Is research a waste of taxpayers’ money?

The answer to the question is ‘no’, by the way, but there is no shortage of people who will claim otherwise. There appears to be a particular tendency for Irish economists (or at least some of them) to play down the economic impact of research.  The tone for this was set by the ‘Special Group on Public Service Numbers and Expenditure Programmes’ (‘An Bord Snip Nua’, chaired by UCD economist Colm McCarthy). Its report in 2009 stated:

‘Research and development (R&D) funding for the third level sector is provided through the Programme for Research in Third-Level Institutions (PRTLI) and the research councils…  In general, the Group is strongly of the view that substantial reductions in funding are warranted given the significant amounts invested to date, the lack of verifiable economic benefits resulting from these investments and the inflationary impact of funding on research and administration salaries.’

More recently Michael Hennigan, founder of website Finfacts, wrote the following:

‘Minister Batt O’Keeffe said this week that nearly half of the new projects won in 2010 by IDA Ireland, the inward investment agency, were research and development-based. This claim cannot be relied on as it could range from little to a lot! No detailed information is available. Foreign-owned companies are responsible for about 90% of Ireland’s tradeable goods and services exports and it is believed that very little original research is done in Ireland.’

This follows a fairly frequent pattern of commentators claiming that there is no evidence to support the view that research has a positive economic impact, when in fact such evidence is freely available; just because someone doesn’t look for evidence doesn’t mean it isn’t there. Also, when Hennigan says that ‘it is believed’ that little research is done in Ireland, this is a particularly inappropriate way of backing an argument. ‘Believed’ by whom? What kind of evidence is that? In this case the IDA regularly publishes information confirming the significance of R&D to foreign direct investment. Most recently the IDA has announced that, in 2010, over €500 million was invested by foreign companies in R&D in Ireland, and the volume and significance of original research done here is regularly set out by the various national agencies.

Ireland’s ability to escape from the recession and to build up its economy depends critically on a successful national research programme, allowing the country to be identified as a centre of excellence in a selected number of key areas. This will not only help to secure much of the inward investment which we can now attract, but it will also be the key to a significant proportion of indigenous entrepreneurship.

Funding the national research programme is not an easy decision, given the competing calls on the country’s scarce resources. But that is where our future lies – not particularly because these research projects will themselves create many jobs, but because they will create the conditions in which others will do so. A debate on whether investment in research is money well spent is perfectly legitimate, but contributors to that debate would do well to get their facts straight first.

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Spreading the research news

It is good to see that the UK journal Times Higher Education has given some space to a report on the most recent round of the Programme for Research in Third Level Institutions (PRTLI). Right now Ireland’s reputation for investing in research and R&D is the key factor determining our attractiveness for high value international investment. When the government decided to ‘pause’ investment in PRTLI in 2003 the impact was immediate and severe, as some global companies concluded that Ireland did not have a clear strategy on the knowledge economy and was therefore not a good place in which to invest. Being consistent now at this point, particularly against the backdrop of serious public finance problems, is vital, and both the fact of the investment and its proposed scale are important pointers to our national strategy that should make a significant difference internationally.

I am pleased that the Times Higher picked this up. And yet, this investment decision needs to be communicated much more aggressively. As far as I can tell, no major international newspaper has run this story. And even domestically, the coverage has been quite low key. All of this needs to be stepped up dramatically. There is no point doing the right thing if too few people know about it.

Sliding towards the Not-So-Smart Economy?

Earlier this year I pointed out that, notwithstanding Ireland’s commitment to spend 3 per cent of GDP on research and development, our actual performance does not measure up to that target. In fact, according to my calculations Ireland’s R&D expenditure now lies at around 1.4 per cent of GDP, and it is falling. Even assuming that the Government is still going to fund the next cycle of the Programme for Research in Third Level Institutions (PRTLI), which I believe it will, the trend will remain unsatisfactory.

A key worry right now is that funding for Science Foundation Ireland (SFI) is being affected. A report in yesterday’s Irish Independent newspaper indicated that SFI has advised the government that 950 research posts will cease to be funded over the near future due to lack of funding. There will be very few newly funded research projects, and some new research themes (including the important theme of sustainable energy) will not after all be resourced.

I am aware of the fact that in some circles the funding for research is being questioned, and it is suggested that some or all of this should be diverted to other public funding causes. What needs to be understood, however, is that low-tech employment will not be the engine of growth for Ireland; we are still too expensive for that. Research and development is the basis on which we can expect to attract foreign investment and domestic start-ups. Without that, we have very little too offer.

Right now we have rhetoric about innovation which is not reflected in actual decisions. This is a dangerous game.

Steady, lads!

Of course I would not wish to be in any way dismissive of the ‘Innovation Alliance’ established by Trinity College Dublin and University College Dublin, but if I had the opportunity I might very gently advise them to turn down the hyperbole just a notch.

This week the online publication Silicon Republic reported that TCD and UCD had invited Stanford University President, John Hennessy, to act as an international adviser to their alliance. So far so good. Dr Hennessy is an academic and entrepreneur of some note, and his participation will enhance what the Southside Dublin colleges are doing. However the piece also describes the ‘Innovation Alliance’ as an initiative ‘which if successful, could generate 40,000 research jobs.’ I confess I find this an alarming claim. At the time of the alliance’s establishment in 2009, the partners were claiming they would create up to 30,000 jobs. Back then most commentators, while welcoming the overall initiative, expressed strong scepticism about the job creation claim, which many would have regarded as something of an exaggeration, by an order of magnitude. But this now appears to have risen by 33 per cent; not only that, these are now ‘research jobs’.

It should be clear that there are absolutely no circumstances in which the two colleges will create research jobs in such numbers, or anything even remotely resembling them. Bear in mind that the two colleges currently employ perhaps 1,000 researchers between them; so now they are claiming that they can increase this number by 4,000 per cent through the work of the alliance. It really doesn’t help to be putting such figures about, not least because it creates a completely false impression as to the impact of research. The benefit of cutting edge research and its commercialisation doesn’t lie in direct job creation, but rather in the establishment of an attractive environment for high value industry investment. But politicians obsess about jobs, often without understanding how job creation happens, and we shouldn’t encourage them by giving them false ideas about these processes.

The other little thing I noticed – though I can see this might not have come from the two colleges – is that the article describes the ‘Innovation Alliance’ as the ‘IFSC of R&D’. The IFSC is the International Financial Services Centre, and its establishment as a global finance hub in the Dublin docks helped to transform the Irish economy in the late 1980s and the 1990s. It is entirely possible that the TCD/UCD alliance will have a major and beneficial impact on the wider R&D scene, but they are certainly not alone in this field, and this label again strongly over-eggs the pudding.

I suppose that what I am arguing is that the two colleges need to focus much more on quietly bringing forward actual R&D successes at this stage of their alliance, rather than trawling the superlatives dictionary in public announcements. I think that other universities, many of them working on their own alliances, are keen to be cooperative and supportive, but would find that easier to do if it didn’t look as if TCD and UCD were trying to claim all the territory for themselves. I would certainly recognise the value of the TCD/UCD alliance, but it is not the only game in town. Let us maximise the potential in what we all do and foster a climate of collaboration as we do so.

Just a little bit of hope?

Yesterday morning I was able to attend an event organised by Dublin City Council, focusing on the potential of an innovation culture as a way of generating new economic growth and prosperity for Dublin. The keynote speaker was Máire Geoghegan-Quinn, European Commissioner for Research, Innovation and Science. As one might expect, she produced an exceptionally well argued and eloquent case for knowledge-based innovation with structured collaboration across Europe.

She also stressed the importance, in terms of global competitiveness, of achieving our goal of spending 3 per cent of GDP on research and development, as well as the desirability of commercialising European discoveries in Europe (rather than elsewhere in the world).

Right now in Ireland, we are talking the talk but we are certainly not acting accordingly. Despite the government’s commitment to the 3 per cent R&D spending target, our actual investment is half that or less and going down. There are now signs that we are losing some of our key scientists as they move to other countries where the research environment is less hostile. We have still not managed to develop proper careers for full-time researchers.

We must listen to the Irish Commissioner, and we must act as she advises. Ireland’s ability to restore its international reputation for innovation depends on getting this right.

What next for Ireland? – Education and research

Last September, at the ‘Global Economic Forum’ held in Farmleigh, former Intel chief executive and chairman Craig Barrett created something of a stir when he suggested that Ireland was under-performing in both education and research and development, and that these failings needed to be corrected if the country was to pull itself out of recession. I wasn’t at the Forum (hey, I wasn’t invited), but I gather from some who were there that Barrett electrified the proceedings and set the tone for a significant debate.

Yesterday evening I was able, along with a few hundred others, to hear him develop his theme a little more at a public lecture organised by the Royal Irish Academy. It was a fascinating talk given by someone with an external perspective but with significant inside knowledge of Ireland.

In his lecture, he set out what he described as some ‘observations’ on current global conditions, followed by a list of things that Ireland needs to get right, and finally by a list of proposals or recommendations for the country.

His observations were as follows:

• Levels of income in any country are closely connected with the educational attainments of the population.
• Levels of productivity – which are vital for future growth – are closely linked to the successful harnessing of new technology .
• It is possible to identify the significant technologies of the future: nanotechnology, nano- and micro-electronics, photonics, biotechnology, new materials and alternative energy.
• Future economic growth will depend critically on entrepreneurship and successful start-ups.

From this he developed his list of national needs:

• A national education system that compares well with the best in the world and is based on excellence. He pointed out that Ireland’s education system has inadequate public investment and performs poorly in vital subjects such as mathematics and science.
• A system of higher education and research that promotes and values basic research, that encourages spin-outs from that research, and that allows universities to be ‘wealth creation centres’. Currently, he believes, Ireland’s universities lack proper expertise in relation to these goals, and their global standing is not as good as it could be.
• The right environment, particularly as regards taxation, IT infrastructure, and a culture that values risk-taking.

Then he presented 10 recommendations for Ireland:

(1) Our goal should be that Ireland’s education system becomes number 1 globally in all subjects, taking account in particular of our current failings in mathematics and science.
(2) We need to have excellent teachers who are truly experts in the subjects they teach. The teaching profession should be rewarded on the basis of performance, not seniority.
(3) Our education system should emphasise 21st century skills such as problem solving and interdisciplinarity, and should rely less on rote learning.
(4) More students need to study mathematics and science at third level, and we should reform the CAO points system in order to ‘bias the system towards the results we need’.
(5) Ireland’s universities need to focus more on delivering start-ups, following the example of Stanford or MIT.
(6) Ireland needs to implement the Lisbon target of investing 3 per cent of GDP in research and development; right now we are only managing about half of that.
(7) We need to ‘grow the economy from within’, as foreign direct investment is unlikely to go back to previous levels. Future growth must come from indigenous start-ups and from entrepreneurship, and we need to have a framework that encourages and facilitates this.
(8) Ireland needs to focus – we cannot do everything, so we need to prioritise those areas in which we can add value and lead.
(9) We need to achieve a dramatic improvement in our IT infrastructure.
(10) Ireland needs to want to compete with the world and to base its economic and business systems on that ambition.

This, it seems to me, represents a good basis for a new national strategy.

Guest blog: The other Lisbon agenda and investment in higher education

By Professor Frank Gannon
Director-General of Science Foundation Ireland

In the recent past, the whole country became very familiar with – even transfixed by – the Lisbon Treaty, with most of us adopting a Yes, No or Maybe position. Less familiar for many, however, was a parallel yet entirely unrelated ‘Lisbon’ Strategy, also known as the ‘Lisbon Agenda’ or ‘Lisbon Process’, issued in March 2000. This Lisbon Agenda involved the Heads of the EU countries declaring a decade ago that the EU would become the world’s leading knowledge-based economy by 2010. That was followed up at a meeting of the Heads of State in Barcelona that stated that every EU country would, by 2010, invest 3 per cent of GDP in R&D (GERD), with two-thirds of this coming from the private sector and the remainder from the public/government funds. Ireland was a signatory to these agreements.

The fact is that, in 2000, Ireland was a long way off spending that amount on R&D. Realism was shown when the Strategy for Science Technology and Innovation (SSTI) plotted expenditure such that 2.4 per cent of Gross National Product (more appropriate for Ireland than Gross Domestic Product) would be invested by Ireland by 2013. The record shows that, since then, Ireland was one of the few countries that consistently increased its investment in R&D in the years up to 2009.

But the 3 per cent target always had two implicit ‘get-out’ clauses. The first came from the fact that Government policy can do very little to ensure that the private sector (and in Ireland this means, predominantly, the multi-national companies) would increase their engagement in R&D such that the 2 per cent (a two-thirds portion of the 3 per cent) attributed to them would be delivered. The second variable is the denominator of GNP. As it diminished in the last year, the recorded GERD for Ireland will increase in 2009 when the statistics are calculated. Perversely, all of the EU data will show an increase because of that macro change. It is more realistic to compare the real money invested. The last such comparison that I saw showed that the EU was spending the same amount of money as the USA had 20 years ago. And it is money – not ratios – that counts!

Now a new EU report, The Role of Community Research Policy in the Knowledge-Based Economy, by Soete presents a different 3 per cent target to be reached by 2020. In this, the focus is on 1 per cent expenditure on R&D by every EU Member State (i.e. omitting the contribution from enterprise and charities) and 2 per cent on higher education. The first part of this new proposal is one that I wrote about in 2003 (Government rhetoric and their R&D expenditure EMBO reports 4, 2, 117–120 (2003) and is within the grasp of Ireland. We are in the top-10 EU countries for this statistic and I hope that consistency of policy (reiterated in the latest Revised Programme for Government) will ensure that we achieve it well before 2020.

The new focus on investment in higher education helps to stress the connection that most commentators make between the higher education institutes (HEIs) and the ‘smart economy’ of the future. It would seem that the road to achieving this 2 per cent will be more difficult for Ireland and most other countries. The EU average is 1.3 per cent spent on higher education, and that compares poorly with 3 per cent in the USA (with private institutions having a major impact). Currently, we appear to be spending approximately 1 per cent of GDP on HEIs.

Doubling that spend on higher education will be a difficult challenge, but one that deserves attention. For both goals, the biggest hurdle is to get ‘buy-in’ that is reflected in the announcements made at budget time. If the roles of R&D and of the HEIs are not understood or appreciated, then death by a million cuts will follow. The question then will be: what is the new non-smart strategy for Ireland’s future economy? I presume it is not that we return to the economy of the 1980s when we were a low-cost location for manufacturing.

Being in Europe allows us to develop policies that have the benefit of analyses of similar countries. I presume that is why we accept policies such as the Barcelona/ Lisbon agendas. Let’s hope that we behave as Europeans in 2010 just as we have voted for Europe in 2009.

Research, economics and trench warfare

There has been a bit of a battle this week in the pages of the Irish Times. On Tuesday Professor Luke O’Neill of Trinity College Dublin wrote an opinion piece in the paper defending state funding of science research, arguing that it allows us to keep the brightest and best in Ireland and that through it we can as a country take part in adventure and discovery that will allow us to improve lives. He also argued that it was not reasonable to expect an immediate economic pay-back for the investment by the state.

Two days later the paper printed a response by Michael Hennigan, the owner of the website Finfacts (and an economics graduate). He suggested that investment in research yielded inadequate commercial returns and that the calls for maintaining research funding were really just pleas by those with vested interests.

I have to say that I am finding the public debate, such as it is, on research funding to be hugely irritating, not because it is taking place but because of the way it is being conducted. For a start, as I have noted before, there appears to be a new economics orthodoxy about the impact of research (on the whole, that there isn’t one). Various economists either argue that there is no evidence that R&D produces a commercial benefit, or even claim there is evidence that it does not. In fact there is evidence of such benefits by the truckload, but maybe it is not being presented well, or maybe we are in a situation where prejudice is trumping facts.

What annoys me is that this debate is often being conducted around the idea that research should create jobs, meaning that there should be immediate spin-offs that generate large-scale employment. Trinity College and UCD fell into this particular trap in the announcement of their Innovation Alliance, promising the creation of 30,000 jobs (which is an unattainable goal and is in any case a completely unnecessary one). Luke O’Neill is quite right in pointing out that investment in research, and in life sciences in particular, will need to be given some time before it creates direct commercial activities and employment. But that is actually neither very interesting nor very relevant in the context of current needs. The economic and trading case for R&D investment now is not direct job creation, but rather the creation of an environment in which others will create businesses and jobs.

For example, the IDA (Ireland’s inward investment agency) has stated several times that its recent successes in generating foreign direct investment have overwhelmingly depended on and been based on our research investment and the existence of a serious research community in Ireland, as this was a vital factor for the companies contemplating Ireland as a location. Similarly, indigenous start-ups increasingly tap into our research capacity. In that sense, the complaint noted by Michael Hennigan that post-doctoral researchers don’t go into business but move on to other research projects is of no significance, in that researchers are rarely the right people to go into business – but they need to go on to help create further discovery that can then be used by those who have the business skills.

Hennigan also cites US professor Amar Bhidé (though he places him in the wrong university and the wrong discipline), who has suggested that the US should not worry about whether it is producing research, but should instead exploit research commercially, wherever in the world it has been generated. The problem however is that even if Bhidé were right, the US is a rather different country from Ireland, not least because it has a very large population and a huge market, so that economic activity can in theory be generated through such an approach. But in any case, he is wrong: the US became the world’s dominant economy precisely at the moment when it decided that it needed to be the global home of research and development, which was perhaps the most far-reaching decision taken there in several generations. And to focus in on a region, when the Research Triangle was created in North Carolina it transformed that state from a rural backwater into an industrial, commercial and financial power house.

The evidence is clear and is well known. It is time to stop pretending that we don’t have the facts. It’s time to be focused and determined, and to show consistency of purpose. Unless we like the idea of going back to the 1980s.

Our country’s future: the fate of PRTLI

The publication of the report last week by ‘An Bord Snip Nua’ – the Report of Special Group on Public Service Numbers and Expenditure Programmes – has raised many issues and questions about the future of public expenditure in Ireland. Broadly speaking the report’s recommendations can be sub-divided into those that address bad value for money, or waste; those that identify expenditure that simply cannot be afforded in present circumstances; and those that claim to identify expenditure under policy principles that may simply be wrong, or at least no longer appropriate.

It appears that expenditure on research was seen by the Group as, at least in part, falling under the latter heading. A key claim in the report is that, as far as the Group is concerned, they could not find enough evidence that expenditure on science, technology and innovation had yielded sufficient economic activity (volume 1, p. 14). On that basis, the Group proposed savings of €27 million per annum on research programmes funded under the Department of Education and Science, and the termination of the Programme for Research in Third Level Institutions (PRTLI). Ironically perhaps, the latter recommendation was published on the exact day that higher education institutions had been asked to submit their detailed proposals under Cycle 5 of PRTLI, and shortly after the tenth anniversary of the initiation of the programme.

In fact, it would be difficult to over-state the historical and current significance of PRTLI. The whole programme would not have got under way at all in the late 1990s but for the financial support and the energetic prompting of Chuck Feeney and Atlantic Philanthropies. Before the first cycle of the programme, Irish universities were largely teaching-only institutions, without either the capacity or the expertise to provide backing for the development of R&D in Ireland. With the first cycle, a small but important number of key research groups were given the means to become internationally competitive and attract world class scientists and researchers. The impact of this was huge, as it allowed Ireland to be presented as a place where some cutting edge research was being undertaken, and this led directly to a new wave of inward investment. Many of the blue chip companies that subsequently invested in Irish R&D did so because of the changed circumstances of Irish research institutions. Furthermore, this R&D investment in many cases helped to secure the retention in Ireland of more general operations by those companies, with thousands of workers benefiting. This has continued right through the present decade. Even high value manufacturing jobs in the pharma sector have often owed their arrival to the backing made available through university research teams.

When the government announced in 2002 that it was suspending PRTLI due to temporary budget problems, the effect was immediate. I was at a gathering in the United States during that period at which American companies were being courted to locate knowledge-intensive operations in various countries. A spokesman for an Asian country suggested publicly at that event that US companies should now focus on Asia, and that Ireland in particular had now been shown not to be serious about R&D. The effect of this statement (and others like it elsewhere) prompted the government to re-start PRTLI, thankfully before the damage had become irrecoverable.

Right now we are looking down into the same abyss, and again we may be doing so because of our own actions. No matter what some may argue, a key element in future economic growth will be knowledge-intensive investment, whether by multinational companies or through indigenous firms. At this point countries in other parts of the world, including big ones like China and India, and smaller ones like Singapore, are competing aggressively for such investment. To shut ourselves out of this would be madness.

It may well be that we need to look closely at how research investment is determined and how well the money is spent. But to argue that such investment does not produce economic benefits is staggeringly ignorant. Not only must this particular recommendation be repudiated, it must be done so quickly and audibly. Our future is at stake.

The role of universities in economic development

Three or so years ago a delegation from a major European city was on a visit to Dublin. The mayor was there, several city officials, a couple of businesspeople, two (if I recall) members of parliament for that city, and some others. Their hosts were an Irish state agency. I was invited to address the visitors over dinner, the topic being what Irish universities have done to support economic development.

So I told them a little about the Irish university system, and I described what we were doing to support the economy: from teaching those who would become skilled graduates in important fields, through managing incubation centres, through linking with industry R&D labs, to spinning out companies. I gave some examples from my own university, DCU. I summed up by saying that the two critical ingredients that enabled universities to play this role were (a) the capacity to compete with universities in an inward investor’s home country by having recognised centres of real world class excellence, and (b) strategic autonomy and the ability to be entrepreneurial and innovative. It was clear from the discussion that the universities from our guests’ city would need to be reformed fundamentally for them to be able to do any of this.

Afterwards the mayor, an extremely affable man with a good sense of strategy and a pleasant witty manner, came to thank me for my talk and for the very interesting insights I had provided (he said). I expressed my appreciation and asked him whether he would look again at the conditions under which his universities operated. He looked staggered at the question, and answered emphatically that he certainly would not, that they needed to know their place as agencies of government and not get any notions that they could autonomously develop their own strategies. I told him that he must therefore expect to see the long-term decline of his city (which he had described over dinner) continue.

The idea of universities as educational agencies following a national plan is not an unusual one in Europe, and indeed there are occasional shades of it here in political discourse. The Universities Act 1997 gave universities in Ireland a degree of autonomy, but more than once I have heard politicians musing that this may have been a step too far and should be revisited. But in fact the autonomy of universities – and by this I mean autonomy beyond what we have now – is a vital ingredient for national success and in particular for stimulating the local economy. For example, the role of DCU is generating economic activity in the North Dublin and Fingal area is pivotal. And more generally, universities have been indispensable in virtually every recent bid to persuade major global companies to locate R&D in Ireland. Universities need to be able to move fast in taking decisions and need to be able to deal effectively with corporate and other partners.

Even when our costs have moderated a little due to the recession, investments in Ireland by companies setting up call centres or basic manufacturing units will not return – those days are over. Our hope for the future lies in much higher value investments and successful indigenous start-ups. These require successful and autonomous universities. Our future as a country is tied up in this. We must get it right.