"The Roles of Interaction and Proximity for Innovation by Irish High-Technology Businesses: Policy Implications"

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Book review: political bubbles: financial crises and the failure of American democracy by Nolan McCarty, Keith T. Poole and Howard Rosenthal

Political Bubbles is very enjoyable, insightful, and challenging, writes Declan Jordan. It addresses a remarkably under-analysed aspect of the financial crisis and the interface generally between politics and economics. Some of the political failures that came to the fore for the financial crises are just as likely to hinder political approaches to important problems, including poverty, inequality, and climate change. The analysis and ideas within the book are too important to be considered in a narrow context

The roles of interaction and proximity for innovation by Irish high-technology businesses: policy implications

This paper presents new survey-based evidence on the increasingly topical question of what drives innovation in Irish high-technology businesses. The extraordinary performance of the Irish economy since the 1990s has been inextricably linked to highly successful foreign-owned businesses, in sectors such as pharmaceuticals, electronics and computers (Gallagher, Doyle and O’Leary, 2002). It might be expected that innovation in these multi-nationals is largely sourced in other group companies located abroad. It is therefore pertinent to ask, in the context of the recent policy recommendations of the Enterprise Strategy Group (ESG) (2004), the extent to which these Irish subsidiaries source innovation in Ireland. This may be through their own research and development efforts and/or through interaction for the purposes of promoting innovation with other locally or regionally based businesses, Third Level Colleges and innovation support agencies, such as IDA Ireland and Enterprise Ireland. Moreover, it may be equally important to ask, in the context of the long-standing emphasis on improved performance of indigenous industry, whether indigenous high-technology businesses interact locally or regionally in order to promote innovation. Beginning with Culliton (1992) and continuing to the present, through, for example, Forfás (2004a) and the ESG (2004), Irish industrial policy has consistently promoted and supported clusters and networks. In recent years substantial State funding has also been devoted to research and development. The National Development Plan 2000-2006 (2000) allocated €2.5 billion and the government established Science Foundation Ireland. The ESG (2004) has proposed further State investment in research and development as well as new initiatives including building enterprise capability, funding collaboration between industry and Irish Third Level Colleges, introducing tax credits for research and development. There is a consensus in the Irish, and indeed the European, policy community that developing innovation through clusters and networks will be important for future Irish and European competitiveness (Bergin et al., 2003; Forfás, 2003; National Competitiveness Council, 2003; European Commission, 2003). By presenting survey based evidence on the sources of innovation in Irish high-technology industry, this paper makes an important contribution to this debate. It begins by outlining the design of the survey instrument and then presents the results. The policy implications of the results are then discussed

Local labour market diversity and business innovation: evidence from Irish manufacturing businesses

This paper estimates the effect of diversity within local labour markets on business-level innovation. Using survey data and Irish census data, the paper explores whether the diversity of human capital at county level is associated with higher innovation output. Diversity in age, nationality and educational attainment is measured using an index of heterogeneity and its effect on business innovation is estimated using an innovation production function approach. It is found that diversity in nationality and educational attainment is positively associated with the probability of a business product innovating. The findings also suggest that greater external labour market diversity and greater levels of internal third-level education may be substitutes. Where a business is in a diverse location, it may not require higher levels of educational attainment among its workforce to source knowledge for product innovation

Cross sectoral differences in the drivers of innovation: Evidence from the Irish community innovation survey

This paper analyses differences across sectors in firms’ propensity to innovate and the relative importance of inputs to innovation classifying firms into four broad sectors. The propensity and drivers of four types of innovation (new to firm, new to market, process and organisational) within these sectors are then analysed. The results indicate that, for new to firm and new to market innovation, there is a strong degree of heterogeneity in the drivers of innovation across sectors. The propensity to introduce process or organisational innovations varies slightly across sectors but that there is no evidence of differences across sectors in the drivers of innovation. These results have important implications for policy instruments to meet the needs of targeted firms

The role of external interaction for innovation in Irish high-technology businesses

There is growing empirical evidence that external interaction is an important source of knowledge for business innovation. This paper contributes to the innovation literature by using new measures of interaction to explore the relative importance of external interaction for innovation in Irish high-technology businesses. Based on survey data, the paper finds that external interaction increases the probability of product and process innovation, but the effect is inconsistent across all external interaction agents. Interaction along the supply chain has a positive effect on innovation, and interaction with competitors has an insignificant effect on innovation output. Notably, the paper finds that interaction with higher education institutions has a negative effect on the probability of product and process innovation

RIO Country Report 2017: Ireland

The R&I Observatory country report 2017 provides a brief analysis of the R&I system covering the economic context, main actors, funding trends & human resources, policies to address R&I challenges, and R&I in national and regional smart specialisation strategies. Data is from Eurostat, unless otherwise referenced and is correct as at January 2018. Data used from other international sources is also correct to that date. The report provides a state-of-play and analysis of the national level R&I system and its challenges, to support the European Semester.JRC.B.7-Knowledge for Finance, Innovation and Growt

A two-stage examination of business innovation decision-making: evidence from Ireland

This paper sheds light on how businesses make decisions regarding product and process innovation by comparing the power of one-stage and two-stage models to explain business-level innovation decision-making. The first, a one-stage model, represents the business as making a one-off choice between four discrete alternatives. These are not to innovate, to product innovate only, to process innovate only or to both product and process innovate. The second model, a two-stage model, represents the business as making an initial decision on whether or not to innovate. This approach facilitates analysis of business innovation as simultaneous and sequential processes and identification of the model which best explains innovation decision-making. The paper uses original business-level survey data from over 400 small and medium-sized enterprises in Ireland. The results suggest that a two-stage model of the innovation decision has a statistically significant advantage in predicting the innovation output, indicating that there is a need to incorporate the incidence and type of innovation into future empirical studies utilising a knowledge production function. The results suggest that the use of a two-stage model provides a better understanding of the impact of different knowledge sources on different types of innovation. However, the paper also discusses whether the two-stage model is a useful way of understanding how businesses make decisions on innovation in practice

Is Irish innovation policy working? Evidence from high-technology businesses

In the last decade Irish innovation policy has been focused on Higher Education Institutions (HEIs). This paper explores the effects of HEIs, in the context of interaction with other interaction agents, on the innovation output of Irish high-technology businesses. Based on a survey of 184 businesses in the Chemical and Pharmaceutical, Information and Communications Technology and Engineering and Electronic Devices sectors, the paper estimates the importance of in-house R&D activity and external interaction with HEIs, support agencies and other businesses for product and process innovation. A key finding is that the greater the frequency of direct interaction with HEIs the lower the probability of both product and process innovation in these businesses. There is some evidence of a positive indirect HEI effect, through complementarities of interactions with suppliers and support agencies. However, while external interaction is important for innovation output, there is little evidence that geographical proximity matters. These findings have important implications for Irish innovation policy. Last year’s Strategy for Science, Technology and Innovation: 2006 to 2013 committed an additional €1.88 billion for research and commercialisation programmes in HEIs. The econometric results presented suggest that this substantial public investment in HEIs may have a disappointing, and perhaps even a negative, effect on the innovation output of Irish business, thus undermining future Irish prosperity. In addition, the absence of evidence supporting the existence of Irish clusters and networks for innovation suggests that policymakers long-standing support for these have been misguided. The paper concludes by advocating that innovation is a business rather than a technological phenomenon and argues for a changed role for HEIs to one of responding to innovative businesses

The effects of geography on innovation in small to medium sized enterprises in the South-East and South-West of Ireland

This paper analyses the effects of geography on innovation by small and medium sized enterprises in the South-West and South-East regions of Ireland. Using an augmented innovation production function it estimates, both directly and indirectly, the effects of interaction with geographically proximate external agents and agglomeration economies on product and process innovation in these enterprises. The findings question the premise that geography matters for innovation in the Irish case. There is little evidence that local/regional interaction is more important for innovation and the close availability of a skilled labour pool and a range of urbanization indicators have no effect