KPMG has conducted annual research of Irish business attitudes to innovation and research and development (R&D) for the past four years. We see this research and associated commentary as essential in encouraging an informed debate about how we further develop Ireland’s strengths in this area. The survey, conducted on our behalf by Red:C Research, gauges opinion amongst a representative sample of over 100 Irish business leaders.
The key findings include growing levels of innovation amongst Irish based business with over 4 in 5 (84%) either innovating or planning to do so.
There are clear trends emerging as Ireland records significant economic growth. Coinciding with the end of recession, 76% of respondents believe that Irish business has become significantly more innovative. However, large companies tend to be more positive about the innovation environment than their smaller counterparts. For example, over a quarter (27%) of small businesses feel that despite the end of recession, Irish companies are either less innovative or static. The larger counterparts are more positive with only 16% of large companies believing innovation levels have declined or remained the same. The report also highlights the continued dominance of the United States as the world’s most innovation friendly economy (37% of respondents), whilst Ireland has moved from third to second place (13%) and the UK has moved from sixth to third place.
Meanwhile Irish companies are increasingly satisfied with government policies to support innovation; however, 35% believe they could do more, with grant aid and incentives being favoured by smaller companies whilst large companies prefer tax based initiatives.
The priorities highlighted by business and innovation leaders interviewed for this report include:
- Smaller companies innovating to secure future growth (Julie Sinnamon, Enterprise Ireland)
- Developing greater synergies between multinationals and SMEs (Bill Kearney, IBM)
- The recruitment of industry partners to work with third level students (Suzi Jarvis, UCD)
- Continued innovation collaboration amongst Irish companies (Vincent Carton, Manor Farms).
Recommendations and Conclusions
The report also highlights a continued need to refine the tax treatment of R&D and innovation. Ken Hardy of KPMG notes that only 44% of companies surveyed have claimed the R&D tax credit, with large companies almost twice as likely to claim as small (60% versus 35%). Amongst the report's specific recommendations are:
- A simplified and more generous SME regime for R&D in keeping with the UK approach
- A reduction in administration and a streamlining of barriers to claiming the R&D credit
- Addressing the challenges posed by relatively high rates of income tax on average earnings
In conclusion, Ken Hardy notes that Ireland is doing very well as when it comes to innovation but warns against complacency given the highly competitive international environment. In particular he notes that many respondents highlight that Ireland does well in terms of inward investment tax policies, but there is a need to focus on an equally positive approach for indigenous and smaller businesses.