Dr. Jane Bourke:

We thought it would be useful to make the committee aware of some new data on microbusinesses in Ireland. This data were collected as part of an international project by the ERC.

Microbusinesses are businesses that have less than ten employees and they comprise more than 90% of businesses in Ireland. In 2016, there were approximately 250,000 microbusinesses in Ireland, employing 27% of the workforce in businesses. These firms are critical to future productivity and job growth. However, we know little about microbusinesses in Ireland, because they are excluded from most Government and academic surveys. For instance, the innovation in Irish enterprises and the Irish innovation panel excludes firms with less than ten employees.

Earlier this year, with support from the UK Government, the ERC undertook a survey based project focusing on the activities of microbusinesses in the UK, Ireland and the US. This project provides new data on innovation, growth ambition and digital diffusion for microbusinesses. Data were collected from 1,500 firms in Ireland and larger samples in the UK and the US.

I will talk briefly about three themes of the data, namely, ambition, innovation and digital adoption in microbusinesses in Ireland. On growth ambition, previous research has linked owner-managers’ growth ambitions to the subsequent growth and performance of the firm. Looking first at respondents' aspirations for their microbusinesses, we consider the proportion of respondents ranking each aspiration as important or very important. The data suggest a sharp distinction between the 71% of Irish respondents who aim to keep their business similar to how it operates now, and the more ambitious 27% who aim to build a national or international business. The 27% figure in Ireland compares to 22% in the UK and 18.2% in Northern Ireland. Individuals’ personal ambitions suggest a rather different set of priorities, with a marked emphasis on freedom and flexibility. This is consistent with much of the research literature on self employment and entrepreneurship which stresses the financial, as well as the non-financial, benefits of being your own boss.

Turning to innovation, we consider two indicators relating to whether microbusinesses introduced new or improved products or services over the three years prior to the survey, or new business models or forms of organisation. On both metrics, microbusinesses in Ireland are ahead of those in the UK and the USA. In addition, the percentage of microbusinesses undertaking innovation is relatively uniform across the country. Another innovation indicator, the proportion of sales derived from innovative products or services, provides an indication of the extent to which firms are able to derive sales from their new products or services - a measure of innovation success. In the year prior to the survey, Irish firms derived around 11% of their sales from innovative products or services compared to 9% for the UK and 10% in the US. This means more than €1 for every €10 of sales in Irish microbusinesses comes from new and innovative products and services.

The adoption of information technology has been one of the key drivers of productivity across advanced economies over the last three decades. The advent of Industry 4.0 presents businesses with new challenges relating to digitisation in both selling and operations. Our microbusiness survey provides the first robust benchmarks for digital adoption in firms with fewer than ten employees in Ireland. The survey focuses on five established digital technologies and two emerging digital technologies, namely, artificial intelligence and machine learning. Generally, adoption rates in Ireland compare well with those in the UK and are markedly higher than those in the USA. Approximately 40% of microbusinesses in Ireland are using web-based accounting software and cloud computing, compared to around 20% in the USA.

Our aim is not to make public policy recommendations for Ireland but to make the committee aware of the new data on microbusinesses. If the committee would like further analysis of the data, we would be more than happy to provide it.