Friday, 22 June 2012

Innovation value for money

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?


Anonymous said...

This is welcome. It is about time somebody challenged the dominant line on public investment in R&D in Ireland. It seems that the view is that any money spend on R&D is "good". Such a view is of course idological in the sense that it is seems to be asserting that any form of subsidy, direct or indirect that may assist business is "good" especially if it gets around EU rules on competition
We need more of this kind of thinking.

Anonymous said...

Spin-off companies which develop as a result of tax payer funding are typically bought out by multinationals ensuring vast wealth for a small number of entrepreneurial professors. Yet the taxpayer receives zilch from the sale of such companies whose existence was due to tax payer funding.

This is a scandalous situation and should be ended forthwith.

Over-taxed Irish citizens need to receive the bulk of the spoils that result from the sale of such companies.

Jim Stewart said...

This is an excellent blog. If the 'good news' stories are full of holes what about the other 99% of projects? The key issue is (1) to what extent are long run sustainable jobs created;
(2) To what extent is the indigenous knowledge base increased (IP etc), and similarly for individual skills and knowhow;
(3) If there are enhanced skill sets are how can they be made 'sticky' (located within Ireland) given the Irish State funded them.

There are other issues in relation to measuring the level of State support. Invariably SFI gives money towards research with extensive existing facilities (Buildings, labs, using resources not paid for by SFI - the institutional contribution 20% does not capture this). SFI money is often cream on top of a lot of accumulated jam and bread. But I think more fundamentally grant giving bodies are highly path dependent in their grant giving. This is rationalised in terms of track record, prior success in attracting grants etc.

Something really new and someone who has no track record (successful form filling) will not get funded. In this environment all that may be happening is that existing knowledge/processes is being tweaked/extended, so that the economic logic is that that those firms that have sunk capital in this area buy up/utilise the research/knowhow, etc. So research in dairying is more likely to be used indigenously. Research in space technology will be used in California.

I think it is a fundamental question as to whether innovation policy can be based largely on university research. In 2009 Ireland had one university in the top 50. Germany had none.

Anonymous said...

At last, SFI's snake oil sales pitch, a mantra repeated religiously by the news media, is being exposed.
Many of these projects are ready-ups by philistine academics who have abandoned the quest for knowledge in return for status and massive salaries, while those who do the work are exploited.
More on what this is doing to our universities can be found here: