Introduction

Definitions

By 'resources' I mean physical resources (buildings, communications etc), natural resources (land, sea, fresh water, minerals, climate, geography, biology etc), human resources (operative labour at various levels of skill) and finance (ie stored energy resulting from previous enterprise).

I distinguish 'knowhow' as a key human resource for the mobilisation of all the other types of resource and their integration into productive enterprise generating employment. I do this in order to draw attention to the key role of the education system as the main knowhow source, and to underline the rationale for using the 3rd-level education system as the prime determinant of the regional framework.

I lay stress on 'innovative' because any enterprise, if it is to make a net contribution to GNP, must have some sort of innovative component and generate a new market, rather than simply grabbing a share of an existing static or declining market, to the detriment of competitors. The term can be stretched to include import-substitution, using a technology that is innovative in the Irish context, If it is innovative in a global context, so much the better, as exports are then feasible.

By 'enterprise' I mean organised productive unit, involving team- work, rather than individualistic effort; control should as far as possible be democratic with the leading role played by the enterprise team, the finance resource being accessible but not dominant. The establishment of a creative complementary relationship between the entrepreneurial team and the source or sources of finance is in fact one of the key problem areas.

Outline

Background

(a) the relative weakness of local government; this is in marked contrast to the situations prevailing in every other European country; also
(b) the delivery of services by the central State at regional level by a number of distinct specialist agencies, each with its own regional structure, with all significant decisions being referred back to Dublin.

Also we have inherited a university system modelled on the British tradition, in which the emphasis is on individual academic distinction within discipline, and where there is little incentive for the people concerned to participate in, or catalyse, the transformation of scientific knowledge into a technology appropriate to enterprise development within Ireland. If this takes place at all, it usually involves dedicated individuals overcoming a series of obstacles.

Entry into the university system dominates the curricula and methods of second-level education, with the result that the technical sector at second level is underrated.

The above background problems in the education field have been partially tackled in the last 2 decades by the inauguration of the RTC (Regional Technical College) and NIHE (National Institute of Higher Education) systems, which are designed to give priority to the supply of knowhow, primarily to existing industry. Only in the past 5 years or so has it begun to be appreciated that there exists potential in the 3rd-level system for supplying knowhow in the context of independent innovative enterprise start-ups. This appreciation has however been impeded by centralist State policies, particularly in the case of the RTCS, whose ability to participate in regional enterprise generation is limited by close Dept of Education control. The obstacles to the support of the enterprise generation process by the 3rd-level system have been analysed in a recent report to the NBST by Jim Fitzpatrick Associates.

Viewed in the European context, the Irish academic system is competent and sophisticated; this is measured by the relatively high success-rate in achieving EEC funding for R&D. This is little appreciated within Ireland, so that it does not reflect itself into a due share of linkages with Irish industry. Insofar as there is transfer of knowhow from the university R&D system into industry as a result of EEC-funded projects, this tends to take place abroad. Thus the Irish academic R&D system is in danger of establishing itself as a European 'off-shore laboratory', rather than an engine of innovative enterprise in Ireland. This problem has been recognised and is under active consideration by the relevant State agencies.

Against this general background, my own personal background is also relevant, in that I have made a transition from an 'offshore laboratory' situation in nuclear physics in the 1950s, via a period of industrial technology and economic planning in the 1960s, towards my present position since 1970 as a non-academic consultant and 'knowhow-broker' at the university-industry interface.

During the last 15 years I have observed the enterprise generation process happening, or trying to happen, on numerous occasions, at the fringe of the postgraduate system, sometimes with ongoing success. I have attempted to embody this experience in several reports for State agencies. This paper is the first attempt to distill the experience in public form, since the Irish Times 'Science and Technology' column of a decade ago.

Statement of the Problem

1. How do we organise to remove the obstacles, or lower the threshold to facilitate innovative enterprise in Ireland, so that motivated people with knowhow (but lacking capital) can go into business and create employment?

2. How do we motivate people with knowhow, primarily in and around the 3rd-level postgraduate system, towards entrepreneurial action in co-ordination with others, rather than personal advancement within a single specialist discipline, or survival through emigration?

3. Given that there are already some people so motivated, who have begun to appreciate the problems arising from the over-centralised and archaic State machine, and to look to Brussels as an alternative somehow perceived as more benign, how are such people to be persuaded that the solution lies at home, in the demand for a properly constituted Regional Government, with the necessary powers and resources to support regional enterprise with minimal bureaucracy and maximum local knowledge?

Pointers towards a Solution

1. In the case of the IDA the emphasis has shifted from the 'advance factory' concept (to be filled by a foreign-owned productive unit) towards the 'enterprise centre' concept, aimed at small local start-ups, and providing on-site support services.

This emphasis is accompanied by the trend towards the regional 'one-stop shop', having several business support services (typically IDA, CTT, IIRS, YEA, AnCo) located in the one place, usually close to the RTC and/or the AnCo training centre.

In some locations the AnCo centre includes a 'new product development unit', in which enterprises destined for the IDA enterprise centre can occasionally be hatched, usually at the 'import substitution' level of innovation, Thus the AnCo system has enterprise incubation potential.

Teamwork and co-ordination at regional level however remain some- what embryonic, each major agency functioning within its own Dublin-based policy, referring back all but minor decisions. In particular, the AnCo and VEC systems, while sometimes they collaborate well at regional level, in other cases they don't communicate and even compete; it depends an the lucky chance of good personal relations among the leading local activists.

2. Private initiatives range from the quasi-commercial (eg a junior venture-seeding fund set up by the local Chamber of Commerce) to the quasi-charitable such as the Liffey Trust and the Community Enterprise movement; the latter includes many ad-hoc community groups initiating YEA-funded schemes, as well as spin-offs of international business experience such as CESL (the latter concept originated with the Control Data Corporation in the US; elsewhere the CDC process has courted a link with the local College as a source of innovative concepts; here however this factor has somehow got left out. We appear to be dealing with an Irish cultural blind spot).

Apart from the local venture-seeding fund, which is an important necessary element in the integrated approach developed in what follows, this activity constitutes an attempt by people of good will to fill, with varying degrees of effectiveness, the vacuum left by the lack of municipal and regional government resources devoted to enterprise development.

3. The academic sector has put some effort into organising its interface with industry, and has come up with a variety of mechanism for facilitating contact with existing industry and support of innovative enterprise, especially when the latter emerge from the postgraduate research system. Various combinations of customised course-work, applied-research consultancy, sponsored project work and feasibility studies ease are now available, one way or another, from most if not all 3rd-level campuses. This represents and important intellectual resource, in most cases of recognised international standing. It is however not adequately used by State and private agencies to encourage enterprise development, largely because of the tradition of undervaluing local expertise and dependence on imported knowhow.

4. Pointers to a solution from regional and local government in Ireland are regrettably scarce. Some local authorities have begun to provide small-business enterprise centres, at a craft or service level, without emphasis on the innovative element. SFADCO (Shannon Development) in the mid-west region has however piloted many of the concepts touched on here, particularly the concept of the Innovation Centre closely linked with a 3rd-level College (NIHE), and the development of a supportive network for exchange of experience between developing regions on the European fringe. SFADCO is an exceptional regional development agency in the Irish context; it is without associated regional government, and is totally dependent on central government funding. Typically, ideas piloted by SFADCO are taken up by the IDA for implementation nationally if successful, on a centralist basis.

There is plenty of positive experience abroad of the role of Regional Government in the support of the regional development process. There is no time on this occasion to go into this, but evidently it has been picked up by DG XVI of the Commission and embodied in the 'Business Innovation Centre' or 'BIC' model; this is currently being piloted in Dublin, Cork, Galway and Derry; it has already been piloted in Limerick in the sense that the Limerick experience has contributed to the BIG concept, along with Liege and other centres abroad.

In the absence of appropriate Regional Government structures, the BIC projects in Ireland are being piloted by ad-hoc task-forces drawn from the business and academic communities and from local government. In Dublin the prime initiative comes from the DIT.

Technopole Model

Consider a system having 3 main components: a teaching component, a research component and an enterprise incubation component. These 3 components function as a co-ordinated, viable system, producing:

(a) people with knowhow employable by existing firms,
(b) solutions to problems,
(c) new product concepts and feasibility studies, and
(d) innovative enterprises.

Let us call this system a 'technopole'. Let us follow step by step the genesis of an innovative enterprise within such a system.

Typically, a member of academic staff is involved in industrial contact through the student placement process, or through specialist consultancy. As a result of such contact, ideas occur which lead to the specification of problems of final-year student projects, of which in a typical College there may be several hundred per annum.

Some proportion of these, say 10%, may show the germ of an innovative marketable concept. This 10% could be encouraged, by accessible seed-funding, to go forward to a feasibility study or prototype stage, that could form part of a postgraduate project. Such a project could form the basis of the development of an enterprise team with complementary skills from different disciplines; market experience could be picked up by linking with appropriate outside sponsorship. The latter might in some cases be the source of some of the seed-funding.

Once feasibility was demonstrated, the team with its project would go forward into the enterprise incubator, possibly taking the sponsor into the management. The academic supervisor of the post-graduate project could remain on as consultant know-how source to the emerging enterprise.

Thus in order to get a flow of a handful of potentially viable innovative enterprises per annum into the marketplace, it is necessary to put hundreds of embryonic concepts through a screening process; the 3rd-level system, with its increasing emphasis on project-work, and its associated postgraduate system, is an ideal place to carry out this screening, creatively, at minimal cost.

In close touch with the teaching, postgraduate and enterprise incubation components of the system would need to be an integrating element, the Regional Development Agency itself, with its databases of market intelligence, demographic statistics, company profiles and all relevant support services, including venture seed funding. This would, in a sense, be the 'technopole management'.

Connell Fanning, in his study of regional development needs in Cork, has identified several key elements needed in support of regional enterprise development which can be constructed at marginal cost simply by integrating existing disparate State services and developing a teamwork approach. This is totally convergent with the technopole concept as outlined; all that is needed is to add in the knowhow ingredient by interfacing actively with the 3rd-level college or colleges viewed as a continuous source of potentially marketable concepts and feasibility studies.

An integrated 'one-stop shop' with resources for venture-seeding, and financial autonomy, would in itself lower the threshold for enterprise development in a region. Bring in the College(s) into the system and we have a dynamic 'technopole', not only providing a continuous source of ideas (whether crazy or otherwise), but also a system for filtering them, and a means for students in large numbers to gain experience of the enterprise generation process, picking up an entrepreneurial culture that is creative and social, rather than individualistic and predatory.

Regional Government

An important factor influencing the viability of new and existing business is the tax environment. For example, at present labour is heavily taxed and capital is subsidised, with the labour tax being deducted at source. Crotty has argued that this should be reversed, with labour being subsidised with a 'social wage' derived from a tax on productive assets. This could be implemented without significantly altering existing cash flows, but the basis would be changed, and the new environment would show itself at the margins: there would be an incentive for owners of productive property to produce with it, recruiting labour for the purpose at a marginal economic wage on top of the social wage; a sort of legalising of the black economy.

In this environment it would be possible for the aspiring entrepreneur to live on his social wage and forgo his economic wage as 'sweat-equity' during the early days of his enterprise; the threshold for entrepreneurship would be lowered, provided the now more costly capital equipment could be leased rather than bought; this could be a regional development agency service.

Thus if the various regional development agencies were to be upgraded to regional governments it would be possible, again within centrally-defined constraints, to experiment with different taxation regimes as well as different enterprise development procedures, and learn from the process.

While the EEC is attempting to impose some overall uniformity, there remains, and are likely to remain, substantial differences between member States in the way they do things. It is useful to have these differences; we can.learn from them. It would similarly be useful to have the possibility of developing different approached to regional development within the various regions of Ireland, whose resources and needs differ widely; local knowledge is crucial to the decision-process.

Immediate Steps

In the former case, there is a ready-made vehicle for exploring the regional enterprise development needs, looking at the problem from all angles, namely the BIG ad-hoc support team itself. The potential role of autonomous regional government in the regional development process is a valid area of investigation in this context, and there is no reason why it should not be on the agenda.

In the other regions, it will be necessary for the existing development activists, who are interested in developing and promoting the *regional technopole' concept, and are already actively involved in one or other of its component elements, to come together around the concept of the 'integrated regional development plan', initially on a voluntary ad-hoc basis, or perhaps using the platform of an existing voluntary organisation (Regional Scientific Council, Muintir na Tire, or whatever).

Aspects of the integrated regional development plan could be elaborated, at zero or marginal cost, using a co-ordinated set of student projects, with development-minded supervisors in touch with the activists' network.

This process, once it became cohesive, could then become professional via the BIC process, forming the active core of the regional technopole, and the basis for the political demand for regional government.

Some navigational notes:

Copyright Dr Roy Johnston 1999