Innovation and jobs through public investment

Cormac Staunton: Ireland’s National Digital Research Centre (NDRC) has been ranked in the top 2.5 per cent of incubators; 19th worldwide and 7th in Europe, the highest placement for an Irish incubator. Incubators provide entrepreneurial support for start-up and early stage companies in particular sectors.

NDRC chief executive Ben Hurley said the endorsement provided further confirmation of the central place the centre maintains in the global ‘innovation ecosystem’.

NDRC describes itself as an early stage investor in innovation, making ventures happen by investing in start-ups and improving the environment in which ventures can grow. The NDRC began operations in 2007. Each year they work with approximately 1,000 individuals and invest into between 30 and 40 early stage technology ventures.

It is important to point out that this organisation is almost entirely government-funded and has registered charitable status. In 2012, it received Government subvention income of €4.3m (other income included EU Grant income of €325,319, and syndicated investment income of €10,000). Its main costs are research investment and fund management (€3.6m). Of its total costs, about 40% (approx. €1.8m of €4.5m) are staff costs for 23 staff.

By the end of 2013, the portfolio of start-up ventures supported by NDRC had secured €40m in commercial follow-on investment. The cumulative numbers of jobs created grew more than fivefold to a total of 250 by end 2012. Preliminary projections for 2013 suggest that this will grow further by well over 20% in 2013.

When ‘ripple impacts’ of digital jobs are considered, the NDRC estimates that the true value to the economy is up to 4.3 times the net digital jobs created. That would assume 1,075 jobs as a result of NDRC’s activities.

Without government funding, it is unlikely that an organisation like this would exist. It is a classic example of government investment ‘priming the pump’ for innovation and job creation, which contradicts the argument that the private sector alone can create jobs.

Investment (public and private) in Ireland has fallen from a high of 27% of GDP in 2006 to just over 10% in 2012, which was the lowest in the EU, and almost half of the EU average of 18%.

Cutting taxes is not going to close this gap. But as the NDRC shows, well targeted public investment has the ability to “crowd in” private investment to stimulate jobs, innovation and growth.

Links:
Irish Times Report 26th June 2014

NDRC Annual Report 2012

Cormac Staunton     @cormac_staunton

Cormac Stauton is currently a policy advisor on EU and international policy in the Central Bank of Ireland. Prior to this, he was a policy analyst in TASC, and co-authored the first economic inequality report, Cherishing All Equally.