I welcome Mr. Feargal Ó Móráin, Mr. Martin Lyes and Mr. Gearóid Mooney of Enterprise Ireland. Before asking Mr. Ó Móráin to begin this short presentation which will be followed by detailed questions and answers, I draw witnesses' attention to the fact that while members of this committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I ask Mr. Ó Móráin to commence.
Research and Development Activities: Discussion with Enterprise Ireland.
Mr. Feargal Ó Móráin
On behalf of Enterprise Ireland, I thank the committee for the invitation to address it to discuss our activities. It is particularly useful for me to have the opportunity to explain the role and position of Enterprise Ireland, EI, in the broad area of science, technology and innovation, and particularly how EI works together with our sister agencies, IDA Ireland and Science Foundation Ireland, SFI.
With the Chairman's permission, I propose to read part, but not all, of my statement in the interests of keeping within the five minute timeframe available. I want to introduce my two colleagues, Mr. Martin Lyes who is the manager of the research and innovation division within Enterprise Ireland, and Mr. Gearóid Mooney who is a director of the commercialisation of science in the ICT area and also in the work Enterprise Ireland does with multinational companies to get opportunities for the transfer of technology from multinational companies into indigenous companies.
Enterprise Ireland focuses its efforts on the development of indigenous industry and sees innovation as the key enabler to delivering export growth in the economy. El works in parallel with IDA Ireland and SFI, and all three bodies work closely together, particularly within the context of Technology Ireland, which is chaired by Mr. Martin Shanagher, assistant secretary in the office of science technology and innovation.
Enterprise Ireland's activities, both domestically and in its international offices, are aimed towards helping client companies to increase their export sales. The fundamental metric of the agency is economic impact as exhibited through export sales and, ultimately, employment in the economy which is EI's fundamental objective.
In a modern knowledge-led economy, innovation is the key. Innovation is fundamental to our success, be it through adopting new business models, training and developing people, focusing on capabilities in research and science, or linking companies with institutions and with each other to deliver innovative market-led products. Naturally, strong leadership, management and market skills are required within companies to drive innovative behaviour, and to successfully and profitably export our goods and services.
The next section deals with the importance of indigenous industry to the Irish economy in terms of value added and jobs. I will skip over that information, which is set out in my statement.
Moving on to the EI approach, technological progress and new ways of doing business set new standards and make new demands of firms. Part of this change is the introduction of new business models, the emergence of new markets, more sophisticated consumer demands and greater competition.
Innovation is about the ability to successfully meet these rapid changes with market and customer-led solutions. As an agency, we have a well-established role in innovation and we have three main areas of interest. These are: seeing the level of innovation increased in indigenous enterprises and the food industry with which we work; encouraging a greater level of open innovation, a term which I will explain; and getting the greatest commercial return from the State investment in research, particularly in the third level sector.
I would emphasise to the committee that innovation informs everything we do as an organisation. We realise that our companies must innovate to survive and that includes not just technical innovation which drives the research and development process as well as productivity improvement, but also business innovation which involves changes to the way in which the business works. This latter topic has become more critical in recent years as companies seek, for example, to use the Internet to get their products and services to customers, or how they might outsource some business functions to reduce costs.
Because innovation is so important to our clients, we see the promotion and application of innovation as the job of each staff member. Whether it is technologists and development advisers working directly with clients, or specialist groups supporting them to build innovative capability in a firm, the central feature of this is the imperative to get clients more competitive through innovation. We have also placed considerable focus on developing the management skills within our client base because this has a significant and direct impact on the client companies, for example, we developed and sponsor the Leadership 4 Growth programme to which I can return if the committee is interested.
The agency acts as an advocate for the benefits of innovation, through innovation forums, networks and a range of seminars offering practical advice and insight for entrepreneurs and innovators. We drive and support in-company research and development through our research and development fund, and by creating awareness of the benefits of innovation through our research and development advocates, who are business people, usually retired, who on our behalf visit companies around the country. Essentially, they knock on doors and talk to them about innovation. Of course, we also have a growth fund which stimulates productivity and innovation in companies.
A recent development are innovation vouchers, which were referred to at the most recent meeting of this committee. They are being successfully used to stimulate a cultural shift in the small business community by encouraging them to build links with the research community. We are adopting a lead role in driving the effective commercialisation of research in Ireland, through the promotion of the commercialisation fund and through stimulating collaboration between industry and the third-level sector. We support between 65 and 70 innovative start-up companies each year. We are also driving collaboration regionally by continuing to financially support institutes of technology in developing applied research capability in areas of strategic relevance to local industry and to the college.
More recently, we are supporting and driving programmes such as the competence centre programme and industry-led networks. These provide strong industry-academic linkages. Specifically, they allow industry to set an agenda for research, ensuring that it is directed at specific industry and market needs. We take a strong leadership role in Ireland's involvement in the seventh EU framework programme and the European Space Agency, ensuring significantly increased participation in the programme, particularly by Irish companies.
If I may move on to open innovation, a term I used earlier, this covers situations where companies that are developing new products or technologies look outside themselves to sources of external knowledge. This would include not only the research community in third level institutions, but also other companies and research groups overseas. Our intention here is to help our clients locate and use this expertise and we do that through the funding available as well as our network of contacts.
Unlike many European countries, Ireland has not developed a set of research institutes dedicated to working with industry, with one or two exceptions such as Teagasc. Institutions such as the Fraunhofer in Germany and CNRS centres in France were created with the intention of developing new knowledge and transferring it to the benefit of industry in those countries. Accordingly, it has fallen to the academic system in Ireland to take up this role, which has the benefit of engaging a community of intelligent, knowledgeable and creative people with industry. Of course, it has the disadvantage that it creates a tension between the natural academic interest in following research driven by curiosity, with an industry expectation of the right answer delivered in a short timescale. To make effective college-industry collaborations work we use our skilled staff who understand the technology and can bridge the academic and industrial world as well as supporting the activity through grant assistance. In the past two years we have supported 479 collaborations between industry and third level institutions involving a range of different types of company, from small companies using innovation vouchers through to established SMEs and multinationals. In the latter case we work closely with the IDA, which is represented on our grant approval committees.
I mention specifically the work we do to encourage participation in the EU framework programme. That programme supports collaboration across Europe and has a European budget of €50 billion. Our national target is to attract €600 million of funding to Ireland, both to the third level sector and to industry during the period of the programme. The target was set by Government through the Cabinet sub-committee on research and development. In the past two years the network we lead has succeeded in bringing in more than €100 million a week. We are working hard to improve on that level.
Our approach to commercialisation, where possible, has been to engage in an industry-driven approach using the existing industry base as a platform to bring commercial reality to bear. We only support research where there is a real opportunity for economic benefit here. To emphasise that point; as an agency our interest is only in supporting commercially relevant research where there is a reasonably near-term possibility of commercialisation, and where industry is helping us to set the agenda. We work with researchers to help them develop their ideas in a way that is more aligned to industry needs. Our commercialisation specialists have distinct skill sets of technical competence, industry experience and deep knowledge of intellectual property and the processes by which it gets into industry.
In addition to supporting the third level sector in this effort the State has funded 32 new staff in technology transfer offices across that sector to bring those skills to bear within the institutions so that the colleges can recognise that intellectual property has to be managed in a professional manner. Enterprise Ireland operates a wide range of supports to promote innovation across our client base, to promote collaboration between industry and the third level sector and to drive the commercialisation of third level research. In carrying out those activities we work closely with our sister agencies, in particular SFI, the IDA and the Higher Education Authority. I thank the committee for inviting us to appear before it today. We would be happy to respond to further questions or issues the committee might wish to raise.
As we have another group coming and because of the time constraints I will limit members to two minutes at a time. I ask members to oblige in that regard.
I thank Mr. Ó Móráin and welcome him and his colleagues. I have two brief questions. Could he give the committee a view on behalf of Enterprise Ireland of the co-ordination and collaboration that currently exists within the higher education sector between colleges? He rightly pointed out in his presentation the importance of the link between industry and higher education but I am interested in hearing his views on whether we are getting proper co-ordination within the higher education sector. My view is that we are not. Given his expertise in the area I am interested in hearing Mr. Ó Móráin's views on the issue.
At the end of his presentation Mr. Ó Móráin indicated that in the past two years more than 20 spin-off companies have emerged from the research community, in addition to 118 technology licences. The target for spin-offs in 2009 is 26 and 62. Will Enterprise Ireland achieve that?
At a time in education when many primary, post-primary and higher education areas are experiencing reductions in funding, some of it quite dramatic and having a swingeing impact in terms of front-line services, the area where we have continued to invest heavily in recent years has been research, in particular through Science Foundation Ireland, SFI. Are we getting value for money? Are we seeing an increase in employment from that ultimate commercialisation of the funds that go into research and development? If not, why can we not use that resource in a more focused way, given the difficult circumstances in which the country finds itself?
Mr. Ó Móráin and his colleagues are very welcome. I will complement those questions in the interests of productivity. I have essentially two key points. How does one overcome the academic resistance to the commercialisation of research? How does Mr. Ó Móráin ensure that the 32 staff located in the campuses are not put in charge of the photocopying machine but are central to the awareness of postgraduate researchers who might come across something that has a commercial value but is an offshoot of the pursuit of their holy grail? Is there a mechanism whereby the commerciality of that offshoot can be picked up by somebody else? If somebody embarks on a research track with a target in mind, he or she might accidentally stumble across something that has a commercial potential. How does one sensitise research teams to recognise that something might have commercial potential and that even if it does not interest them it might interest somebody else on the campus? What role does each of the 32 technology transfer officers have and what is their status within the seven universities and the other higher level organisations?
Is Enterprise Ireland aware that the regulatory side of the State and the control side of the public service sector is making it extremely difficult for those young infants to get out of the cot and walk by themselves? I specifically refer to the requirement that if a fledgling company tenders for public business it must have three years of accounts and tax returns and other documentation. That eventually says to the child learning to walk that unless he or she can sprint 100 m in ten seconds it will not do business with him or her. The first question that company will be asked if it is trying to sell to the public service anywhere else in the world is how many Government or public service contracts it has at home. If one answers that question in the negative then one is spancelled.
I welcome the delegates. I wish to ask one question that is on the minds of everybody. Apart from innovation, one is dealing with companies that are exporting. As Mr. Ó Móráin indicated, we need to have export-led growth. Are many of the companies with which he is involved experiencing the credit crunch from the banks? What is Enterprise Ireland doing about that and what can be done about it? Is it impacting on innovation in the colleges as well as on Enterprise Ireland's budget? Companies are now more interested in survival than pursuing innovation.
Two weeks ago Science Foundation Ireland came before the committee with a specialist in innovation, Mr. Seán McNulty, from a firm called Innovator.
Mr. Feargal Ó Móráin
We read the transcript.
That is great. He spoke about the innovation vouchers being worth €5,000 each, and that approximately 300 out of 500 companies that received the vouchers have not redeemed them. Why are the vouchers Enterprise Ireland is giving out not being redeemed? Are the companies being shown how to redeem them for their benefit? Is it not the case that the companies do not know how to use them because they are not being shown how to carry out research to meet customer needs? Should the innovation vouchers be only redeemable with universities and institutes of technology when providers such as Mr. McNulty exist who work with private clients? His work seemed to be extremely well targeted to customer needs. Surely it would be beneficial if the vouchers were used in that way? Does Mr. Ó Móráin work with Richard Keenan & Co. Limited, a company that is based in Carlow?
Mr. Feargal Ó Móráin
Yes.
Will Mr. Ó Móráin explain his role with that company, which has managed to innovate and develop a new feeding system for farmers that did not result in cuts in income? In fact, output has increased.
There has been a criticism levelled against Enterprise Ireland that it avoids the knowledge game like the plague. How would Mr. Ó Móráin break down Enterprise Ireland's overall activities in terms of imparting knowledge and advice and of empowering companies, not just to be fed for one day but to learn how to do it for themselves in future?
This is a small open economy. We rely heavily on export growth in indigenous industry, which is Enterprise Ireland's specific responsibility. Since the late 1990s the level of indigenous growth has been relatively trivial. There was a report in 2004 by Mr. Paul Tansey and others who have been extremely critical. Given these reports, how can Mr.Ó Móráin account for Enterprise Ireland's outcomes?
I welcome the Enterprise Ireland representatives. There seems a significant overlap in the work and functions of Enterprise Ireland and IDA Ireland. In some instances, Enterprise Ireland may be seen to be in competition with IDA Ireland, although strictly speaking Enterprise Ireland is for indigenous industries. I note that after a period we have not developed a research institute dedicated to working with Irish industry as occurred in other European countries.
Often when help is sought Enterprise Ireland is reactive rather than proactive. Especially in the current climate where so many small indigenous industries are experiencing hardship, Enterprise Ireland seems restricted in providing financial supports for matters such as consultancy efforts. Small token grants are being made available in a time of crisis to many industries.
Going on the information from Mr. Ó Móráin, it is difficult to understand why it is necessary for Enterprise Ireland to be involved in overseas missions to the most peculiar locations in the context of innovation in Irish industry. Mr. Ó Móráin spoke of indigenous Irish industries involved in overseas missions to Las Vegas three or four times last year, boot camps in New York and other such efforts. I would be grateful if he would explain the function and relevance of such trips to the growth of indigenous industry.
I welcome the delegation. How does Enterprise Ireland measure success in innovation per se in the economy? Are there international benchmarks against which it operates and how does Ireland compare against those?
Mr. Ó Móráin stated Enterprise Ireland supports 70 innovative start-up companies each year. Is that an internal definition Enterprise Ireland uses for particular types of start-ups as opposed to non-innovative start-ups? He might give the committee an insight into that.
The EU framework programme seems to be about collaboration across Europe. Mr. Ó Móráin stated there is funding of €50 billion available, Ireland's target is €600 million and we are achieving €1 million per week. That seems to be in collaboration with a kind of network. He might clarify the matter.
On success in the food area, how much scope is there at this stage for further innovation in the food area? As we travel right across Europe and around the world, we see many possibilities and new products. Is there further scope or potential in Ireland or is there anything uniquely Irish we could develop?
Obviously, the Enterprise Ireland representatives read the transcripts from last week's meeting which was quite an education and informative session. Science Foundation Ireland's representatives were here not to talk about innovation but to talk about that organisation's work. However, the discussion focused on the area of innovation. The disadvantage of coming in after their contribution is that some questions were raised at the meeting which can only be answered by Enterprise Ireland.
Senator Healy Eames mentioned the issue of innovation vouchers. It is valid to ask how many companies have them. Enterprise Ireland has 4,000 on its database. How many companies would need them and how many would have them? Of those who have been given them, how many companies have not used them? That is a valid point. The companies might have been given them or someone within the organisation might have been given them but did not know what to do with them. What is happening? Perhaps there is a need for more of a marketing approach towards the companies stating what they can do with the innovation voucher.
Deputy Feighan mentioned how in an economic recession one tries to cut one's cloth to make it fit and one is not focused on innovation. I would be interested in Mr. Ó Móráin's views on how innovation can help a company get out of the depressionary cycle, for example, by launching new product lines. This will not always apply in the retail sector but there is scope in the food business, for example, for innovation in information technology.
Mr. Seán McNulty, Dr. Frank Devitt and Professor Frank Gannon spoke to members at the last meeting. Professor Gannon, in referring to IDA Ireland more than anything else, stated that with his colleague, Dr. Ruth Freeman, he had been working with IDA Ireland outside Ireland and had visited the US to explain programmes. He mentioned that the batch of companies with whom Dr. Freeman works often does not know about the innovation voucher system. Given that Mr. Ó Móráin spoke of 479 collaborations and this idea of open innovation whereby indigenous companies can interact with third level institutions and other companies, possibly from abroad, perhaps there is a need, in conjunction with IDA Ireland, to market the innovation vouchers internationally as well and to ensure when collaborations are being discussed that this concept, which I presume is still fairly novel internationally, is espoused more. Some of the companies which are innovation-driven might see it as a opportunity and might be attracted more by that than by our generous corporation tax levels, for example.
Although I have other questions, there is a time constraint. The members would be interested to hear what Mr. Ó Móráin has to say in reply and then we will respond.
Mr. Feargal Ó Móráin
The questions range over virtually every area of economic development policy. In case I or my colleagues miss some issues raised, I will make my excuse in advance and we will happily come back afterwards. I will go through the questions in order as it might be the simplest way.
The question of the co-ordination between colleges in Ireland was raised. The fundamental purpose of the universities and the institutes of technology is to train and teach. That is why they were established. There is the question of how they co-ordinate the number of courses being provided. The area in which we have an interest is co-ordination between them in research expertise. The honest answer is that the level of co-ordination has not been good enough and is getting better. We will see much more co-ordination in future, and the activities of Mr. Colm McCarthy's group and others will help that purpose.
The attitude taken by Enterprise Ireland as a funding agency of research is, like SFI, one of insistence on collaboration. The significant change over the four, five or six years has been that the majority of grants which SFI, for example, approves, such as the large CSETs, involve inter-institution collaboration. It is expected now that collaboration will happen and the institutions are responding.
In Enterprise Ireland's case, for example, where we are supporting competence centres, we will only support one competence centre in an area and we want a competence centre to link in with every area of expertise in the country. We can insist that such will happen because we are the funding agency, and it will happen. In our experience, the third level sector is responding. It is coming from a position where there was insufficient co-ordination to a position where there is a fair amount going on, and to one where there will be much more in the future. The spin-out target will be achieved this year, as will the licensing target. I will return in a moment to the question raised by Deputy Quinn on what is happening within the universities.
On the debate which has developed in the context of constrained resources about the relevance of funding research relative to other priorities, I would make two points. First, it is important we as a country take a long-term perspective on the development of our infrastructure and it is not really possible to develop a research infrastructure on a stop-go basis. When one is appointing and building up expertise, one cannot suddenly withdraw the funding unless one wants to see the infrastructure, which has been built up, dissolve again.
From an industrial development point of view, our interest is in such research funding which is relevant to industry. Our view of life is that in the world we face, both now and in the future, the lifeblood of industry is innovation, part of which is the technology and knowledge which is emerging out of the third level sector. Our argument for the continuation of funding is that it is a necessary part of developing the country and a necessary underpinning of the export-led growth which the country needs.
As for the relative amounts for different areas, obviously, that is not a matter for the agency itself. What we can see is the direct benefit of the funding we are investing and how it is connected to industry. As I stated in my presentation, that is our only interest.
I will ask my colleague, Gearóid Mooney to cover the question of academic-industry interaction. However, on a point of clarification, the 32 staff which we mentioned we were funding are not our staff. We are adopting a two-pronged approach. We have been supporting the development within the institutions of the technology transfer offices, and what we have provided is funding to enable them develop those offices. The purposes of those offices, as in any third level institution, is to identify and protect technology and then find a way to transfer into industry that portion of the technology which is relevant. As the Deputy stated, it is a rather serendipitous process because in many cases it is a by-product of other activities and the challenge is to capture it and convert it into technology. When my colleague, Gearóid Mooney, who manages one of our teams working in this area, has spoken, the committee will understand that there is no chance at all of them deviating from what they are supposed to be doing.
Mr. Gearóid Mooney
On the academic resistance question that was specifically raised, no doubt an academic has a particular purpose and his or her career and advancement depend on publications and the like. While it is probably unreasonable to expect that there would be a higher level of entrepreneurs among academics than one would find in the normal community, there have been a number of spectacular successes out of the academic entrepreneurial side such as Professor Barry Smyth with ChangingWorlds, the people in Havoc, etc. It is possible, but we would recognise it is a small proportion.
Our aim for the balance of those who are not directly entrepreneurial themselves is to ensure they get connected to the best entrepreneurial resources external to the university. For instance, when we look at our commercialisation fund, part of our efforts while those projects are ongoing is to ensure they get connected to the right people in industry who can bring that kind of input to them. More recently, we launched a business partner programme where we specifically recruited skilled entrepreneurs who have done it before — raised money and built technology companies — who would volunteer to come in and work with the potential spin-out companies to give them the kind of commercial backbone they would not necessarily have within their own resources. All we ask of the academics in those cases is to support the technology piece they are well used to and well capable of, and work with the entrepreneur to bring it out.
On attitude and the resistance question, we must ensure there is a decent infrastructure with people, such as the 32 my colleague mentioned, who are promoted enough on campus so that somebody with an idea knows to whom to turn.
Can one of those 32, or persons like them, review the research that has been undertaken or must they wait until somebody doing research knocks on their door to say he or she might have an idea?
Mr. Gearóid Mooney
If we look at their behaviour over the past two years, in particular, which is the time period most of those 32 have been put in place, they have been proactive. They have met all the major research groups. The larger SFI-funded centres would have specific people in those offices assigned to look after those specific centres and make it their business to know what is going on. There are still challenges but efforts are being made in that respect.
I thank Mr. Mooney. I will return to Mr. Ó Móráin because there may be a vote called on the Order of Business in the Dáil in five minutes which means we would have only another ten or 12 minutes. I am sorry to cut Mr. Mooney short. I accept there were other questions.
Mr. Feargal Ó Móráin
I will try to go through the questions quickly. Public procurement was raised by Deputy Quinn. All I could say on that is there is a tension between the public procurement system as it is operated and small companies who find it difficult. Deputy Quinn's analysis is largely correct.
Who is winning?
Mr. Feargal Ó Móráin
It is probably a draw at present. There are efforts being made within the system. Various initiatives have been taken but it is an oft-repeated claim of small companies that they find it easier to do business with public procurement bodies outside Ireland than within, as the Deputy will be aware. It is an ongoing issue.
How can we help?
Mr. Feargal Ó Móráin
Those operating the public procurement system are concerned that they must satisfy the requirements of the Comptroller and Auditor General and the Committee of Public Accounts, and I suppose their bottom line is that everything is done rigorously as it should be. The issue is to find a way to put a developmental approach on top of that.
Measures can be taken such as, for example, giving extra benefit to those who include small companies in their proposals, and on rules and regulations which the Deputy mentioned. It is quite true that the way applications are scored often disadvantages smaller companies because they do not have the track record or the bond in place. The committee can help by continuing to emphasise that this is an important area and the requirements of proper fiduciary management, which is extremely important, and good value for money to the taxpayer must be balanced with the developmental approach, and that there could be a better balance.
The credit crunch was mentioned. While a little removed from the immediate topic under discussion, it is uppermost in our minds. It is what we are spending most time on at present. We have been allocated an additional €50 million this year for the enterprise stabilisation fund which we are investing in companies. Our typical investment is in the order of €300,000, usually through preference shares. There was a suggestion that we were making trivial investments, but I do not regard that as trivial. Similarly, the level of our research and development grants would typically be in that range as well. These are fairly substantial sums of money. A substantial sum of money is being invested by the agency this year. In addition to the banks, we require in those companies we support that the banks are part of the solution. It is a tripartite arrangement between the management of the company, the banks and ourselves. We expect to have invested and supported through this mechanism well over 100 companies by the end of the year, and considerably more as time goes on.
I welcome what Mr. Ó Móráin has said. Would it be wiser that more money be put into that fund for Enterprise Ireland to administer to companies which need it? Does Enterprise Ireland need more money from the Government or wherever?
Mr. Feargal Ó Móráin
At present, we are happy. As the Deputy will be aware, budgets work on an annual basis. We are looking at the period between now and the end of this year and we are happy that we are adequately funded for that period. As to what happens next year, that is another story.
There were a number of questions about innovation vouchers, on which I will ask my colleague, Mr. Martin Lyes, to comment, but before he does, I will run through some of the other questions.
Some members get anxious when the division bell starts ringing. It rings for six minutes and then one has four minutes to get back for the vote. We have another four minutes of time here. I will take 30-second follow-up questions from members. Then I will ask Senator Healy Eames, who, as a Senator, does not have to attend the vote, to chair the meeting. Mr. Ó Móráin's responses will be in the Official Report. There are three Senators present.
For my part, I want to ask a quick question. At the last meeting I spoke of Enterprise Ireland's applied innovation department, which is small. There was a call for a new innovation foundation similar to Science Foundation Ireland. Is Enterprise Ireland's innovation section too small? Should it be a stand-alone agency or should it be enlarged?
As nobody is offering a question, I ask Senator Healy Eames to take the Chair. Mr. Ó Móráin may follow up with the responses. I thank him for his co-operation.
Senator Fidelma Healy Eames took the Chair.
I ask the delegation to continue with its answers to the questions.
Mr. Feargal Ó Móráin
Perhaps we will cover the issue of innovation vouchers on which there were a number of questions. I ask my colleague, Mr. Martin Lyes, to comment on the questions raised.
Mr. Martin Lyes
I thank the committee for its interest in innovation vouchers. The vouchers started as a recommendation of the Small Business Forum in 2006 and in 2007 we are asked to make them a reality. We based our approach on the Dutch model. The Dutch had started innovation vouchers at an early stage. The policy objective behind the vouchers is to encourage collaboration between small companies — those with fewer than 50 employees — and public sector research providers, institutes of technology and universities.
In the documentation provided there are data on the number approved. Approximately 1,500 have been approved to date and 370 have been redeemed. In my experience in running programmes, there is always a slow period at the beginning of any programme, while people begin to get used to it, while it is being promoted etc., and that happened in this case.
The position in which we find ourselves is that there continues to be a sustained interest in the vouchers, not only from small businesses. This is not the 4,000 to which we referred earlier; this is 250,000 small businesses around the country with fewer than 50 employees. Accountants, hairdressers, retailers etc. are equally open to apply.
There is significant interest in this and the systems and procedures in handling vouchers, particularly in the institutes of technology, have become much more proficient. There was a long period when none was redeemed and we began to get worried.
Describe the link-up? They apply through Enterprise Ireland's website.
Mr. Martin Lyes
Yes.
What follow-up has Enterprise Ireland with them? Is Enterprise Ireland mapping out a route for them? Who is their link person, for example, in the institutes of technology? Do they have all that information? Speak to us about that process.
Mr. Martin Lyes
The innovationvoucher.ie website gives information, not only on examples of successful vouchers so that people can get an idea of the type of work that is conducted, but also on sources of knowledge, contact points in colleges etc. It contains a full pack of support information.
It is an electronically submitted two-page form and the process is quick. The turn-around time for approval is approximately four weeks in most cases. We introduced a fast-track approach so that one could apply directly electronically and if one has an acceptable project, one is an eligible applicant, that is, a small company.
With respect, that is not the difficulty. Some 1,500 were approved and 370 redeemed. The difficulty seems to be that many of the small and medium enterprises do not know how to use them. How is Enterprise Ireland scaffolding that business? For example, many small and medium enterprises would not have a clue how to research. How is Enterprise Ireland leading them forward? How is it taking them by the hand? Speak about that process.
Mr. Martin Lyes
We provide support through our staff so that the companies have contacts within Enterprise Ireland to whom they can talk. We have regional offices and they are used as well. As I stated, we have contact points throughout the website. We have a fairly active promotion activity and a fairly active interaction and follow-up with the companies as they go through the vouchers. The redemption rate is increasing significantly. The systems are now in place. People understand the purpose of the vouchers and the colleges are very much more open and more organised in how they deal with them.
Has this brought colleges out to target the companies that have got the vouchers, for example?
Mr. Martin Lyes
Yes. This is a feature that we have seen during the past year where colleges, particularly institutes of technology, are going out to businesses suggesting that they get vouchers and suggesting work that they can do. That is a positive feature. The other point is there is a number of examples of cluster vouchers where groups of companies have come together and developed a common project between them and gone to a single supplier to deal with it.
On the process of approval for a voucher, obviously, there is an approvals border and Enterprise Ireland has decided that 1,500 are entitled to get them. Is there a sense that perhaps those who got them did not deserve them given that they have not redeemed them?
Mr. Martin Lyes
The approval process is a simple one. If the company is eligible and if there is a reasonable project to be done rather than something aspirational, so that it is not felt to be a waste of time, there is a simple approval process and people hear back quickly.
On the lack of redemption, the Dutch scheme which has been in operation for ten years enjoys a 60% redemption rate. That is because people apply and then lose the vouchers, find other things to do or the project perhaps becomes less relevant to them. There are all sorts of reasons projects are not redeemed. There is a year in which to use the voucher and if it is not used in that year, people can reapply. They are not restricted from sending a second application, and that often happens.
There was a further question in that regard. How does Mr. Lyes feel about the fact that they are only redeemable currently through universities and ITs. Are there other providers, for example, Innovator, the representative of which spoke at our last meeting, with whom it may be more beneficial to cash them in?
Mr. Martin Lyes
The policy objective is to link small companies with the public investment in the third level sector. If we start to expand beyond that it becomes difficult as a programme to control. For example, if we moved into consultancy, there is a considerable number of consultants and it would be difficult to see how such a programme could be controlled or why one would run that. Public expenditure in the research and development system in universities and institutes of technology has resulted——
Some courses were accredited. They could easily work in.
Mr. Martin Lyes
Training is not an eligible cost in the vouchers. Our intention is to get research and development going. There is an existing market for training courses.
This is not about training. The presentation at the last meeting by Mr. Seán McNulty was clearly about innovation and research and development-led activity.
Mr. Feargal Ó Móráin
That is correct. The innovation vouchers do not support training——
I accept that.
Mr. Feargal Ó Móráin
——and the reason they were introduced was to make use of the infrastructure which the State has developed. Essentially we provide vouchers to anybody who is eligible, subject to budget. Unlike other schemes, we are empowering applicants. We are not trying to second guess what they want to do.
It is clear that applicants have no difficulty in getting the voucher. The difficulty is that small and medium-sized enterprises end up with a voucher worth €5,000 that could be valuable to them in terms of innovation, but they do not know how to use them as they might if there was a "show and tell" approach. It is clear that that enabling approach is not currently being offered by Enterprise Ireland. That is what small and medium-sized enterprises are telling me.
Mr. Feargal Ó Móráin
There are two questions here. The question I answered related to why vouchers are not available to other service providers. I misunderstood the question.
My reason for asking that question is that other providers might be better able to enable the companies to use them.
Mr. Feargal Ó Móráin
The reason they are not available to other providers is that the policy objective is a different one. I will ask my colleague to comment. We work with companies to point them in the right direction. People may argue that we do not do enough. We do a lot, and I will comment on that. The innovation vouchers is only one scheme and, in terms of money, it is a relatively small scheme. Through the growth fund and through the R&D fund we support companies to use external providers. The difference is that it is done in the context of a programme. In other words, if a company informs us that it has a development plan and as part of that plan it needs to do training and to use external providers or private technical consultants, we will support it. We have supported many companies similar to the company mentioned by the Acting Chairman. I do not know whether that particular company was ever supported. It may have been. It is up to companies to retain whom they like. The voucher scheme is in a different category because it provides a wide level of support to lots of people.
To return to the specific issue the Acting Chairman raised regarding what help we are providing to people to find the right source, we accept the criticism that when we started the scheme and made vouchers available there was a problem. We have been taking action in the past year or so to overcome that. I am not sure whether we have got as far as we need to go. There are various issues.
Perhaps we could move on to the other issues.
Mr. Martin Lyes
I will address one point. We have a group within Enterprise Ireland managing the programme which is available to people. We use our regional offices for promotional activities. The colleges are also very active advocates.
That is a welcome development. Perhaps Mr. Ó Móráin would move on to deal with the other questions.
Mr. Feargal Ó Móráin
The Acting Chairman raised the question of Enterprise Ireland's involvement with Richard Keenan & Company Limited. We have had a huge involvement with that company over many years. It is a very interesting company, particularly because it combines a product with a service. What it is selling is not so much its machines, its fodder machines and so on, but the knowledge that goes with them. What Keenan's is selling to its customers is a complete package. We have supported Keenan's in many ways. We have supported it through work on the ground with some of our staff, helping with productivity and innovation. The company has received very substantial financial support from Enterprise Ireland. It has been involved in various training programmes and so on provided by Enterprise Ireland. Keenan's is a company that we highlight as an example because it is in a very traditional sector and one might ask how a company like that can survive.
What percentage of its business is exported?
Mr. Feargal Ó Móráin
The vast bulk of it is exported. I would guess it is 70% or 80%. Its exports go all over the world.
We accept it is a model of good practice. Perhaps we could move on and deal with the other questions because another group is due in.
Mr. Feargal Ó Móráin
There were some comments regarding how responsive Enterprise Ireland is as an agency. All I can say is that we work very hard to be responsive. We do annual surveys of our clients. We are not perfect but we are aiming to be as good as we can. Many of our programmes operate on very defined time limits where a company is guaranteed an answer within a set period. If a company applies for an R&D grant it is guaranteed a decision within eight weeks of receipt of the application.
There was a suggestion that indigenous growth is trivial. I reject that. We mentioned some figures in our document. In terms of the value of indigenous industry to the economy, there was a spend of approximately €19 billion, nearly €20 billion in the economy up to last year. The growth rate in exports of indigenous industry has been phenomenal, moving from approximately €10 billion to approximately €13 billion in the space of four or five years. There has been quite a significant growth. All our clients are obviously facing a serious economic challenge at the moment. What 2009 holds for them we do not know. However, even in 2008 the total exports of our client base increased slightly, which is very encouraging. From our point of view it reflects the fact that we now have a completely different industrial base than, say, 20 years ago. As the Acting Chairman emphasised, innovation is the lifeblood of the companies, and it is the innovative companies that are surviving.
In addition to labour costs what would Mr. Ó Móráin say is the major cost affecting the competitiveness of indigenous companies in exporting successfully?
Mr. Feargal Ó Móráin
The cost of energy is often quoted by many companies doing developments locally. Local authority charges are a big disincentive where they are being levied as part of the funding of local authorities.
Is Mr. Ó Móráin talking about rates?
Mr. Feargal Ó Móráin
No. I am talking about levies related to obtaining planning permission and levies for the services local authorities provide. It is an additional charge of development. Professional services in Ireland have become very expensive as well. It is not any one area. We would not single out wages in particular. Ireland has become a very high cost economy across all ranges.
On the issue of energy, since Mr. Ó Móráin specifically mentioned that in the first instance, it has been my experience as well that it is a major issue for companies at this time. What does Mr. Ó Móráin feel needs to be done there?
Mr. Feargal Ó Móráin
To be simplistic about it, we need to bring down the cost of energy. How that can happen is outside our remit. All we can say is that in terms of generating the export led growth that is required from both our companies and from the IDA client companies, it is an issue that needs to be addressed. There is much debate regarding how it should be addressed, by finding alternative sources of energy, competition and so on, but I do not have a solution to that.
There are many agencies in Ireland. Enterprise Ireland is one. Is it not the case that they all exist and operate in straight lines. Is Enterprise Ireland also feeding into the agencies that they may have a chance to make real change in this area? Is Enterprise Ireland informing the Commission for Energy Regulation about its findings?
Mr. Feargal Ó Móráin
Absolutely. We are informing our parent Department, the Department of Enterprise, Trade and Employment, because we are an agency of that Department. We are interested in everything that is a barrier to the development of our client base. The barriers to the development of our client base and that of the IDA are largely the same. There are some areas which are different, such as venture capital, which is not applicable to the IDA. There is no point in our giving grants to companies if there are other, bigger barriers to development.
Does Mr. Ó Móráin find that in practice there is joined-up thinking?
Mr. Feargal Ó Móráin
I do. Within our own Department there is a high level of joined-up thinking.
I mean has there been a response from the Department based on the feedback Enterprise Ireland has given regarding energy? This is a real threat to our competitiveness.
Mr. Feargal Ó Móráin
There is a high level of understanding. My perception is that it is now understood across the Government system that this is a very real issue. We have already seen some reductions in energy costs which we welcome very much. We look forward to further reductions.
I think I was asked how we measure success.
I asked about benchmarking, innovation and how we compare internationally.
Mr. Feargal Ó Móráin
As an agency, we measure success in terms of the overall impact our companies make. It is all about exports and jobs. Everything we do is about how well our companies provide economic benefit to the economy by employing people. This is the biggest impact companies have and it is measured through exports. That is our overall metric.
Is that an annual target and do Enterprise Ireland's executives receive a bonus on this basis?
Mr. Feargal Ó Móráin
Bonuses are a thing of the past now but there were bonuses previously. The metrics we publish are divided up by department, division and down to individual level. We all operate to metrics, though they vary in different areas. For example, in Mr. Mooney's area the metric in question is the number of spin-outs from universities and the number of licences his team achieves in a year. The target for this year is 26 spin-outs and Mr. Mooney is responsible for one third of those. He will be measured on his ability to deliver in this regard and this runs through the organisation. Like any company, we have metrics and they are scaled down. Each department has targets and we monitor them on a monthly basis and sometimes more frequently, depending on the nature of the activity.
Regarding our competitiveness compared with other countries, Forfás conducts comparative studies on the cost of business in Ireland and the efficiency of companies here, relative to other countries.
The question was how innovative Ireland is compared with other countries.
Mr. Feargal Ó Móráin
There have been some such studies but we do not spend much time conducting them as they are the responsibility of others. We realise that no matter how innovative our companies are compared with those in other countries, they are not innovative enough. The only way we can sustain an industry base in an Irish economy that is not a low-wage economy is on the basis of innovation. There is no other way, therefore, everything we do is focused on innovation, be it applied innovation, as discussed at the last committee meeting, research and development grants or work with universities. Everything is focused on innovation. Regarding comparisons with other countries, I do not think we are as innovative as leading countries like Finland but we are a great deal more innovative than most. It is a difficult question to answer but if the Senator is interested in related studies we can point him towards the available information.
The European framework programme was mentioned and the bulk of it consists of collaborative projects between Irish companies and universities and European companies and universities. There are two major benefits to this. First, regarding innovation, we believe that the more companies connect with projects involving companies and institutions outside the State, the more they will learn and build contacts. Second, Ireland Inc. seeks to attract as much funding for research in Ireland as possible from the EU. As I said, the target set for the seventh framework is €600 million. To date we have achieved €107 million and are on target for the total. The financial objective is very important but the whole purpose of the framework programme, relating to connections and so on, that lies behind this is equally important.
A question was raised relating to the scope for further innovation in food and there are good possibilities in this regard. At company level, a great deal of food research relates to product and process development. There is sometimes a misunderstanding that our research and development grants are to enable companies to engage in cutting-edge research. This is the case for some companies but for many others it is about developing products and processes through innovation, that is to say, it is about doing things better. This applies to the food industry as a great deal comes down to cost and the number of cent spent per minute. Separate from this there is a need for important and fundamental research in key areas, such as milk. To use an analogy, milk can be mined, the ingredients within it make it very interesting as a source of innovation. Enterprise Ireland has taken a major initiative in this regard and has invested €25 million over five years, in collaboration with the four big dairy companies, in a food innovation centre that connects a number of universities — the lead university is University College Cork. This is an example of how we take a long-term view but our only interest in this project lies in securing benefits for Ireland. We want to see results here, not elsewhere.
Deputy Paul Gogarty took the Chair.
On the issue of milk, farmers are currently being asked to produce milk at 20 cent per litre, though it costs 27 cent per litre. I am very interested in what Mr. Ó Móráin says about innovation in terms of milk. When does he think we will realise the benefits of this and how will prices for farmers be affected?
Mr. Feargal Ó Móráin
It is a long-term approach. The idea is, given that milk can be used in different ways, dairy companies buying milk from farmers can convert it into added-value products and pay farmers more. The problem is milk is a commodity. This time last year everyone thought we had reached nirvana as milk prices were as high as they had ever been but the world then changed very rapidly. The reasons for high prices disappeared due to drought, the collapse in the world economy and so on and this placed milk producers in an extremely difficult position. We are trying to work with the dairy companies to help them convert milk into more valuable commodities.
Are we talking about a period of five years?
Mr. Feargal Ó Móráin
Yes, we are.
Mention was made of our work overlapping with that of the IDA but I am bemused by this. There is much talk of overlapping at the moment but I am not sure how Enterprise Ireland overlaps with the IDA. We work closely with the IDA but there is a clear distinction between the two agencies.
The only overlap would be in areas of collaboration where indigenous companies work with overseas companies.
Mr. Feargal Ó Móráin
Could I give an example of that?
Please be brief, as we are running out of time.
Mr. Feargal Ó Móráin
We regard this as an area of opportunity. I will ask Mr. Mooney to comment on the example of Microsoft.
Mr. Gearóid Mooney
Microsoft has intellectual property it would like other companies to pick up on. Most recently, Microsoft was prepared to let go of a small business unit it had in Seattle, which was making money, but not enough, because it could not see how to make it grow. We found an entrepreneurial team here that was willing to take the unit on as a brand new start-up company. There was an announcement on this two weeks ago. The deal has been done and Enterprise Ireland has supplied the support package. Multinationals are a good source of such opportunities. If our companies have attractive products it makes sense to bundle them with those of the multinational as this helps with market development.
Mr. Feargal Ó Móráin
I thank the committee. This has been a brief meeting and many questions have been asked. I may have missed some questions because of the time limits but if members wish to engage further with us on the topics involved we would be happy to do so. We are very anxious to engage in the debate with Members of the Oireachtas.
On behalf of the committee I thank the delegates for attending. Their answers will be recorded in the Official Report so I suggest members consult that publication before getting back in touch with Mr. Ó Móráin. Depending on our work schedule, we may get the opportunity to invite the delegates back at some point in the future.
The joint committee went into private session at 11.20 a.m. and resumed in public session at 11.25 a.m.