Investment in innovation lays the foundations of a better future

The land of saints and scholars may be increasingly secular but Ireland’s education system remains noteworthy, with one of the highest levels of science, technology, engineering and mathematics (Stem) graduates per capita in the EU.

Perhaps the land of scholars and start-ups would be a more appropriate nomenclature for the modern era; recent figures quoted by IDA Ireland in its marketing material say 36.9 per cent of undergraduates are enrolled in Stem degrees. They also state that start-ups in Dublin are experiencing an 18 per cent growth rate year-on-year.

When it comes to Ireland’s start-up scene, UCD holds the number-five ranking in Pitchbook’s annual tally of the number of alumni entrepreneurs who have raised venture capital in the past decade. Although it has been pushed down the list, until recently TCD had been leagues ahead, with its alumni founding more venture-backed companies than graduates from any other university.

Mark Jordan, chief strategy officer, Skillnet Ireland, sees at first hand the innovative fruits of collaboration between Government, industry and academia in his work.

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“Ireland is really well positioned in terms of the way that the universities engage across industries, in the creation of research at the lead-in to R&D initiatives and further R&D investments by companies,” he says. “It’s a real positive, even across areas such agriculture and food production.”

Ireland’s economic growth, through foreign direct investment (FDI) and right down to university spin-out companies and budding entrepreneurs, has all been facilitated and driven by sustained investment in R&D (research and development) and innovation. It’s a great story, says Jordan, but in order to stay competitive on a global scale, it’s important not to become complacent about it, either in terms of Government policy and funding, or upskilling.

“Underpinning it is the education system producing the candidates but also the engagement that we have, in terms of lifelong learning and [people] building upon their academic skill sets making them workforce ready in R&D spaces,” he adds.

The high level of interest from FDI companies is a direct consequence of the chain of events set in motion by TK Whitaker’s influential paper Economic Development in 1958, written when he was secretary of the Department of Finance. Since then, successive governments have underlined their commitment to economic growth by funding education and research and encouraging companies that have collaborated and partnered to build the rich ecosystem we have today.

Ireland’s particular focus on innovation has meant that foreign direct investors have targeted high value areas such as advanced technology (artificial intelligence, the internet, robotics), IT and advanced manufacturing.

A 2023 study of global FDI investors conducted by Bloomberg found that 51 per cent of those planning to invest in Ireland within the next one to three years are motivated by Ireland’s expertise in such advanced technologies, areas where R&D and innovation promise high-value jobs.

Although the agreed increase to the corporate tax rate, from 12.5 per cent to the OECD global minimum effective corporation tax rate 15 per cent, is due to come into effect in January for corporations with a turnover of at least €750 million, Ireland still offers a considerable carrot to companies engaged in R&D.

This comes in the form of the recent budget increase from 25 per cent to 30 per cent tax credit for expenditure incurred on qualifying R&D activities and the standard 12.5 per cent revenue deduction available for the R&D expenditure.

“This is a really interesting time for Ireland, given the significant changes that are happening around the international tax rate,” says Claire McGee, head of education and innovation policy, Ibec.

“This is a huge opportunity for Ireland to develop a new economic narrative and the case for investment in innovation has really strong economic but also social benefits.”

Ibec’s ambition is to constantly ensure that businesses, regardless of their size, scale, or sector, are all working in a more innovative way.

“We know that investment in innovation drives productivity and economic growth,” says McGee. “But, crucially, it raises living standards and improves public services. Ultimately it lays the foundations for a better future for all of us.”

Innovation is also crucial to solving our housing crisis and helping to achieve climate targets, particularly around retrofitting. The construction industry may be one of the last sectors to really jump on the digitalisation bandwagon but with building information modelling, modern methods of construction and a new National Construction Training Centre in Co Offaly, it is finally and fully embracing technology.

Jordan says we are learning from some of our more advanced European neighbours.

“In the construction space we look at Germany a lot; they have a robust, scalable model that we can leverage an awful lot of key R&D activity from,” he says.

It is not by accident that Ireland is home to 16 of the top 20 global technology companies and 10 leading biopharma companies; it is by design. And it is crucial that strategic vision is present and acted upon to secure the future – McGee says Ibec is calling for greater funding in R&D to ensure this happens.

“We’re way behind,” she says. “We should invest about 2.5 per cent of GDP into research and innovation, and that has stagnated at about 1.25 per cent. If Ireland is serious about being an innovation leader it has to put the critical finance in place to enable that to happen.”

McGee also suggests that doubling the value of the Innovation Voucher, currently set at €5,000, would be “transformative for small businesses”, supporting collaboration with universities. Closing the gap between SMEs and larger companies and multinationals, supporting SMEs to access the innovation ecosystem and educating entrepreneurs around protection of intellectual property (IP) are other key areas where tangible impacts can be made, she suggests.

Ultimately, she says, it all comes back to investing in people. “A recent OECD Skills Review in Ireland confirmed how skills are incredibly important for innovation capacity into the future,” she says. “It’s not just technology, it’s actually investment in people and their skills to be able to work with technology.”