Submission to the Department of Finance in respect of the Public Consultation on

The Knowledge Development Box on behalf of

The Knowledge Box, the MNCs and #Vision2020 Startup Island

Ireland’s ambition to be a global startup hub

8th April 2015

“Ireland...will become recognised as a place where good ideas can be transformed

into excellent businesses and new jobs will be created as international investors and

mobile entrepreneurs seek Ireland out as a location of choice. “

Minister Bruton – National Policy Statement on Entrepreneurship in Ireland 2014

Submission prepared by Eoin Costello, CEO Startup Ireland

About Startup Ireland

Startup Ireland is an independent not-for-profit public/private partnership committed

to the goal of making Ireland a global startup hub by 2020. We seek to unify all those

stakeholders in the startup industry in Ireland around this goal which we call

‘#Vision2020 Startup Island’. By startup we mean high impact technology (in the

broadest sense) businesses that have the potential to grow rapidly internationally

from their base in our country thereby creating significant jobs and innovation in

Ireland.

Our membership of Startup Nations, the global network of national entrepreneurship

initiatives, gives us unrivalled access to international best practice in creating the

right conditions for high impact entrepreneurship thereby maximising the impact of

this key engine of economic growth in our country.

We have a national strategy which focuses on helping create internationally

competitive startup hubs in each of Ireland’s cities by 2020. A key building block

towards this is our flagship project, the Startup Gathering. Comprising 5 Days, 5

Cities, 5 Industries this is Ireland’s national startup expo on the theme ‘Start, Scale,

Succeed from Ireland’.

Ireland is fortunate to have an intense concentration of the world’s most influential

international technology corporations thanks to a considerable degree to the work of

the IDA, and a deep and proven government commitment to innovation and the

startup agenda through the work of our state enterprise agency Enterprise Ireland.

Tax is important but it’s not everything – deepening the startup ecosystem

makes all the stakeholders more embedded

Based on international experience, strengthening of Ireland’s startup sector through

incentivising certain key ‘mission critical’ activities of the multinationals to be located

here will help make the multinationals more deeply embedded in Ireland for the long

term due in part to a strengthening of the access to the network of innovation and

talent provided by Irish and international startups that cannot be easily replicated in

other European cities.

Therefore our submission does not seek to answer in detail the quasi technical

questions listed in the Public Consultation document, instead our objective is to

constructively highlight the potential gain to Ireland as a knowledge intensive

economy if the Knowledge Development Box is configured in the optimal manner to

create the incentive to multinationals to locate those knowledge intensive activities in

Ireland that are integral to successful startup ecosystems in advanced economies,

namely R&D, corporate venturing and corporate startup accelerators in Ireland.

Effectively it could be seen as a shopping list of what the relevant stakeholders

already based in Ireland could be incentivised to do if the Knowledge Development

Box is configured appropriately, as well as helping incentivise the next generation of

upcoming multinationals to locate knowledge intensive jobs in Ireland.

Our submission is composed of two parts, this document by Startup Ireland and an

accompanying research document in part two below which we commissioned from

specialist consultants, Ruby Consultants, who examined key components of the Irish

ecosystem, including activity of major companies involved in startup activity support,

research and high value employment.

Introduction – why a strong domestic startup sector is essential to FDI

In order to compete internationally for foreign direct investment we must identify

those factors that will have significant systemic framework benefits to Ireland’s

attractiveness when compared to competing countries. We believe that a strong

indigenous startup industry offers this because increasingly both large multinationals

(MNCs) and rapidly growing companies (that are scaling up) want direct exposure to

high impact startup clusters in their industry sector in close proximity to their R&D

centres. Many advanced economies recognise this and have created programmes to

attract international startups to their cities to work with corporates located there (the

Boston Mass Challenge for example).

We believe that Ireland’s unique advantages can make it a nexus of innovation

between the EU and the US if the Knowledge Development Box is configured in a

way to encourage the above companies to locate their mission critical R&D in

Ireland.

Startups are the leading creators of applied innovation in modern economies. MNCs

have recognised this and applied the open innovation model to seeking to harness

the best startups to collaborate with. In other startup ecosystems (for example Tel

Aviv or Silicon Valley) symbiotic relationships between the R&D centres, corporate

venturing (please see image below) and corporate backed startup accelerator

activities of the MNCs and high impact startups are well established.

These interface points have successfully enabled ‘effective engagement’ (defined as

genuine collaborative activities occurring within an effective network which yield

symbiotic outcomes to the participants) through MNC open innovation activities such

as corporate backed venturing activities and corporate backed startup accelerators.

Effective engagement creates deep network linkages that are difficult to replicate in

outer competing ecosystems. This in turn increases the likelihood that the top tier VC

firms will locate in Ireland attracted by the breakouts with deep, world beating tech.

A new understanding of the essential role of startups in modern economies

Research published by the Central Bank of Ireland in 2013 (Action Plan for Jobs

2014) concludes that 67% of new job creation comes from companies within their

first five years. Research from the Kaufmann Institute in the United States (Kauffman

Foundation Research Series: Firm Formation and Economic Growth 2013) also

indicates that new and young businesses are the primary drivers of net job creation

in modern economies.

A new industry emerges – the industry of high impact startups

Startup hubs thrive in dense networks with substantial inward and outward flows of

people, ideas and capital. The startup industry of Silicon Valley has been optimised

in a way that creates startups that can achieve billion dollar valuations rapidly on an

almost predictable pipeline basis, please see image below.

Source: Wall Street Journal, February 2015

The economic benefits of having a global startup hub in Ireland

A comparison between Dublin and Tel Aviv (Israel) of the outputs of the ICT/Tech

startup industry are contained below in the chart Startup Ireland presented to the

Dail Committee on Jobs, Enterprise and Innovation in July 2014. The potential

benefits to the Exchequer in terms of CGT, Corporation Tax and PAYE are

substantial as illustrated by this comparison.

Density and Velocity are essential characteristics of successful startup

ecosystems

Successful startup ecosystems in advanced economies are composed of dense

networks comprising universities, multinationals, state agencies, investors and

professional service providers around the entrepreneurs that form high impact

startups. There are many other stakeholders directly and indirectly involved in the

dense network that underpins success in the startup industry. These can be

summarised by stage of development as:

Start Stage - CoWorking Space, Incubators, Networks & Groups, Startup

Programmes.

Scaling Stage – Accelerators, Embassy Commercial Attaches, Enterprise Support

Agencies, Funding, Multinationals, Research Centres, Tech Transfer Offices,

Networks & Groups (both national and international), Stock Exchange, and

Professional Service Providers.

Well developed startups hubs are characterised by density and velocity within this

network of stakeholders illustrated above. Density is the physical proximity of the key

stakeholders of a mature startup ecosystem while Velocity is how quickly startups can

progress through the ecosystem without encountering undue obstacles or delays. As

time to market and the development of virtual products and services grow

exponentially the nexus between the fundamental pillars of successful startup

ecosystems has become critically important.

Multinationals and large corporates are key players in these networks as they are often

the first clients for high impact startups thereby providing the initial sale that validates

them and helps the startup raise funds from Venture Capitalists. Accordingly in

choosing an EU location international high impact startups (ones that have raised

significant initial investment) have two key questions:

A. Can I access the senior decision makers in the mission critical engineering

department of my key potential multinational clients?

B. Can I raise a €5m A or substantial follow on round in the city (preferable from the

venture arm of my first big multinational client?

The key role of multinationals in advanced startup ecosystems around the

world

As startups are a key source of innovation, most innovation driven multinationals

have strategic interfaces with the startup sector in the cities where they operate.

Examples of such interfaces include:

1. Acquisition Activity – The book ‘Startup Nation’ (D.Senor & S.Singer)

outlines that Cisco had by 2008 acquired more companies in Israel than Cisco

had bought anywhere else in the world. Cisco’s investment arm made another

$150 million in direct investments in other Israeli startups and $45 million into

Israel focused venture capital funds. In total the book says that Cisco had by

2009 spent $1.2 billion to buy and invest in Israeli companies.

2. Investment/Venturing – As can be seen from the ‘Top Corporate Investor’

table above many multinationals have active corporate venturing arms

investing in startups and the level of activity in this area is growing

internationally.

3. Collaboration – A number of multinationals from Disney to Telefonica

operate corporate backed acceleration programmes that are active around the

world to provide a structured interface between the corporate and selected

startups.

4. Community Development – A high profile example of successful grassroots

startup community development is the Google Campus initiative present in a

number of capital cities around the world.

5. Breakouts - Successful startups emerge from ecosystems where there is

significant applied research being performed and this spills over into

ecosystem wide benefits. Indeed many successful startups are often the

result of what is termed ‘Breakouts’ whereby a senior engineer/researcher

from a large corporate partners with a professional consultant from one of the

international professional services companies to commercialise technologies

that have the potential to scale rapidly.

Startups often catalyse the entry of MNCs into a country

According to the Times of Israel South Korea have been busy building international

network that complements their ambition to be a global startup hub of Asia. The first-

ever Korea-Israel Creative Economy Forum. Israeli creativity, Kim told The Times of

Israel, was much admired in his country, “and has special strengths and capabilities

that, when joined together with the strengths of the Korean economy, can create an

economic powerhouse.”

The Times of Israel piece outlines the typical entry strategy, electronics giant

Samsung, which has been operating in Israel for about six years, after it acquired

Ramat Gan-based Transchip Israel it was the company’s first foreign acquisition in a

decade. As of now, Samsung’s two Israeli facilities, employing upwards of 50

engineers between the two of them, are the only Samsung R&D centers outside of

South Korea. Attending the event were Israeli companies and investors looking to

work with Korean powerhouses like Samsung, Hyundai, LG, and the many other

industrial giants in that country, along with a group of 15 Korean students who are

studying in Israel (part of Tel Aviv University’s StarTAU entrepreneurship program),

where they are learning the Israeli way to start-up success.

Achieving the goal of Ireland becoming a global startup hub – what is the

driver?

What is notable about the startup industries that Ireland can learn from is that:

1. Their rapid economic development (in particular of their startup sector) has

been in 10/15 years as opposed to decades, South Korea’s bid to leverage

their substantial MNCs to the benefit of their startup sector is only beginning in

earnest now. Israel had no startup industry 20 years ago. Culture change can

be achieved in a finite amount of time, the book Startup Nation says that

Israel economically was in a ‘dire state just a little over half a century ago’.

2. Economic landmass, population and outward orientation are in our favour as

with two of the members of the Top 20 Startup Ecosystems (Tel Aviv and

Singapore).

However at the heart of any successful startup ecosystem must be an economic

engine – we believe that the proposed Knowledge Development Box as biggest

structural reform of the fiscal framework in the history of our state offers the ideal

opportunity to create this economic engine for Ireland’s startup sector.

How might the configuration of the Knowledge Development Box best support

Ireland’s startup sector

It is widely accepted that incentives often shape the ecosystems of business activity,

current corporation tax incentives in Ireland have created a framework that supports

job creation (frequently in the areas of sales, tech support, customer care, call

centres) but often not knowledge intensive jobs. The book Startup Nation (D.Senor &

S.Singer) suggests multinationals set up their call centres or IT services in Ireland

but not their ‘mission critical’ R&D work. If one looks at Israel the tech MNCs many

have their mission critical R&D located in Tel Aviv, as a result 39% of Israeli high-

tech employees work in the R&D departments of multinational companies in Israel.

We believe that the existing ecosystem of activities that the multinationals located in

Ireland currently conduct can be built upon to move their activities located here up

the skills ladder, thereby creating increased value in the economy and capturing for

Ireland a higher proportion of the value add contained in products and services

facilitated through Ireland.

We also believe that, in line with experience of other advanced economies, the

startup sector is an essential component of this deepening of the knowledge

intensive nature of industry in Ireland. To support this it is essential that the

Knowledge Development Box is configured in the optimal manner to create the

incentive to multinationals to locate those knowledge intensive activities in Ireland

that are integral to successful startup ecosystems in advanced economies, namely

R&D, corporate venturing and corporate startup accelerators in Ireland.

PART 2

Knowledge Development Box Submission Startup Ireland

3/16/2015

FAO: Eoin Costello

Startup Ireland

Re – Knowledge Box Submission research support

Ruby Consulting are delighted to respond to your request for research support for Startup Irelands

submission to DJEI on the development of the Knowledge Box. We have been a part of the

development of Startup Ireland for almost one year now and are delighted to support this important

piece of the jigsaw to support the development of high potential startups in Ireland.

Ruby Consulting have been involved in technology commercialisation and the support of startups in

terms of investment finance, scaling and internationalisation for nearly ten years and we see the

development of Startup Ireland (SUI) as an important piece in the ecosystem in Ireland. It is a relevant

extension of SUI capability to examine the Knowledge Box (KB) and its impact upon the startup system,

including those that are spinning out of larger corporates, licensing technologies from Research

Practicing Organisations (RPO) or other relevant starting positions.

This report is constrained by a number of important parameters. The timing involved to the deadline

for submissions to DJEI on the KB, the lack of transparent complete data on research practitioners in

Ireland and the fact that this is a new area for SUI to investigate means that this report has to use a

number of proxy metrics to examine the issues, outlined in detail in the methodology. This report

cannot claim to have comprehensive data and may be subject to different interpretations as more data

becomes available, although we understand that other authors will review this study in order to further

support a single submission to DJEI.

Our Understanding of this project The Knowledge Development Box is a tax treatment of IP – whether that be Patents, Copyrights, Brands

or possibly extending to process IP and trade secrets. It is designed to replace the Double Irish system,

whereby companies were able to route profits/revenues through Ireland, Luxemburg and other pro-

business tax jurisdictions to reduce their overall tax bill. The tax rate is purported to be approximately

5% to maintain a tax leadership position in Europe.

http://www.irishtimes.com/business/economy/knowledge-box-tax-rate-likely-to-be-5-1.2064954

The OECD are alleged to be proposing a heavy orientation towards Patents only, rather than a wider

interpretation of IP, which would be challenging for startups in Ireland or indeed anywhere. Patent

development is dominated by hardware and life sciences and the majority of startups in Ireland are in

the ICT sector.

In the development of the KB, it is important to look at the existing R&D tax credit scheme, whereby

companies are able to claim a tax credit for work that is counted as research. There is anecdotal

evidence that this system may be taken somewhat generously by some clients and this may be affecting

the development of the new KB.

In this report we also examine the amount of active research is being engaged with in Ireland by Irish

and international companies, using proxies such as patenting, PhD employment and where possible

utilisation of the existing tax credit. We recognise that this information is sensitive to the companies

and we will only be able to take a surface view of this situation on behalf of SUI.

In this report, we analysis several sources and aspects of the research community in Ireland, with

particular reference to startups and the development of the KB. We look at which companies are

research active, which companies are engaged with the startup community and look at specific case

studies to illuminate the position of SUI in their submission on the KB.

Overview of Methodology We reviewed a number of different sources including:

www.cso.ie – number of people with PhDs active in Irish industry

www.patents.com – review of the number of US patents registered by Irish based inventors

www.top1000.ie – Top companies based in Ireland by global headcount and cross referenced

by revenue

www.linkedin.com – To review the number of PhDs in each of the top companies.

www.newmorningIP.com – to review Irish patenting activity

We started our methodology by isolating the top companies operating in Ireland by headcount down

to 1000 and identified 180 companies. We then cross referenced those companies with revenue above

€260m and eliminating any of those with less than 100 staff, in order to eliminate those entities which

are here for tax or residency purposes only, adding 80 companies. We then cross referenced these

companies with google searches on how many staff they have actually in Ireland, how many of them

have a corporate venture fund (CVF) or support startup accelerator programmes. We checked Linkedin

to examine how many staff based in Ireland had a Linkedin account and did an extensive search for

terms such as PhD, Doctorate and so on. This forms the basis of the accompanying table of information

included in this report.

We then examined patent records in Ireland, in the US where the inventor was based in Ireland and

utilised available information on the R&D tax credits to gain an understanding of the corporate research

sector in Ireland. Finally, we analysed and gave our interpretation as to how this impacts upon the Irish

startup community and then then relevance to the KB submission to DJEI.

Discussion & Analysis We outline here our discussion and our own analysis of the KB as it pertains to Startups in Ireland. It is

important to reassert the caveats listed in previous sections, this analysis is more important in the ratios

and proportionality discussions, rather than the absolutes.

Company analysis

We refer here to the accompanying database of ~280 companies in Ireland, sorted by number of global

employees and then by revenue in Ireland, down to 1000 staff or above €250m revenue with more

than 100 staff. This excludes examples of companies that have very low numbers of staff processing

revenue through IFSC and similar circumstances.

We can review these companies in terms of the type of activity so for instance some of the larger food

processing companies, hospitality groups and building materials groups would register in this table, but

their activity may not affect either the startup community, funding the ecosystem or indeed the wider

ramifications of the knowledge box, so from this list, we estimate that approx. 100of them are

significantly practicing research practicing entities and/or supporting the development of the startup

ecosystem.

When we look at which of these companies have global accelerators or global corporate VC funds, the

number breaks down again to approximately 25 corporate venture funds and approx. 35 with

accelerator supports. This would concur with global views, whereby corporate venture funds are only

beginning to be formally adopted as against individual corporate investments and the growth in

accelerators globally, particularly in software and services has been sharp. Reflecting upon their activity

levels in Ireland, we see real on the ground activity from companies like SAP, MasterCard, Accenture,

Bank of Ireland and AIB, Eircom and some special examples in companies such as PCH and Bell Labs.

Global activity that we might expect to see reflected in Ireland could include the Diageo accelerator,

Google Campus and Apple. The recent retirement in the Wayra accelerator is a sore blow for the

Dublin/Ireland accelerator community. It is fair to say that Dublin is as well represented as it could it

expected in terms of accelerator supports, although other groups could launch in Ireland, but it is

disappointing to see how little activity there is from corporate venture funds, with some small

exceptions in the life science sector.

The life sciences are a special factor in terms of VC funds with large global presence and relatively little

activity in Ireland except for examples like Opsona in Trinity. Some of the larger technology companies

like Google have strong VC offerings based in London but their activity in Ireland is often based around

acquisition of companies, rather than VC activity, e.g. Green Parrot.

Knowledge Box

The Knowledge Box (KB) concept is one whereby definable R&D created in a country would be subject

to a lower rate of taxable income than other enterprise income. Versions of this exist across Europe

already, notably in the UK who launched a Patent box with a tax rate of 10% in 2014. It should be

noted that this arrangement is being strongly challenged by Germany and the OECD and its long term

future is in some doubt, although most commentators expect elements of compromise

http://www.ft.com/intl/cms/s/0/d2c783dc-7a54-11e4-8958-00144feabdc0.html#axzz3Sr9DAtzI

In the Irish context, negative media attention was drawn upon our tax efficient arrangements, known

as the ‘Double Irish’ whereby taxable revenues/profits/transfer pricing and Netherlands, Cyprus/Malta,

Irish and Caribbean companies were used to minimise profits. It was argued that Ireland benefited

from this arrangement by attracting companies who would pay employer taxes, employ more people

and so on, combined with our already low corporation tax rate of 12.5%. The Double Irish and other

similar arrangements n Luxembourg are coming under unsustainable international pressure, including

from the US who are seeking ways to repatriate EMEA held funds back to the US, (considering amnesties

etc). It is proposed that the development of a Knowledge Box (KB) will support the development of

more definable IP creation in Ireland by subjecting it to a favourable tax regime, thought to be ~5%

along with the equivalent lowest rate available in Europe.

Some definitions of IP would imply that only patents would be acceptable, but this is not sustainable in

the Irish context, given that so many of our enterprise are orientated towards the technology sector

where patenting is not as common an issue as copyrighting, branding and so on. Life sciences and

engineering dominate the patent landscape, but the key factor to consider would be novelty in the

research outputs, whatever the context of its legal standing.

Related to this concept is the R&D tax credit system, whereby companies can get a tax rebate on

activities that are covered under a Revenue defined scheme. It is noted that applications to this scheme

have increased sharply in recent years and indeed we note the increased efforts being put in place by

professional service advisors in the sector to promote its use and development.

http://www.finfacts.ie/irishfinancenews/article_1026390.shtml

http://budget.gov.ie/Budgets/2014/Documents/Department%20of%20Finance%20Review%20of%20

R&D%20Tax%20Credit%202013.pdf

http://www.arthurcox.com/wp-content/uploads/2013/03/Arthur-Cox-Ireland-as-a-location-for-your-

IP-Trading-Company-April-2014.pdf

Patent analysis

We look here at an analysis of US registered patents that cite an Irish based author. We are grateful

for the support of NewMorning IP in this regard. This data is useful in so much as it reflects work that

is being delivered from Ireland and activated in the major global market and as such is a useful marker

of activity. To have 475 patents registered in the US from Irish authors is impressive. Drilling down

through the numbers, we see a number of clear trends. IBM massively dominates and although they

have significant research base in Ireland, it would be interesting to parse their impact upon the Irish

patent landscape also and which technologies are being commercialised here. Life sciences companies

are strongly supported here, especially the medical device sector in the Midwest. Google are notable

to have 9 patents registered in the US citing an Irish author, which might support the contention that

many of the tech giants EMEA HQ are developing more than commercial operations.

To put this in context, analysis from NewMorning IP shows that in April 2014, 263 patents were

registered/filed in Ireland, of whom ~115 were of Irish origin. Interestingly, of the patents filed in

Ireland, Accenture dominates the April 2014 figures, as they do in most months, although this seems

to be not reflected in US patenting figures with an Irish based author.

US based patents from Irish authors – IBM/Life Sci

Assignee #Publications IBM 109 ANALOG DEVICES, INC. 23 Cook Medical Technologies LLC 22 Medtronic 21 MASTERCARD INTERNATIONAL INCORPORATED 20 AVAYA INC. 19 Henkel 16 GOOGLE INC. 9 LOGITECH EUROPE S.A. 9 MICROSOFT TECHNOLOGY LICENSING, LLC 9 TELEFONAKTIEBOLAGET L M ERICSSON (PUBL) 9 COVIDIEN LP 7 HEWLETT-PACKARD DEVELOPMENT COMPANY, L.P. 7 ORACLE INTERNATIONAL CORPORATION 7 CAMERON INTERNATIONAL CORPORATION 6 IVAX 6 ALCATEL LUCENT 5 BOSTON SCIENTIFIC SCIMED, INC. 5 SEAGATE TECHNOLOGY LLC 5 FACEBOOK, INC. 4

CSO data

The CSO has deep information relevant to the utility and origin of research enterprises in Ireland and is

represented in the following tables. We first look at the type of research carried out by various sized

enterprises in Ireland and it is important to note the OECD definition of experimental research in

respect of the R&D tax credit and the possible restriction of KB to patent activity.

Business Expenditure on Research and Development (%) by Size of Enterprise, Type of Research and Year

2011

All enterprises

All types of research and development 100.0

Basic research 4.6

Applied research 23.9

Experimental development 71.4

Small (<50 persons engaged)

All types of research and development 100.0

Basic research 4.0

Applied research 27.5

Experimental development 68.5

Medium/Large (50+ persons engaged)

All types of research and development 100.0

Basic research 4.9

Applied research 22.6

Experimental development 72.5

Novelty is an important factor in this survey, although we draw attention to the OECD definition of

Experimental development

Experimental development is systematic work, drawing on existing knowledge gained from

research and/or practical experience, that is directed to producing new materials, products or

devices; to installing new processes, systems and services; or to improving substantially those

already produced or installed

Looking further into who is delivering this type of work, we look at PhD level qualifications engaged in

Irish based industry, which we cross reference in the accompanying excel chart with Linkedin.

Interestingly, the number almost exactly corresponds which validates in part our use of Linkedin as a

review tool.

Headcount of Research Personnel (Number) by Type of Researcher, Size of Enterprise, Sex and Year

2011

PhD qualified researchers

All enterprises

Both sexes 1,551

Male 1,114

Female 436

Small (<50 persons engaged)

Both sexes 539

Male 434

Female 105

Medium/Large (50+ persons engaged)

Both sexes 1,012

Male 681

Female 331

Almost 30% of enterprises stated that they were very likely to employ more PhD graduates in the

coming years.

Referring back to our searches of large Irish based companies and their research impact, we searched

their staff for PhD, based on our level of access to Linkedin. This is a proxy metric, but a worthwhile

one, allowing for PhD employment as a proxy for research active and Linkedin 1.25m Irish profiles

having a reasonably strong degree of coverage.

The CSO also highlights the decline from 2000-09 in the number of STEM graduates, while our PhD

graduates increased per capita, we are significantly behind our EU colleagues in this factor of

innovation.

http://www.cso.ie/en/media/csoie/releasespublications/documents/otherreleases/2011/measuringir

elandsprogress2011.pdf

Number of patent applications per capita:

An interesting aside emerges when looking at actual and estimated R&D expenditure by Irish based companies, whereby it was estimated that ~€1.9bn was the value ascribed to R&D but the survey could not capture the actual value of R&D spend. It is noted elsewhere in the data that just under this amount was actually spent, when broken down by region Actual and Estimated Business Expenditure on Research and Development by Size of Enterprise, Statistical Indicator and Year

2012

All enterprises

Estimated Current Expenditure - Labour Costs (Euro Thousand) 1,091,281

Estimated Current Expenditure - Other Current Costs (Euro Thousand) 641,037

Estimated Total Current Expenditure (Euro Thousand) 1,732,318

Estimated Capital Expenditure - Land and Buildings (Euro Thousand) 12,902

Estimated Capital Expenditure- Payments made for licences to use intellectual products (Euro Thousand)

109,491

Estimated Capital Expenditure - Instruments and Equipment (excluding software) (Euro Thousand)

85,823

Estimated Capital Expenditure - Software purchased wholly for Research and Development purposes (Euro Thousand)

14,566

Estimated Capital Expenditure - Software development by company in-house and used in-house (Euro Thousand)

6,612

Estimated Total Capital Expenditure (Euro Thousand) 229,394

Estimated Total Research and Development Expenditure (Euro Thousand) 1,961,712

Actual Current Expenditure - Labour Costs (Euro Thousand) ..

Actual Current Expenditure - Other Current Costs (Euro Thousand) ..

Actual Total Current Expenditure (Euro Thousand) ..

Actual Capital Expenditure - Land and Buildings (Euro Thousand) ..

Actual Capital Expenditure- Payments made for licences to use intellectual products (Euro Thousand)

..

Actual Capital Expenditure - Instruments and Equipment (excluding software) (Euro Thousand) ..

Actual Capital Expenditure - Software purchased wholly for Research and Development purposes (Euro Thousand)

..

Actual Capital Expenditure - Software development by company in-house and used in-house (Euro Thousand)

..

Actual Total Capital Expenditure (Euro Thousand) ..

Actual Total Research and Development Expenditure (Euro Thousand)

Value to startup and Conclusion

There are a number of aspects to this report that pertain to the work of Startup Ireland and more

particularly to its members and the sector it serves.

High value ideation and novelty is created by highly qualified leaders and it is important to see

the interaction that our PhD level students have with industry in order to understand the

dynamics of their movement from learning to focussed high value research outputs

The role of corporates in supporting startups that are relevant to them, either through

accelerators or through dedicated VC funds is a new but very rapidly growing concept. It is

important to know which companies are operating these functions in Ireland or internationally

but not yet in Ireland

Understanding the role of the R&D tax credit system to producing high grade research, aligned

with a visible output in terms of patent activity is crucial to the narrative of Ireland providing

an environment of high value, mission critical outputs for international corporates.

With these contexts, it is easy to see the value the startup ecosystem brings to corporates and

also the reciprocal value from corporates to startups. The fluidity of ideas and commercial

activity towards and from corporates and startups is crucial to gain scale for startups,

innovation activity for corporates and increase the value add and tax take that can be gained

for Ireland.

On a patenting basis, Irish based inventors appear to be performing well and are integrated with

international counterparts. R&D tax credit utilisation has risen sharply in line with its promotion as a

tool for larger corporates. PhD employment is still dominated by third level institutions, with approx.

1300 PhDs working in industry, primarily in life science and ICT industries. The missing piece thus far is

the level of interaction from the international corporates towards the Irish SME and startup ecosystem

and this can be remedied by encouraging the use of corporate venture funds, accelerators and linkages

between the industry bodies.

Importantly for this interaction, the Knowledge Box affords a possibility to orientate and direct higher

value research activities at corporate level, perhaps partnering and networking with more nimble

entrepreneurs. This cannot be aligned only with patent activity, as we see, the R of R&D is, according

to the OECD, development of activity to new products or processes. It is here that startups need to be

supported to do innovative work with and for larger international corporate players, increasing the

value of them to each other and to the wider Irish context.