NET RESULTS:Award-winning author insists one of Ireland's greatest assets is 'unbelievable' goodwill from all over the world

A DECADE or so ago, an Israeli PhD student attending the Massachusetts Institute of Technology arrived in Dublin interested in talking about the extraordinary growth of the technology sector in Ireland over the preceding decade.

We met over coffee and he told me about his doctoral work, comparing and contrasting some of the surprising nations that had gone from being among the poorest and backward within their regions to the very front edge of new technology production and development.

A software entrepreneur himself, he had great personal insight into the fast-paced growth of the Israeli technology sector and now was working to understand what was happening in Ireland.

The student, Dan Breznitz, immersed himself in talking to and seeking opinions on and from Irish companies, entrepreneurs, industry organisations, agencies, and policymakers.

In 2007, that extensive work became an award-winning book published by Yale University Press: Innovation and the State: Political Choice and Strategies for Growth in Israel, Taiwan and Ireland.

It’s a fascinating read, unusually looking at a much larger picture than just the business angle. Breznitz delves into the social, cultural and political environments in each nation and looks at public policy.

I caught up with Breznitz, now an associate professor at Georgia Tech, by phone recently. His perspective is, I think, very thought-provoking and useful as the Government again faces the need to make pivotal, brave, long-term decisions regarding this State’s economic future.

He began by noting that it is really impossible for states to try and copy what has worked elsewhere, because every national context is different. Choices made at one point can produce quite unexpected results years into the future. Some of the Irish choices, led by some good civil servants, he says, were spot on and still pay dividends. Others were not.

“Some mistakes were made in Ireland in 2000 and 2001 for which the Irish high-tech industry is still paying,” he says.

In the 1990s, “people decided to stay in Ireland and built an impressive succession of companies. There was Iona, and direct spin-offs, and many TCD/UCD core companies.

“But then two things happened,” he says. “The first was the real estate boom. It’s very hard to be an entrepreneur in a real estate boom. A lot of talent moves to real estate – and why not. It’s much easier to make money than to work hard and build a company.

“And two, there was a misunderstanding by the State of what those companies do, what they are coming from and what support they needed . . . The problem was and is, the State had a stranglehold via the IDA and Enterprise Ireland on every single level. The State was too involved.”

This, he says, locked down capital investment into a narrow, state-supported pipeline that invested timidly, when at all. The tiny number of successful Irish technology companies and initial public offerings (IPOs) since 2001 are stark testimony to the weakness of state-led technology investment as well as the Irish venture investment community, he says.

“The venture capitalists (VCs) in Ireland have had 15 to 20 years of attempting to build companies. Think of the amount of money channelled into VC funds in the years since the dotcom crisis, and yet the Irish high-tech industry has been in stagnation – in decline. Those were the years when Irish VCs had the most money of anywhere bar Massachusetts and Silicon Valley.

“I think this was a failure of policy because, by then, [the Government] had a proof of concept” – Ireland can create very successful companies, he says. “There were seven Irish IPOs on the Nasdaq. But the industry was given a blow to the stomach by the very institutions in which it was located.” One of the better policy decisions, he says, has been the “massive investment into the university sector, with some successes”.

But the State “expects intellectual property (IP) companies and jobs too fast – in five years. But it takes eight years to finish a PhD. If you want to generate change, you have at least a seven-year time lag and at least 10 to 15 years before you really start to see something happen.”

At any rate, he says, “it’s also a ridiculous idea that IP somehow transforms into millions or billions of euro. In the whole information and communication technologies (ICT) sector, how many companies actually make billions out of IT? Very few.”

What Ireland needs to do, he thinks, is totally strip down and rethink the state agencies (IDA Ireland and Enterprise Ireland should be perhaps a single agency) and the financial sector, and encourage finance in from outside the State (without making the Israeli mistake of having almost all of it come from outside and therefore benefiting only outside investors).

The economic crash “may be the best thing to have happened” because it could enable badly needed change, he thinks.

Ireland also has, even in the early years, idolised outside companies and inward investment, and been indifferent to its own indigenous businesses, he says, a perspective which must be rethought.

“There are very few big companies left to come in [to Ireland]. What’s much more important is to really create a lot more companies and create policy vehicles which enable companies to be created,” he says.

“You need to ask, at which stage of production does Ireland excel, and then the question is how to create a system to make that sustainable.”

And he adds, the State should never forget Ireland has one thing nowhere else in the world has, at which he still marvels. “There’s an unbelievably huge goodwill towards the Irish people from all around the world. It’s capital – it’s an unbelievable resource.”

Full interview available at techno-culture.com