Professor Stephen Roper:

I am pleased to be here and to be reunited with one or two old colleagues around the table whom I have worked with previously. I am professor of enterprise at Warwick Business School in the UK. At Warwick I lead the Enterprise Research Centre, or ERC, the UK’s national centre for research on small and medium enterprises. The ERC is a collaboration between five UK universities - Warwick, Aston, Imperial, Birmingham and Strathclyde - and is funded by the UK Government, the UK’s major banks and one or two of our targeted agencies, including Innovate UK. Therefore, we have a very strong strand around innovation and exporting.

My interest in the all-island economy is long-standing. Before moving back to England in 2003 to take up a chair in Aston, I worked for nearly 20 years in Northern Ireland in economic research centres. I worked with Dr. Tom Healy for a while and I have written extensively on the all-island economy and particularly on issues related to innovation and innovation promotion. I also had the chance to spend time at the ESRI in 2003 working on some issues around the broader Irish economy.

I welcome the committee’s focus on trying to build stronger synergies across the all-island economy. This all-island perspective on policy-making is long overdue, in my view, and it is a welcome development. I also welcome the focus on trade, but I think that any focus on all-island trade - on cross-Border trade - is somewhat misplaced. Instead, I wish to see the committee focusing much more broadly on emphasising exports from the island of Ireland rather than on exports within the island and on exploring mechanisms that can be put in place to strengthen businesses and collaboration between businesses to enable them to innovate and export from the island. Therefore, I wish to make some remarks about the mechanisms that might be adopted for building co-operation between businesses to enable them to become more effective innovators and exporters. In some ways, this reflects closely the original objectives outlined in the Bradley Best report, which seem to me to have been rather lost in more recent discussions about the cross-Border enterprise zone, the objectives of which have become very much less clear.

Recent research has emphasised three findings. First, innovation and exporting are very closely related. Small businesses that export grow more than twice as fast as those that do not, while internationally active SMEs are three times more likely to engage in innovation of products and services. These two things go together. Second, innovation is very much enhanced where firms work in partnership with each other or in partnership with external organisations.

That innovation then provides the basis for exporting. Indeed, one study we recently published, based on data from the Republic and Northern Ireland, suggests that for small firms with fewer than 50 employees, approximately 40% of the value of their innovative activity derives from partnerships rather than from knowledge that is developed within the firm. Those external links are hugely important for small firms in driving innovation. For large firms it is approximately 25%, for smaller firms it is approximately 40%, so that is quite a big difference. Of course, the Border zone, particularly in the central Border, is dominated by those types of smaller companies.

The third big picture research finding over the last few years is that productivity gains arise when innovation and exports come together. In a sense what we want ideally is to encourage firms to be innovative and then to export the results of that innovation. We have taken some useful steps already in promoting innovation across the island wide economy through things such as the innovation vouchers programme, a cross-Border initiative between Enterprise Ireland and Invest NI. However, we can do more and there are three particular areas where we might consider more activity.

The first is brokerage. This is the idea that small firms often find it very difficult to identify the partners that they might use for joint innovation and, potentially, joint export initiatives. We could do more to broker partnerships between small businesses to generate those things. In the UK we have been playing with policy initiatives such as growth vouchers and creative credits to try to form these innovative partnerships.

The second theme, and it follows from the first, is that we could prioritise support for collaborative innovation. Typically, in the past we have supported, through Enterprise Ireland and Invest NI in the North, innovation by individual businesses, but increasingly we have learned that it is partnership or network based innovation which is really most important and provides perhaps a more successful basis for exports. Prioritising that type of collaborative innovative activity might be more important.

Third, I believe supply chains offer an opportunity. We have a number of supply chains which have a significant cross-Border dimension. They offer the opportunity for the upgrading of SMEs, innovation along the supply chain and the potential for building a stronger innovation and export base both in the Border region and in the wider Irish economy.