At the same time that nearly 100 other countries held their global entrepreneurship weeks, Ireland hosted the IBM SmartCamp competition and its head of government said the nation aspired to be an innovation hub.
Brian Cowen, Ireland’s taoiseach, in mid-November said: "Our goal is to make Ireland a global innovation hub and I would like to extend an open invitation to all our international visitors [to the IBM SmartCamp] to return to Ireland and to take advantage of the hospitality and business supports we have to offer."
However, as almost every country tries to improve the rate of innovation and entrepreneurialism to compete in a global economy and recover from the credit crunch, Ireland’s hospitality is being put to the test.
The bailout by the European Union [EU] of its Irish member state brought low by property speculation and bank lending will result in tax rises and public spending cuts in return for less than €100bn ($132bn) in potential funding coordinated by the European Central Bank – or more than half its gross domestic product (GDP).
Despite public spending cuts, the Irish government has made investment in innovation a priority. In July, nearly two years after a series of reports and taskforces were drawn up to formulate policies to deal with the consequences of the economic downturn, Ireland launched a €500m fund of venture capital funds.
The Innovation Fund Ireland was launched in New York as part of a plan to have venture capital funds invest in and bring portfolio companies to the country, one of the main recommendations in the Building Ireland’s Smart Economy – A Framework for Sustainable Economic Renewal report published in December 2008 and updated in March this year.
Cowen picked Damien Callaghan, strategic investment manager at Intel Capital, to chair the fund’s advisory board. Callaghan said: "The hypothesis is that an economic downturn is the time to invest most in research and development [R&D] and innovation so companies can cut costs and come out of the downturn in a strong position."
He said Ireland had a unique concentration of multinational companies based on the island but had been less successful in building indigenous, export-orientated companies. "The question was: what would help these companies and, beyond just software and start-ups, innovation more broadly?"
He added: "The role of the state is to enable people to take risk, such as through legislation of bankruptcy laws and intellectual property rights and [address] the shortage of risk capital and venture capitalists [VCs]."
The Innovation Fund Ireland is designed to meet the lack of risk capital and VCs by providing money and encouraging VCs to set up in the country. But Callaghan said: "It is a chicken and egg problem – VCs only come if there are sufficient start-up and growth companies.
"This requires an iterative process to solve individual problems for each VC so Ireland becomes the European base for VCs."
As well as Callaghan at Intel Capital, the board includes Martin Kelly, European partner of computer company IBM’s Venture Capital Group. Other board members include Bernard Byrne of bank AIB; Ray Nolan, formerly of Web Reservations International (WRI), Europe’s most successful venture capital exit last year worth more €1bn; Bernie Cullinan of Clarigen; Helen Ryan of healthcare company Creganna- Tactx Medical, which has just been acquired by private equity firm Permira; UCD president Dr Hugh Brady; special economic adviser to the taoiseach Prof Peter Clinch; Ireland’s National Treasury Management Agency director John Corrigan; Prof Frank Gannon of Science Foundation Ireland; Barry O’Leary of IDA Ireland, which promotes foreign direct investment; and Enterprise Ireland’s Frank Ryan.
The fund and strategy more broadly have been regarded positively by those they have tried to attract – overseas VCs. Robert Ackerman, founder of US-based technology VC Allegis Capital, said: "Europe as a VC market is more interesting than India or China, as these markets are growing but structurally challenged in financial transparency, IP [intellectual property] rights and non-equal treatment of domestic and foreign firms and investors.
"Europe does not have their GDP growth but has transparency, laws and IP rights plus innovation and R&D. The challenge for Europe is cultural and regulations – hence Switzerland being popular as it is outside the EU.
"Ireland has realised that to sustain innovation requires critical mass and an ecosystem. Ireland has a package of resources to help VCs that you do not see elsewhere.
"In the past 15 years Ireland has positioned itself as a European base for technology companies, and has been effective with that approach."
He said policy-makers were trying to lever low corporate tax rates for large corporation to encourage start-up activity, and Ireland could offer, among other things, an English-speaking, educated and young workforce.
Dan’l Lewin, vice-president for strategic and emerging business development at Microsoft, said the main factors promoting entrepreneurship were culture and local attitudes to start-ups; education, skills and leadership development; taxes, incentives and legislation; financing; and information and communications technology.
He cited the Monitor Entrepreneurship Benchmarking Survey, 2003-06, which has 14 criteria covering the following areas:
1 Financing strategies
2 Equity capital
3 Debt capital
4 Development skills
5 Research and development incentives
6 R&D spin-offs
7 R&D access
8 Technology transfer
9 Legitimacy
10 Individualist culture
11 Attitudes towards income taxes
12 Attitudes towards bankruptcy
13 Attitudes towards stock option use
14 Supply of business services
The World Economic Forum, a Switzerland-based nonprofit research organisation, said Ireland ranked 22nd in the world for innovation, seven places higher than its overall economic competitiveness, which had been dragged down by the financial crisis in its financial services sector.
The forum’s global competitiveness report for 2010-11 said Ireland "continues to benefit from a number of strengths, including excellent health and primary education (ranked 10th) and strong higher education and training (23rd), as well as well-functioning goods and labour markets, ranked 14th and 20th, respectively".
The report goes on: "These attributes have fostered a sophisticated and innovative business culture (ranked 20th for business sophistication and 22nd for innovation).
"On the other hand, the decline in rank is attributable to a weakening macroeconomic environment as well as continuing concerns related to financial markets (with a precipitous fall from seventh two years ago to 45th last year and 98th position this year."
Key indicators 2009
Population: 4.5 million
Gross domestic product: $227.8bn
GDP per capita: $51,356
GDP (PPP – purchasing power parity) as share of
world total: 0.25%