Part of our “Growing Ireland” event series

Multiple Pathways to Technological- Entrepreneurship – The Strategic Roles of the State Comparative Lessons for Ireland? Dan Breznitz © The Sam Nunn School of International Affairs & The School of Public Policy Georgia Institute of Technology

Session Objectives Clarify how global change influences choices about industrial innovation Policy Consider the new roles for the state in ICT based development Identify lessons from International examples Open a discussion about Ireland - lessons for Ireland and Irish lessons to the World

The World has Changed The Policy Logic Rapid-Innovation Based Growth When technology itself is the product then markets and products are undefined. The Increased Fragmentation of Production Activities, not necessarily whole industries, are spatiality clustered The Service Transformation The Algorithmic Revolution

Multiple Pathways are Now Available Emerging economies have real choices with regard to rapid innovation based growth Multiple paths - each path has different strengths/weaknesses and different income distribution = Once Choice is Made Capabilities must Match Needs – look to your past imagine your future* * Zysman, Nielson, Breznitz with Wong. “Building on the Past : Imagining the Future” A Berkeley Roundtable on the International Economy (BRIE) Working Paper 181 University of California, Berkeley,

When Can The State Act as a Strategic Manager?* National industries are a multitude of economic agents in dynamically competing and cooperating with each other The role of the state: assisting agents to develop capabilities that would allow them to succeed in an environment of constant radical change: 1.Create – Assisting in Creating and Reconfiguration Capabilities 2.Stimulate – Incentivise Agents to Use Capabilitie s 3.Stepping In – Agents Development and Diffusing New Capabilities to Others * Breznitz, D., & Zimmermann, C. (2008). The State as a Strategic Manager? A Dynamic Capabilities View. Challenge 51,

The State as a Strategic Manager – The Case of Rapid-Innovation-Based Growth* States need to actively engage in two critical domains: 1.R&D market failure 2.Local-Global The ways in which states engage shape the development paths of their industries * Breznitz, D Innovation and the State: Political Choice and Strategies for Growth in Israel, Taiwan, and Ireland. Yale University Press

Four Critical State Decisions: R&D: Skills – influence which organizations play a leading role in innovation. Resources – affect R&D scope and scale. Local-Global: Foreign firms within and outside national borders. Foreign investors within and outside national borders.

Learning in Action – International Regions Smaller Regions Need to Adapt – a natural laboratory to successful approaches Israel Taiwan Ireland give us an “ideal type” of three distinct strategies

Crisis and Recovery Israel R&D workers with academic education in the whole industrial sector raging inflation = % The largest number of IT firms on NASDAQ after the US and Canada. IT exports $13USD billion = 71% of industrial exports and 70% of GDP growth.

Choice and Problem Formulation Science-Based Industry Policy – R&D = horizontal policies Policy – Global Local = R&D focus / Division of labor / Activity not ownership is the focus Outcomes: Supplier of new technologies and products Success in both software and hardware Issues: Industry migration to the US; building of sustainable success; economic inequality Crisis and Recovery Israel

Multiple Choices: Lessons From Some (Small) International Regions Taiwan, Province 1978 A newly established governmental lab starts to fabricate the first ICs Revenues of the Taiwanese semiconductor industry $21.4USD billion, the second largest in the world.

Choice and Problem Formulation A New Model of China Policy – R&D: Mistrust of big business = Public Research Institutions – the state as the R&D agent Policy – Global Local: Bring them (MNCs) and then “ twist ” them; OEM/ODM division of labor; ownership matters Outcomes: The world ’ s leading OEM/ODM industry. Supplier of components and 2 nd generation innovation Great success in hardware; utter FAILURE in software Issues: Institutional system that inhibits novel product innovation Taiwan, Province Policy and Outcomes

Multiple Choices: Lessons From Some (Small) International Regions 1840 –1989 Prolonged economic crisis leading to massive emigration million million million % of population Revenue of the software industry €14.9 billion. Ireland is the second largest exporter of software in the world. Population 3.5 million. Ireland

Choice and Problem Formulation Job creation Policy – R&D: Tradable services – software the focus Policy – Global Local: If you bring them (MNCs) it (Economic Growth) will come; double listing play Outcomes: Center of low-to-mid level activities and mid- sophistication novel products Success in software; FAILURE in hardware Issues: Moderate R&D and innovation capabilities; stagnation of technological entrepreneurship Policy and Outcomes Ireland

Innovational infrastructure – good work on the front end, the question is of persistent – good research infrastructure is not an “instant coffee” problem The issues: Commercialization? Diffusion? Local industry versus MNCs? Ireland – finding so far (the good, the bad, & the questionable)

Local high-technology industry Since 2000 = “full gas in neutral” Policy CANNOT be the wild wild west The issues: New companies More, More, and MORE! Scaling-up Sustainability A critical concern – the suitability of the financing regime to the true need of industry from the national point of view Ireland – finding so far (the good, the bad, & the questionable)

The two critical questions for Technological Entrepreneurship and Innovation policies today: How to maximize the local economic benefits of innovation? How to ensure a distribution of the fruits of the success, which is both “fair” (and politically stable), and still approaches the maximum efficiency of the above? Globalization, Innovation and Growth Future Concerns

Questions that need to be answered for strategic planning to be coherent: What does Ireland want to be? What levels of inequality can the Irish society sustain? Can we have more self confidence? What capabilities and strengths Ireland already have that would make sense to build upon? Ireland – future challenges

Part of our “Growing Ireland” event series