835)
79.81
23,755
11,900
-19.1
11
GN Store Nord
212
Telecommunications equipment (9578)
71.35
4,786
721
-9.8
12
Bang & Olufsen
214
Leisure goods (374)
71.20
2,541
278
-23.7
13
William Demant
221
Health care equipment & services (453)
66.91
5,383
2,672
8.7
14
Coloplast
262
Health care equipment & services (453)
51.86
7,420
2,195
8.1
15
Topotarget
282
Biotechnology (4573)
46.51
109
81
-48.4
16
ALK-Abello
289
Pharmaceuticals (4577)
43.94
1,454
514
-40.8
17
LEGO
291
Leisure goods (374)
43.26
5,388
18
Simcorp
296
Software (9537)
41.45
949
619
-4.3
19
NKT
304
Electrical components & equipment (2733)
38.91
8,610
724
-35.9
20
FLSmidth
316
Construction & materials (235)
36.01
11,509
1,812
-45.9
21
Lifecycle Pharma
324
Biotechnology (4573)
35.43
102
72
-56.7
22
NeuroSearch
325
Biotechnology (4573)
35.40
242
274
-50.5
23
Auriga Industries
343
Chemicals (135)
32.29
1,904
247
-49.0
24
Santaris Pharma
357
Biotechnology (4573)
29.61
100
25
Rockwool International
370
Construction & materials (235)
28.22
8,689
1,400
-22.1
26
LM Glasfiber
398
Chemicals (135)
25.02
6,241
27
Dako
431
Biotechnology (4573)
22.01
1,048
28
Symphogen
451
Biotechnology (4573)
20.62
87
29
Thrane & Thrane
455
Telecommunications equipment (9578)
20.55
693
119
-42.1
30
Terma
463
Aerospace & defence (271)
20.06
1,183
31
Post Danmark
488
Industrial transportation (277)
18.41
20,021
32
TDC
512
Fixed line telecommunications (653)
16.93
16,193
4,999
-35.5
33
Schouw
576
General industrials (272)
14.20
3,743
377
-50.9
34
Pharmexa (now Affitech)
578
Biotechnology (4573)
14.17
74
22
-18.9
35
Carlsberg
600
Beverages (353)
12.90
45,505
7,952
-19.7
36
Zealand Pharma
647
Pharmaceuticals (4577)
11.10
68
37
KMD
649
Computer services (9533)
11.03
3,027
38
Sondagsavisen
804
Media (555)
7.00
1,187
39
Maconomy
833
Software (9537)
6.53
224
19
40
Bavarian Nordic
844
Biotechnology (4573)
6.32
270
307
42.8
41
Dantherm
853
Industrial machinery (2757)
6.12
2,303
30
-73.9
42
Exiqon
879
Biotechnology (4573)
5.78
216
60
43
Dansk Landbrugs Grovvareselskab
913
Food producers (357)
5.26
4,556
44
Ambu
917
Health care equipment & services (453)
5.23
1,397
132
36.3
45
Topdanmark
945
Nonlife insurance (853)
4.97
2,467
1,730
-1.8
46
Solar
967
Electrical components & equipment (2733)
4.70
3,010
201
47
Glunz & Jensen
976
Computer hardware (9572)
4.58
362
6
88
-45.8
-57.9
OECD Main Science and Technology Indicators (STI Scoreboard 2009)
R&D expenditure of foreign affiliates as a percentage of R&D expenditures of enterprises
1986
Australia
Austria
Belgium
Canada
Czech Republic
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Netherlands
Norway
Poland
Portugal
Slovak Republic
Spain
Sweden
Turkey
United Kingdom
United States
61.57
1993
1995
31.11
1997
34.64
22.09
13.25
1999
41.79
31.77
29.75
32.01
27.40
14.92
15.87
6.51
17.09
16.06
3.75
21.79
17.17
3.61
65.34
17.84
4.52
66.25
66.22
65.33
63.77
0.86
1.37
1.29
20.57
3.93
21.52
17.98
6.61
39.65
14.72
0.83
26.80
20.71
12.10
29.16
13.28
35.72
18.65
14.84
32.80
10.93
32.83
36.38
7.29
31.16
13.05
2001
2003
2005
2007
53.47
59.37
33.91
54.72
57.13
31.88
46.63
13.99
22.58
26.74
56.83
34.05
51.48
16.12
23.49
27.78
66.50
73.21
66.65
70.30
25.20
5.12
72.37
4.56
30.76
18.97
30.99
40.65
72.11
26.28
4.27
27.13
25.38
9.31
24.62
22.41
26.22
44.70
27.84
30.38
34.03
23.94
26.22
42.26
30.46
30.70
23.12
37.47
42.81
13.10
44.55
14.85
39.13
13.75
37.52
14.78
29.64
45.26
14.25
21.54
24.77
65.23
32.95
3.39
19.62
19.62
26.21
35.48
Business R&D: OECD Science, Technology and
Industry Scoreboard 2009
Table. Irish Companies in Business Week's Fast Growing 500: 2000-2003
Company Name
Sector
CPL RESOURCES
Management Services
(employment agency)
Construction & Real Estate
MERCURY HOLDINGS
DCC
KINGSPAN GROUP
IT Services
(distribution)
Construction & Real Estate
Sales 2003
(€ Mil.)
Sales Change Jobs Created
2000-2003
2000-2003
%
Employees
2003
52
156
1,166
1,406
310
104
1,581
2,500
2,198
18
712
3,768
784
18
653
3,102
408
(707 website)
75
438
3,438 (error)
600 website
UNIPHAR GROUP
Biotech & Life Sciences
(wholesale)
ELECTRICAL & PUMP SERVICES
Industrial Services
40
33
75
195
FLI INTERNATIONAL
Management Services
(environmental services)
IT Services
(enterprise compliance; reg)
15
104
52
98
10
192
45
95
QUMAS
BusinessWeek and Europe's Entrepreneurs for Growth, a Brussels organization that represents more than 2,000 entrepreneurs, have teamed up for the second year in a row to sh
Business Week October 25, 2004
Is Ireland a high-tech economy?
•
•
•
•
•
•
•
Yes, affiliates of high tech companies
Yes, higher education skill formation
No, GER&D/GDP
No, R&D activities of affiliates
No, sector transition or creation
No, new technology development
No, establishment of distinctive regional
technological capabilities (knowledge base that
attracts R&D FDI activity).
Concern: Ireland’s lost decade
• Expansion of debt masquerading as
wealth creation
• Limited expansion of innovative
enterprises with NPD and TM capabilities
• Limited TBED leadership capability
• Non-focus on design and innovation
engineering: plant by plant, sector by
sector
North Pole: variants
• Silicon Valley
• Greater Boston/Route 128
• Nordic Model
North Pole: organizational
characteristics
• Open-system business model
• Subtle coordination of government,
industry, science (education)
• New Sector Development capability
• Organization principle of systems
integration
• System engineering skills (vs. design, process
and concurrent engineering associated with mass prod.)
Figure 1. Competing Business Models
The Old Vertical Computer Industry
- Circa 1980
The New Horizontal Computer Industry
- Circa 1995
Sales and
distribution
Sales and
distribution
Application
software
Application
software
Operating
systems
Computer
Operating
systems
Disk drives
Computer
Chips
CMs
Retail
Stores
Superstores
Word
Word Perfect
DOS and Windows
Compaq
Seagate
Dell
OS/2
Intel Architecture
Selectron
SCI
I-net
Lotus
SAP
UNIX
Linux
Mac
Packard
Bell
Quantum
Mail
Order
Dealers
HP
IBM
Western
Digital
Maxtor
Motorola
Flextronics
Etc
Jabil
RISC
Celestica
Chips
Printers
IBM
Source:
HP
Epson
DEC Sperry Wang
Univa
c
Adaptation from Only the Paranoid Survive by Andrew Grove, 1996.
Used by permission of Doubleday, a division of Random House, Inc.
M. Best, NCA
Forenel
(forestry/eng./electronics
Forest industry: wood; paper, board, pulp
170,000 employees in Finland
•Forestry
•Construction
•Furniture
•Packaging
•Machinery and equipment
•Chemical industry
•Automation and IT
•Printing
•Energy
•Research and education
•Business services
Source: Kuusisto, OECD
MA: New Sector Creation (distinctive
dynamic regional capability)
• Minicomputers
• Data Storage Systems (‘file cabinets of IT)
• Medical devices (US output grew 9 times in 25
years to 2004; regionally specialized)
• Network Switching Equipment
• Mutual fund industry (asset management)
• Biotech
• Business software tools
• Robotics
• Advanced materials/nanotech
• Renewable energies
vTHREAD
Techno-Historical Regional Economic Analysis
Database
• Cluster characterization and regional
capability audit tools
• 50,000+ company profiles and 4 million
product entries
• Historical 1990-2005
• Finely granulated technology taxonomy
• Company data supplied by CorpTech
vTHREAD tools
•
•
•
•
•
•
•
•
Fast growing firm query
Technology audit (major categories)
Enterprise location quotient
Visualization and discovery tools
Cluster query and mapping
Cluster analysis: drill down loc. & tech.
Cluster dynamics: industry churn analysis
FDI as indicator of regional competitive
advantage (foreign direct investment)
Cluster growth with scale: example
Medical devices in Massachusetts: (7000
employed in 1990 to 28,000 in 2003 plus
3K to 20K of non-MED company growth)
Fast-Growing, Big Medical Device Companies:
Employment
Fast-Growing, Medium-Sized Medical Device
Companies Based on Employee Level
Fast-Growing Non-Medical Device Companies With
Medical Device Product Offerings
Foreign-Headquartered Medical Device Companies
with Massachusetts Divisions or Facilities
Inward Investment in MA
• 69 of 200 largest employers are
headquartered out of state (IBM, HP,
Microsoft, J&J, Cisco major employers)
• 8-10 % of 3000+ High Tech business units
are foreign headquartered
• R&D/gross state product = 5.4%, higher
than any other state or country in Europe
Source: Massachusetts Innovation Index 2009, page 41.
Source: http://www.usmm.org/ww2.html
NSD: WW II-MIT Legacy
• Microwave
• Digital computer
• Guidance systems
• Internet
• Radiation lab (Raytheon)
• Lincoln lab (DEC; 50+)
• Instrumentation-Draper
(SAGE; 55)
• BBN, ARPA funded
• MITRE (systems eng.)
• ESC, Hanscom AF:
200+ C4I systems
Triangular Relations (subtle
coordination) and New Sector
Development with Oomph
• Government (mission-driven R&D…)
• Industry (production
capabilities/engineering skills)
• Science/education/skill formation (open
fundamental research, regional knowledge
base, curriculum for sector ramp-up)
Company-level capabilities and
associated engineering-skill metrics
• Production: material transformation activities (alignment
of hundreds); product and process engineering
associated with WCM
• New product development: concept, materials,
production planning, process engineering, pilot, ramp-up,
scale performance; design and concurrent
engineering
• Technology management (beyond assimilation): applied
research, development research, technology sourcing
networks; systems engineering
• Technology management (leadership): technologyintegration teams; dip-down for basic research;
innovation engineering
Central Message
• Subtle coordination across government,
industry, and university is integral to New
Sector Development
• Cluster evolution, increasing differentiation
and technological transformation are all
part of a single, long-term developmental
process.
• Government role of market creation and
sector development is often obscured
“Golden Semicircle”
• 1968: 690 “science-based” companies
along “Golden Semicircle” (Lieberman
1968) Success factors: “uniqueness of
each company’s technology…and
availability of government contracts during
its crucial early years” (Roberts)
• 1973: 1212 high tech companies
• 1985: 3000 high tech companies
TBED policymaking and market
creation instruments
• Mission-driven R&D funding via triangular
relations (FFRDCs)
• Pricing to reflect market externalities (carbon
tax; congestion charge)
• Government purchasing in early stages of
market development (semiconductor,
computer…)
• Peer reviewed, proof-of-concept, new
technology, small company funding (SBIRs)
• Bank regulation for long-term finance of industry
Intractable sectors to economic
mandarinates
• Energy
• Urban transportation
• Food
• Depletable resources
Market Creation: the case of the
absentee government
• Market for energy: ROI v Nolan County,
Texas (or Denmark)
• Market for urban transportation: Dublin v.
Copenhagen or Amsterdam
Energy: democratic versus exclusive products
Renewable
Energies
wind energy,
hydropower,
photovoltaics
, etc.
in per cent
80
traditional biomass
70
coal
60
oil, gas
50
40
30
20
10
nuclear power
0
1860
1880
1900
1920
1940
1960
1980
Year
2000
2020
2040
2060
2080
2100
Market creation for renewable
energy
• Natural resources plus smart grid
• Super grid leadership
• Gov’t power to convene: World leaders in
fundamental and related technologies
• Establish troika (3-way) innovation model
• Internalize the externalities to include
fostering indigenous innovation
engineering and business development
Facing the Inconvenient Truths:
Towards a Sustainable Model of
Economic Governance
• Extend the social partnership to account
for social infrastructures of consumption.
Example: Nordic model of urban
transportation
• Focus technology research, assimilation
and development on clean technologies.
Example: Texas and renewable energy
Dubliners visit Copenhagen
Cargo bike: SUV alternative
Bridge over harbour
Cities and Innovation: SBA study of
4000 in manufacturing
• 45% took place in 1 of 4 cities: NY, SF,
Boston, LA
• 96% took place in metropolitan areas
• Boston and SF have rates of 9 per
100,000; rest of country 1.75
• Only 14 cities have innovation rates
greater than the national average
Texas: $10 billion clean energy
project with huge employment
Clearwater, Nolan County, Texas:
from oil to renewables with scale
• Today, Nolan County (pop: 18K) produces
more wind power than UK, France and CA
on 3 large wind farms. Wind West
• T Boone Pickens 4 year plan: 4000 MW,
2700 turbines across 200,000 acres—150
miles across Panhandle (1 million homes)
• Master scheme: Army of wind farms North
to South Great Plains and West to CA
solar energy corridor
Cuchulainn’s energy
Where is Cuchulainn? Dundalk’s
alternative energy: no hulk
Lessons for Rapid Growth (2)
• Driver is business enterprise with NPD and TM
capabilities
• Role of business enterprise is to develop
capabilities (cumulatively and mutually)
• Business competitive advantage is about the
development of distinctive capabilities
• Regional competitive advantage is about the
development of clusters of enterprises which
mutually advance distinctive capabilities