With Ireland losing out on manufacturing jobs to low-cost economies, indigenous firms will have to innovate and add value to their products if they are to survive in the next 10 years.
The key to that survival will be investing in research and development - something Irish firms have been poor at compared to companies in other EU states. A Forfás report published this summer found business expenditure on R&D was running at 0.97 per cent of GNP in 2003 - below the EU average of 1.13 per cent and significantly less than the OECD average of 1.45 per cent.
But for Irish companies, financing their own R&D is not the only way to introduce new technology to their products and processes. With over one million patent applications filed worldwide each year, the international trend is towards licensing in new technologies externally to integrate into firms' own products.
The bible for exponents of this technology in-licensing is the 2003 book Open Innovation: The New Imperative for Creating and Profiting from Technology by Harvard academic Henry William Chesbrough. Based on his analysis of large in-house R&D departments at companies such as Xerox, Bell Labs and IBM, he argues that such a model has had its day and that technology giants like Cisco and Microsoft do little basic research themselves, a model he calls "open innovation".
"No company can afford to rely on its own ideas any more or restrict the use of its innovations to a single path to market. All companies have to improve their ability to experiment with new technologies in new markets," Chesbrough says in the book.
One multinational that seems to embrace that philosophy is consumer goods giant Proctor & Gamble. In 2002, it acquired about 10 per cent of its product innovations externally. Now, it has a target of sourcing 50 per cent externally by 2007.
These large firms are acquiring technology from universities' research groups, start-ups, and even other multinationals.
Companies with major R&D budgets have generally established some form of intellectual property unit to exploit the innovations that they have developed. This allows them to generate revenue from intellectual property that may not be core to their business and to use as leverage in building partnerships, notes Jim Cuddy, who heads up Enterprise Ireland's dedicated technology acquisition service, TechSearch.
In the technology sector, IBM and Lucent are investing billions of dollars in R&D each year and filing thousands of new patents.
The State agency's TechSearch service has helped broker about 400 technology transfer deals since the early 1990s and has made it a key part of its strategy.
These deals include Irish firms licensing technology in and out, technology collaboration agreements, strategic alliances and manufacturing agreements.
"Once you put the companies in touch with each other they set the agenda," says Cuddy. "They may start by looking at a licensing deal, but it may become a strategic alliance.
One of the main reasons why technology acquisition began to move up the agenda in the mid-1990s is that tools such as the internet and private databases became available, which make it much easier to find other companies' intellectual property.
Enterprise Ireland is also the Irish Innovation Relay Centre, a network of 70 centres across the EU and beyond whichCuddy says lists between 3,000-3,500 pieces of technology available for licensing at any given time.
"We are trying to make companies aware that they don't have to develop everything in-house," says Cuddy. "We can help them findtechnology they need, but we need to get that on their agenda."
Cuddy also believes that this model can also benefit small to medium-sized enterprises.
"Some SMEs are already doing R&D, which is fine," says Cuddy. "But if they are not, licensing is less risky as the technology has already been developed for an overseas market. The licenser will usually also help with marketing as he gets paid a royalty, so it's in his interest to help you."
Ntera, which produces displays based on nano-technology, is an Enterprise Ireland client company which licenses. A UCD spin-off, Ntera initially licensed three patents from UCD and École Polytechnique Fédérale de Lausanne in Switzerland, which it developed further in-house.
John McManus, group intellectual property manager with Ntera, oversees licensing at the company and believes the model is suited to Irish companies.
"Irish companies are not very good at R&D, but there is pressure from the Government to move up the value chain," he says. "We can't rely on manufacturing anymore, so we have to look at adding value to products.
"For traditional Irish companies, it's difficult to become an R&D company, attract researchers and secure funding. In the interim, if you want to get a new technology to enhance your processes or make new products, the quickest way is to license."
Although small Irish firms are unlikely to secure an exclusive global licence, McManus advises them to seek exclusivity for the UK and Ireland or for Europe or, failing that, to seek exclusivity for applying the technology for a certain class of product.
However, he cautions that plenty of due diligence is required before buying in a technology or process. "Theoretically, it is quicker than developing yourself but technology is never that simple and there is a lot of work to get a patent working at a robust product level. You need to know what you are getting and what stage of development it is at," says McManus.
