The tangible contribution of R&D-spending foreign-owned plants to a host region: a plant level study of the Irish manufacturing sector (1980–1996)

Abstract

The rapid growth of the Irish economy over the past decade and the simultaneous increase in (i) the number of foreign-owned plants in the high-tech sectors and (ii) the research and development (R&D) activities of foreign-owned plants have given rise to an increased interest in the relationship between foreign direct investment (FDI) and economic growth in Ireland. The central question explored in this paper is whether the tangible contribution of MNC plants which undertake R&D investment in Ireland is greater than the tangible contribution of MNC plants which undertake no R&D investment. We use a plant-level data set and conclude that the scale of R&D activity in a plant is an important determinant in (i) lengthening the duration over which that plant will remain in Ireland and (ii) improving the quality of employment created in that plant. Although it has long been recognised that the attraction of FDI to Ireland has been beneficial, the results of this paper support the idea that R&D-active firms generally provide greater benefit to the economy. On employment grounds alone, policy should favour R&D-active plants in high-tech sectors.