7/2/17: There's Zero Growth in Irish Patentable Innovation & Research Outputs

In a recent post on Irish patents filings and applications with the EPO, I showed that:

1. Irish R&D and innovation performance - as reflected by patents data - is hardly impressive, with the country ranking 14th in the sample of 50 countries as an origin for EPO Applications;
2. There has been no material improvement in Irish standing in the data in recent years, compared to trends.

Some of the readers have taken me to task on the second point, despite the fact that my evidence (based on EPO data) shows no gains in Irish patenting activities with the EPO in terms of both applications and filings, and in comparative terms as a share of both in the total number of EPO applications and filings. 

So I took a different exercise, plotting a relationship between average levels of filings and applications (combined) across 2006-2008 period against the same for 2014-2015 data. 

Not surprisingly, Ireland comes smack in the middle of the distribution and right on the regression line, implying that:

1. Ireland's patenting performance is to the upper range of the overall distribution of 50 countries, but it is at the bottom of this sub-group of top performing countries. In fact, Ireland's position is statistically indistinguishable from 'mediocre' or 'average' group of countries. 
2. Ireland shows only tiny growth in applications between 2006-2008 period into 2014-2015 period (see Ireland's point position just slightly above 45 degree line), which is statistically indifferent from zero growth.
3. Once we control for the factors that drive global trend in patents (blue regression line), Ireland shows no statistically identifiable growth (Ireland's point is bang on the regression line).

Yes, patents are not the only measure of innovation and R&D, but, being the core part of STEM-focused research, they are the main measure of innovation and R&D, because patents data omits only one form of innovation - that linked to software. Now, software innovation is important, and Ireland may or may not be doing well in this sub-sector, but STEM research is based not on software innovations, but on 'hard' patents. And Ireland does not brand itself as 'Software-only Innovation Hub'. In fact, Ireland spends (as a State and economy) more on STEM innovation than on software innovation, so the key focus on Irish policies is, once again, measurable via patents.

Until we get 2016 data to update the above analysis, I rest this topic discussion.

5/2/17: European Patents and Ireland's 'Knowledge Economy' Myths

Irish policymakers are keen on promoting Ireland as a technology and R&D centre of excellence, often claiming the country is a ‘Knowledge Economy’, a ‘Data Island’, a ‘Europe’s Tech Capital’ and so on. While catchy, these tag lines are far from reality, and, in fact, represent an empirically dubious proposition. 

To establish this claim, consider the European Patent Office data on patent filings and approvals, with the latest data set covering the period of 2006-2015. 

As chart below clearly shows, Ireland is far from being a significant source of patent filing in Europe, despite the fact that many patents from Ireland are filed by the U.S. and other multinationals, including a score of foreign companies that choose to tax-invert into Ireland. The EPO data, in fact, fails to control for this distortion. Still, even with those companies filings counted as ‘Irish’ by origin, Ireland ranks 14th in a key metric of the rate of European Patent Applications per million of inhabitants. 

Worse, Irish rate of patent applications (119 per 1 million of inhabitants) is below the mean for the sub-sample of European states (including EU28 states and other countries within the EEA). Statistically, Irish rate of patent applications per inhabitant is not distinguishable from the rates filed by Italy and Slovenia, and is well below the rate recorded for France, Belgium, Austria, Germany, Denmark, Finland, Sweden and the Netherlands. Irish numbers are also statistically indistinguishable from the global average - the average that includes non-European states’ filings. It is worth noting that the data set includes other countries, that similar to Ireland serve as major tax optimnization locations for R&D and IP, e.g. Luxembourg and the Netherlands. However, even controlling for these states, Irish data does not shine beyond being average.

In absolute terms, Irish patent filings and applications with the EPO have trended up in 2006-2010 period, but have since flat-lined (on trend) for filings and declined (on trend) for applications. 

In addition to the chart above, combined filings and applications for EPO patents by Irish-origination stood at 1,325 in 2015, down on 1,364 in 2014 and down on 1,356 average for 2008-2011 period. While data can be interpreted in a number of ways, there is clearly no indication of an improving trend in either filings or applications over the recent years. This comes on foot of aggressive acceleration in tax inversions into Ireland in previous years - an acceleration that brought into Ireland a range of large R&D-intensive companies.

Consistent with the above, Ireland’s share of all European Patent Office filings and applications has declined, on trend, in recent years, as evidenced by data presented in the chart below:

As the chart above shows, Ireland accounts of just 0.266% of all EPO patent filings and 0.364% of all EPO patent applications. Separately reported data for patents approvals shows Irish share of all patents granted by EPO to be just 0.395%. The number is laughably negligible by Europe-wide standards and is massively out of line with Irish share of European GDP. However, these numbers are consistent with the simple fact, also highlighted by EPO data, that Ireland fails to register in the top tier of generators of patents in any of the sectors tracked by EPO. 

In summary, Ireland is far from being a powerhouse for R&D and knowledge economy activities as measured by a key research output measured by European authorities.