Concern at the level of R&D undertaken in Ireland has again been raised with the recent publication of the STIAC Report (1995). It is felt that Ireland under-invests in R&D activity, based on economy-wide as well as business sector evidence. Figure 1 illustrates how Ireland’s Gross Expenditure on Research and Development (GERD) compares with selected OECD countries. This picture is mirrored in the business sector, as Irish industry spends considerably less on R&D than the OECD average. This has significant implications for the competitiveness of indigenous firms. Both the development of new and more efficient means of producing existing products and the development of new products are vital in maintaining the competitiveness of Irish industry, especially in the face of strenuous competition from low-cost producing countries. The main purpose of this paper is to analyse the scale of R&D in Ireland and the technological capability of Irish industry. This involves looking at the level and composition of R&D undertaken within Ireland whilst also recognising the vital role that multinational enterprises play in technology transfer.
This paper is subdivided into two main sections. Section 1 looks at the evolution of intramural business R&D undertaken within Ireland from 1963 to 1991. Both the overall level of business R&D activity and the composition of these expenditures are analysed. Section 1 highlights the important role that foreign multinationals operating in Ireland have in determining the evolution of R&D activity in Ireland. Section 2 recognises that multinationals may enhance the technological capacity of Irish industry not only by undertaking R&D expenditures within Ireland but also via the transfer of the fruits of R&D work undertaken abroad. Using the system devised by the United States tax authorities in allocating R&D expenditures against U.S.-source income and foreign-source income, a rough estimate of the scale of technology transfer from U.S. parent firms to their affiliates operating in Ireland is calculated. This estimate, albeit an approximation, is useful in indicating the importance of technology transfer relative to domestically undertaken R&D. The paper concludes by noting that recognising the important role of technology transfer by multinational enterprises can help us better understand Irish industrial performance over the past two decades.