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Máire Geoghegan-Quinn

Commissioner for Research, Innovation and Science

Investment in Research and Innovation – the Path to Economic Recovery

Keynote Speech at the Dublin City University

Dublin, 22 November 2010

Chancellor Byrne,

Prof MacCraith

Ladies and gentlemen,

These are difficult days for Ireland.

So I am delighted to be with you here today since it gives me the opportunity, amid all the current difficulties, to express my absolute confidence in Ireland's ability to build a positive future for itself.

This is not just my view. As Eurogroup and ECOFIN Finance Ministers noted in their statement last night, and I quote: “Given the strong fundamentals of the Irish economy, decisive implementation of the programme should allow a return to a robust and sustainable growth, safeguarding economic and social cohesion.”

And where better to deliver this message than here in Dublin City University (DCU), one of Ireland's leading Universities, and one which I am sure will be one of the powerhouses of Ireland's recovery?

Ireland is going through a period of great difficulty, a period of unprecedented challenges. But Ireland will come through. Ireland is blessed with enduring, fundamental attributes that will help safeguard its economic future.

In the year to date, Ireland had the second largest goods trade surplus in the entire EU. One third of exports were in high tech areas, such as information technology and life sciences. And Irish exports are growing - in the third quarter of this year, overall exports showed an annual rise of around 10 per cent In 2008, it was in absolute terms the 11th largest global exporter of services. Again, about one third of these were in high-technology sectors, such as computer services, much higher than the EU average of 17 per cent.

Irish companies are maintaining investment in research and development, which will be just as important as reducing costs in underpinning future competitiveness. The Commission has just released a survey showing that 57% of Irish companies had innovation activity between 2006 and 2008 – the fifth best figure in the EU.

And the Commission's recent R&D Investment Scoreboard showed that the 16 Irish-based companies in the top 1400 global investors in R&D actually increased their R&D investment by 13% in 2009.

There are also strong signs that inward investors continue to see Ireland as the right place for hi-tech investment.

It is extremely well placed to become a global innovation hub.

Against the backdrop of the serious economic and financial crisis, and the implementation of austerity measures in many countries, I am more convinced than ever that innovation is the key to a stable European economy, to growth and job creation.

In March this year, the European Commission proposed the Europe 2020 Strategy. This is an ambitious agenda designed to transform Europe into a smart, sustainable and socially–inclusive economy. It is aimed at getting Europe out of the current economic crisis, and research and innovation are at its heart.

The Member States approved this Strategy in June, and since then we have begun to launch the seven Flagship Initiatives promised by the Strategy to implement its objectives. As the European Commissioner for Research, Innovation and Science, I launched the third of these – the Innovation Union Flagship – in October in Brussels.

Facing up to our severe economic challenges, the Flagship proposes a bold and coherent set of policies and actions to make Europe an Innovation Union, with a successful innovation economy - the "i-conomy" as I like to call it.

We are being ambitious - we need innovation in every walk of life, not just in the laboratory or the factory. Not just in the most prosperous regions, but in cities and rural areas across the whole European Union. Not just research-driven innovation, but innovation in business models, management structures and processes, design and marketing.

The Flagship aims at balanced economic development in Europe, with the most advanced manufacturing sector in the world, capable of incorporating new innovative technologies, such as nano and bio-tech, into its products and processes, and a strong, vibrant services sector, with room for big businesses, SMEs and start-ups.

Nor is innovation limited to the private sector; it must happen too in our public sector, in our hospitals and our schools, and in government itself.

We need to reach the target of 3% of GDP spending on R&D that has been re-confirmed by Europe 2020. But we will not reach our goal without the right economic and regulatory conditions. And reaching it will only make sense if, through innovation, we transform ideas into new products and services that people actually want, and into new jobs for Europeans.

We also need to be more innovative to tackle the major challenges faced by our society now and in the coming decades, such as fighting climate change, healthy living for the growing number of older people in Europe, and using scarce resources more efficiently.

The solutions to these challenges can present enormous commercial opportunities for European companies, such as new medicines and treatments for older people or greener technologies for our homes, cars and cities.

The Innovation Union will use all relevant resources and policy instruments at its disposal, at local, regional, national and European level, across all relevant policy areas, and making full use of the talents and ideas in both our private and public sectors.

The first pillar of the Innovation Union is reform of higher education. Ireland has been at the forefront amongst the EU Member States pushing for the reform of universities. It has made a lot of progress since the modernisation agenda for universities was launched in 2006. Irish universities are forward-looking, but they need to develop even better links with European partners and become even more business-focused. It is time to go one step further and build new forms of cooperation across borders and across sectors, time to bring together business and academia, time to build up on innovation along the whole policy chain, from research to retail.

DCU has already adopted this approach, dubbing itself a "University of Enterprise", by establishing a DCU Enterprise Advisory Board comprised of global and national leaders from the enterprise sector and launching a seed-venture fund for early-stage technology start-ups in the Ryan Academy for Entrepreneurship. These are excellent initiatives which I warmly welcome.

The synergies produced by world-class universities, research organisations and international companies can develop into a growing innovation eco-system where local start –ups and SMEs can thrive. Ireland is well placed to capitalise on this type of innovation. Last month Ireland was ranked globally as the number one destination for jobs created by foreign inward investment, as international companies continue to make investment that is of high value, requires high skill levels and a sophisticated and open business environment.

We need to create the conditions to grow the research base alongside manufacturing. Ireland needs to foster its own indigenous companies. Why should there not be an Irish Nokia, Apple or Google? There is no trade-off between attracting and keeping big multinational companies and helping Ireland's own companies to grow. Indeed, the presence of a big international player can often create an ecosystem of start-ups and SMEs around it, where innovation can thrive.

These considerations are all addressed in the Innovation Union Flagship. I am determined, for example, to ensure that the EU's Framework Programme for Research will continue to provide the much-needed investment in research on which innovation is based. We must make it easier for researchers and companies – SMEs in particular – to access funding. We will streamline the funding process and take better account of the intrinsic risks associated with research and innovation projects. We also need to improve the use of Structural Funds to boost research and innovation capacities in the Member States and their regions. I think we should encourage their implementation as part of smart specialisation strategies.

Along with my colleagues in the European Commission, I am also determined to create the right framework conditions for enterprise. Our overall aim is to unblock the path from ideas to markets, to create the right conditions for entrepreneurs to flourish. We have tabled a full set of proposals to do just this.

The EU patent needs to be quickly agreed. Our innovators often pay ten times more to patent their ideas in Europe, compared to their competitors. This amounts to a tax on innovation, and the burden falls particularly hard on our SMEs. We will look into all the possible options to ensure that a breakthrough is finally achieved. Also a European market for patents and licensing could be developed, modelled on good practices in Member States such as France and Denmark.

To free up the markets for innovative goods and services, we need to systematically screen the regulatory frameworks concerned and then propose any necessary adaptations. We should also review Europe's standardisation system in order to speed up the setting of standards in key sectors that underpin innovation, such as Information and Communication Technology.

At the same time, the ever more rapid deployment of new information and communication technologies speeds up the transmission of knowledge and makes collaboration easier and more efficient. Now and in the future, companies cannot afford to rely on just their own employees for knowledge; the open paradigm began in ICT but is spreading to other innovative sectors, such as pharmaceuticals and the bio-economy

We need to remove obstacles to the cross-border flow of people, ideas and funding. This open circulation of information, and based on this, open innovation, are goals of the Innovation Union Flagship. We need to foster more open innovation. We must embrace new ways of sharing knowledge – knowledge and know-how is more evenly distributed around the world. One step we have already taken is to encourage open access to publications and data from publicly funded research.

Cooperation between the world of research and the world of business must be enhanced, obstacles removed and incentives put in place. We will provide the means for simpler and cheaper management of intellectual protection to reduce costs for researchers and companies.

Once companies embrace innovation, they can find their capacity to develop and expand, particularly internationally, is hampered by limited access venture capital. Most of the European funds are too small and do not have the critical mass to specialise and operate trans-nationally. Another obstacle to innovation is the shortage of higher risk loans to our most innovative companies. Banks do not put a value on knowledge assets, such as intellectual property, and so are often unwilling to invest in knowledge-based companies. Loans are also needed to help fund major infrastructure projects. So, what can we do?

At EU level, the current Risk Sharing Finance Facility (RSFF) under FP7 and the financial instruments of the Competitiveness and Innovation Framework Programme (CIP) have leveraged investments worth more than twenty times the contribution from the EU Budget, and have been unable to keep up with the great demand. However, we need to ensure that more SMEs participate in these programmes so that they can also leverage greater levels of private investment.

The expertise and market standing of the European Investment Bank (EIB) Group in managing these financial instruments has been a major factor in their success. The European Commission will work with the European Investment Bank, national financial intermediaries and private investors to develop proposals to bridge the funding gaps for all companies, but especially for SMEs and start-ups. This includes investment in knowledge transfer and start ups, so that research can be turned into innovation; venture capital for fast-growing firms; risk-sharing finance for research and development and innovation projects, and loans to fast growing SMEs.

The European Commission will also work to make it easier to invest across borders by ensuring that venture capital funds established in one Member State can invest freely anywhere in the EU, and without any unfavourable tax treatment.

We must also harness our large procurement budgets for the purposes of innovation, as they do so effectively in the United States. For highly innovative companies, it is very important to have a large reliable buyer prepared to purchase their products. Indeed, for many, this is as important as access to venture capital. What is needed, therefore, is nothing less than a fundamental re-alignment of procurement policy. Member States need to set aside part of the procurement budgets for pre-commercial or innovative procurement. I am hoping that EU leaders will give us the green light for this at the European Council meeting in February next year.

Ladies and gentlemen,

I warmly welcome the innovation-led initiatives that DCU is contributing to including An tSli Ghlas - The Green Way, Ireland's first green economic zone. An tSli Ghlas is an excellent example of the critical role that partnership across academia, industry and regional authorities can play in leading to significant innovation. This and other DCU initiatives are focussed on economic development and support for enterprise and embody many of the objectives and principles of the Innovation Union that I have talked about.

At this difficult time, they demonstrate great confidence in the role that research and innovation can play in creating a stable long term economy in Ireland. Confidence too in Ireland's ability to capitalise on the opportunities which the low-carbon economy will create. Why shouldn't Ireland, the country of forty shades of green, become a "green-tech" hub, with forty shades of innovation!

In Brussels, when they are talking about their own Member State, people refer to "the country I know best". Well, this is the country that I know best. And I know that Irish people are among the most resourceful, dynamic and creative in the world.

I am confident that Ireland will recover its fighting spirit and seek out and capitalise on opportunities to build a new economy. An economy built on innovation. The Innovation Union will help you to do this.

Ireland, its people, its companies and its universities, must not lose the dynamism and optimism they have shown over recent decades. Ireland has faced and overcome adversity in the past, and great challenges have brought out the best in Irish people. The challenges, as we are all very aware, are great, but the opportunities for Ireland are immense. The worst thing that we could do now would be to lose our confidence.

I am confident that Ireland will emerge from this immensely difficult period and go on to become one of the success stories of the first half of this century.

Thank you.

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