A track record in R&D has given Ireland a reputation as a good location for innovative activities.
Ireland’s strong R&D capability not only encourages new companies to locate here, but helps existing ones cope better with market changes.
It’s a fact Mark Gantly, R&D director at Hewlett Packard Enterprises in Galway, has seen at first hand.
“Ireland has a tremendous base of US FDI (foreign direct investment) companies, from long established companies such as ourselves, IBM, Intel and Apple, right through to the new digital companies such as LinkedIn, FaceBook and Google,” he said.
“What is interesting is how resilient these companies have proven to be. Very many that came here, stay here. Very few ‘up-sticks’ and leave. Instead they tend to transform over time and stay. A significant part of that transformation is attributable to R&D.”
HPE, his own employer, is a case in point, having established in Galway back in 1971 as Digital Equipment Corporation. “The name has changed and we are doing very different things than we were 45 years ago but we’re still here. And typically transformation such as that involves significant R&D expenditure.”
This track record in R&D has given Ireland a reputation as a good location for innovative activities.
“Trust is a factor. We tend to get trusted to do very new and exciting things here, the Version 1 stuff. That trust is based on a track record going back over 30 years now, and it’s very hard for other locations to compete with,” said Gantly, who is currently leading a cloud based software project. “HPE can set up operations almost anywhere. Ireland is certainly not the lowest cost base around but we have the R&D expertise.”
The continued availability of expertise is a challenge however. “The main risk facing us is that the fuel for innovation is talent. Historically the view here has always been that we have this huge labour pool and that all we need are new opportunities to use it. But in R&D the scarce resource is talent. The challenge for us is to continue to produce the graduates, the expertise, the scientists and the engineers required to do that,” said Gantly.
It will be an increasing pressure point if R&D activity continues to grow as it is. “The amount of tax credits being claimed by businesses here is going up each year,” said Ken Hardy, partner in KPMG’s corporate tax practice.
“That’s across all sectors and from small indigenous businesses to large multinationals. In total, Department of Finance figures show that nearly Euro 500 million of R&D tax credits are being claimed each year. It’s a very positive story,” he said.
A significant part of that story is the strong linkage fostered between third level and industry in relation to R&D.
From Innovation Vouchers which enable small businesses receive Euro 5,000 of third level R&D to Innovation Partnerships worth up to Euro 200,000, government policy has been to support business innovation.
The establishment two years ago of Knowledge Transfer Ireland, the national tech-transfer agency, has also helped, while private sector initiatives such as the Industry Research and Development Group (IRDG) actively foster innovation.
“We’d like to see even greater interaction between the FDI and the indigenous sector, not just in terms of supply, but through the use of R&D,” said Denis Hayes, the IRDG’s chief executive.
This vibrant ‘ecosystem’ is all the more impressive given that it didn’t exist up until recently. “In the 1990s R&D wasn’t very high on the agenda here at all,” said Barry Heavy of IDA Ireland.
“In those days universities were much more focused on being teaching institutions, with not much research budget. As a result, we’re a little late to the game compared with the storied R&D activities of the UK and Germany but there have been benefits to that too, in so far as we could see what works and doesn’t and learning from others mistakes. We’re benefitting from that now.”
The IDA’s emphasis is not just on getting FDI to locate here, but getting those companies already here to do more research here.
“The med tech sector is a good example,” said Heavey. “In the 1990s we had a strong med tech cluster mainly focused on manufacturing, making first generation medical devices. We encouraged many of those to do additional R&D and now have a pipeline of new products coming through. Our client companies here have evolved from waiting for new products to be handed down from corporate HQ to developing newer products here themselves.”
In 2006 IDA Ireland companies spent Euro 1 billion on R&D. In 2014 that figure was Euro 1.5 billion. In 2006, 7,400 people in IDA Ireland client companies were employed in an R&D capacity. That figure is up 77% to 12,700, while spend is up 44%.
A decade ago IDA grants were given mostly on the basis of capital investment, or per job. “Now, more than 60% of our grants are going to R&D projects,” said Heavey.
The success of companies such as AbbVie, the drug-making spin-off of Abbott Laboratories, here shows just how dynamic the sector is.
It concentrates R&D on four core areas - immunology, oncology, virology and neurology - and boasts above industry standard levels of R&D investment, adding more than $850 million in annual R&D investment since 2013.
Last year it AbbVie announced joint investments with Science Foundation Ireland (SFI) worth Euro 10 million involving teams at Trinity College Dublin and University College Cork.
“As a multinational with a significant Irish presence we actively support those whose ambition it is to establish Ireland as a world class research hub,” said Todd Manning, AbbVie’s Ireland general manager.
“Innovator companies like AbbVie have an important role to play in ensuring the government’s commitment to research in Ireland, which is already strong, increases to the point at which this ambition can become a reality.”
This article was originally published by Sandra O’Connell in the Irish Times on May 16 2016 and is reproduced here with our thanks.
© 2017 KPMG, an Ireland partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG has launched a state of the art digital platform that enhances your experience and provides improved access to our content and our people, whatever device you are on.