Research and Development – How it shapes Irish business

Bold new ideas, and the successful implementation of them, is crucial to a company’s survival as well as to Ireland’s wider economic success.

Ireland has long been at the forefront of research and development (R&D) spending. According to recent CSO statistics, expenditure on R&D leapt from just over €1.6 billion in 2011 to €2.5 billion in 2018.

On both domestic and global levels, marketplaces are also becoming more competitive thanks to wider access to new technologies and increased knowledge-sharing opportunities, particularly in this COVID-19 era.

It’s not just about competitiveness either. Being able to bring new and improved products and services to market, improve its offerings, and increase efficiency not only help a company to maintain a healthy bottom line but shores up its brand reputation too.

Innovation is crucial – No matter what the industry- Research and Development is imperative

Mention research and development and most people will think of large pharmaceutical companies and high-tech multinationals – and yes these industries are certainly prolific innovators.

But in fact, further CSO statistics show that R&D spending is typically highest in the services sector, accounting for around 55% of all expenditure (although of course, the impact of COVID-19 is yet to be seen).

R&D is defined by a couple of different things. The first is seeking an advance in the field in which the company operates, and the second is overcoming challenges that are not easily solvable by a competent relevant professional.

This is pretty general, with industries such as e-commerce, agriculture, construction, and manufacturing also being substantial R&D investors.

Indeed, the value of R&D Tax Credits in 2018 to the manufacturing sector totalled €174 million according to Revenue data. As another example, the Information and Communication sector claimed €68 million. Essentially, innovation is vital to all companies in every single sector – not just the obvious ones.

Other benefits of Research and Development 

Some of the benefits of innovative research and development projects are less apparent, however, they are still extremely important. They include:

Reducing production costs

R&D activities that serve to reduce production costs and improve a company’s processes means less money is spent out on a product’s manufacture over time. Reductions in waste and unnecessary spending means better efficiency, which is then reflected in the company’s profit margin.

Gaining additional finance

Potential investors care about a company’s vision and ambition. When the company looks to raise funds, its more engaging R&D activities tend to put it in a very positive light.

By showing them the company has a firm R&D strategy and the necessary structure in place to implement it, it demonstrates the ability to achieve sustainable growth and profitability. This is incredibly attractive.

Recruitment

Top industry talent will be most drawn to companies that are innovative and cutting edge, with progressive new plans for the future. The best way to attract these people is to therefore have an innovation strategy that stands out above the rest.

Patents

Any new products that come about through R&D activities can be patented by the company that creates them. This brings substantial competitive advantages and puts the company in a very comfortable financial position long term. Knowledge Transfer Ireland has created a guide on Intellectual Property that’s well worth a read.

How does R&D relate to business?

How innovation is approached and carried out are unique to each business. Some companies will have an in-house R&D department, whereas other innovative work will be completely outsourced.

Likewise, different companies will have different organisational structures, budgets, R&D strategies, and priorities. The outcome of each R&D project and what impact it has will also therefore vary.

The whole concept of ‘nothing ventured, nothing gained’ is at the heart of R&D, and it’s a complex function within any business. The costs of innovative activities is also a big factor for Irish companies, however, these costs can be reduced through R&D grants and Tax Credits.

How innovation and R&D are connected

R&D is the process by which innovative ideas and concepts are brought to life. Without it, there would be no new technological innovation, no new products or services, and no new progress.

R&D is also the embodiment of a company’s long-term vision. It’s an on-going process that involves strategy and evolution. Innovation however operates more in a short-term economic model.

When all is said and done, R&D is about investing the company’s money into something that will in turn generate money in the future.

Innovation and R&D, therefore, go hand in hand, and one cannot exist without the other. After all, there’s no point in dreaming up some amazing new ideas for products, services, and processes if they stay just that – ideas. R&D makes these ideas a reality.

Final thoughts on Research and Development

In these difficult economic times, it’s very tempting for companies to put innovative R&D projects on the back burner.

Such projects are indeed inherently risky, both in terms of company reputation and the money involved in pulling them off.

However, these risks can be mitigated thanks to a number of Government schemes including Revenue’s R&D Tax Credits scheme.

Funding grants are also on offer, for example via Horizon 2020’s Fast Track to Innovation programme and Enterprise Ireland.

Times are tough and business innovation is key. But the COVID-19 pandemic has brought with it the chance for Irish businesses to innovate and grow (KPMG actually did a very interesting piece on this recently).

It’s been the ideal opportunity to address some of the biggest technological challenges and diversify income streams.

Prepared by Patrick O’Brien.

This article was issued by Myriad Associates. Visit their website at https://www.myriadassociates.ie/

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