The idea that third-level institutes can drive business innovation is a myth, according to Irish researchers Declan Jordanand Eoin O'Leary

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For all the positive press about innovation, the massive public investment in research at third level may have a disappointingly limited effect on future Irish prosperity. That seems to be the finding of recent surveys showing that the more Irish businesses interact with third-level institutes, the lower their chances of introducing new innovations.

Our first study was of 184 high-technology businesses in 2004, which found that the greater the frequency of direct interaction with academics, the lower the probability of both product and process innovation in these businesses.

Last year, we undertook a similar survey of nearly 200 small and medium-sized enterprises in the southwest and southeast, and found that interaction with third-level institutes, within or outside those regions, had no effect on innovation by these businesses. The same result was also found in another study this year for Ireland and Northern Ireland. All of these surveys fail to find the positive role for third-level colleges on which the government has shaped Irish innovation policy.

As part of its strategy to develop Ireland as a knowledge-based economy, the government is increasingly targeting investment in science and technology, the promotion of which is now at the heart of Irish enterprise policy. It has committed €20 billion in new investment under the Enterprise, Science and Innovation priority in the National Development Plan. Under the Strategy for Science, Technology and Innovation 2006- 2013, the Government has pledged €1.88 billion to fund research, the majority of which is targeted at what is termed "fourth-level Ireland".

This policy, which started at the beginning of the millennium with the foundation of Science Foundation Ireland, seems to be based on a "science-push" view of innovation, which is that scientific laboratories are the source of the new products and processes introduced in Irish businesses.

It overlooks the majority of business innovations that are non-technological, the shining example of which is Ryanair. It is also misguided in that business innovation is usually market-led.

Historically, third-level institutes have rarely been the main source of business innovation in any country. However, they are increasingly seen by policymakers as driving business innovation, thus jeopardising their traditional economic roles of educating the workforce and publishing research.

Our findings should be seen in the context of the overall contribution of third-level institutes. Clearly, business innovators may be Irish graduates and businesses conducting R&D may use research published by Irish-based academics. However, the absence of any positive effect from interaction with academics is worrying, given increasing policy emphasis on this form of collaboration.

The approach taken in our research was to survey businesses on their innovative performance, in terms of new products and processes introduced. They were then asked to identify the sources of these innovations, which could include in-house R&D activity and external interaction with third-level institutes, and other businesses, such as customers and suppliers.

In defense of the third-level institutions, the results of the various surveys may be explained by businesses only turning to third-level researchers when faced with particularly difficult or complex problems, which may be insoluble.

Alternatively, the result may reflect differences in work practices and objectives between businesses and academics that hamper the commercial development of new products and processes. Either way, the results suggest that the substantial public investment on research in Irish higher education institutes may have a disappointing, and perhaps even a negative, effect on the innovation performance of Irish business.

Possible reasons for these disappointing results might be that academics are either not interested or not offered enough incentive to interact with business, and that businesses do not appreciate the level of expertise available in universities and institutes of technology.

More research is necessary to answer these questions. This might include analysis of the barriers to university-business linkages as well as the nature of these relationships when collaboration is present.

One inescapable fact is clear: this research is now urgent if the interaction between business and third level is to be the cornerstone of our multi-billion drive towards creating an innovative economy.

Declan Jordan and Eoin O'Leary are lecturers in the Department of Economics, University College Cork.