Economic growth is central to improved living standards, in turn; innovation and the spread of economically useful knowledge are essential inputs for sustainable productivity based growth. This paper discusses the idea of innovative competence, examines whether it matters for long-run prosperity, considers the National Innovation System (NIS) and innovative competence of the Republic of Ireland, and proposes some reforms.
Inherent characteristics of knowledge imply that a self-regulating market will invest less than the socially optimal amount in knowledge generating activities. This suggests a rationale for public investments in Research and Development (R&D) as well as in other knowledge generating and diffusing activities. However, it is unwise to conflate innovation with R&D or to treat innovation as a linear process. Technological change does not occur in a perfectly linear sequence, but through feedback loops within the economic and social systems. Even so, it is notable that the Republic of Ireland invests significantly less in R&D than other small open economies in Western Europe. In addition, the Republic invests less per pupil in third level education and has one of the weaker broadband networks in Western Europe. These are concerns given the negative long-term implications for innovative competence and productivity led growth. In spite of these concerns the Republic generally performs well across a range of innovation indicators compared to the majority of other EU countries. This suggests the Republic has a reasonably robust NIS upon which to build.