Ireland’s R&D efforts dominated by multinationals

19 Jul 2016

The European Commission recommends rationalising the number of state-funded R&D programmes to achieve a better impact

Foreign multinationals active in Ireland account for over two-thirds of the total business expenditure on R&D, according to the latest report from the European Commission.

The European Commission’s Research and Innovation Observatory (RIO) reported that Irish R&D intensity (that is, expenditure on R&D divided by sales) was 1.52pc for 2014, which is below the Europe 2020 target of 2pc.

Business expenditure on R&D (BERD) came in at €2.1bn, accounting for the lion’s share of R&D activity in Ireland and exceeding the threshold of 70pc of gross domestic expenditure on R&D.

‘Thanks to the strategic sustained investment in R&D of the last decade, Ireland has been able to join the top 20 countries for scientific output and scores remarkably well in a number of innovation output indicators’

Statistics published by the Central Statistics Office show that expenditure on R&D by the enterprise sector is dominated by MNCs as 400 companies accounted for 65pc of total R&D expenditure in 2013.

Indigenous SMEs also show slightly lower levels of formal collaborations with higher education institutes (HEIs) compared to foreign-owned businesses.

Only 19pc of Irish-owned R&D-performing enterprises collaborate with HEIs or other institutions in Ireland, 7pc with HEIs or other institutions outside Ireland, whereas these percentages are 21pc and 10pc respectively for foreign-owned R&D-performing firms.

The evidence also points to the fact that most R&D expenditure in Irish-owned firms (72pc) is being carried out in sectors that are not significant exporters.

The report said Ireland took several policy measures through the years to increase the research and innovation (R&I) capacity of indigenous firms, the most relevant in economic terms being the R&D tax credit, which has a cost in terms of foregone tax revenues estimated at €421m in 2013.

However, official figures show the credit is used predominantly by multinational firms and other large employers in the high-tech and manufacturing sectors

The Knowledge Development Box will be introduced in 2016 and has a similarly broad application for all types and sizes of firms.

Call for number of R&D support schemes to be rationalised

The European Commission report recommended that the existing large number of support schemes to business’ R&I should be rationalised. This was also pointed out by the OECD in its 2013 Economic Survey of Ireland, which called for the consolidation of funding into a drastically smaller number of agencies, with one group dealing with science and basic research, and another with applied research and innovation.

The Industry Research & Development Group, in its submission to the Consultation Paper for Innovation 2020, noted that “companies can struggle to understand the funding structures in place for research and innovation across the various Government bodies from Enterprise Ireland, Science Foundation Ireland, IDA Ireland, Irish Research Council, Revenue Commissioners, H2020, etc.”

In its assessment, the European Commission noted: “Ireland has been severely hit by the economic crisis, with dramatic repercussions on its public finances. This led to the agreement with EC, ECB and IMF upon an Economic Adjustment Programme which included a joint financing package of €85bn covering the period 2010-2013.

“After successfully exiting the programme in December 2013, the Government has sought to maintain the reform momentum to achieve the goals of creating more jobs to enhance living standards and, ultimately, to achieve full employment.

“The economic outlook looks positive, with figures for 2014 and the forecasts for 2015-2016 showing an increase in GDP, a reduction of the unemployment rate and a decrease in the debt-GDP ratio,” the RIO report stated.

“Thanks to the strategic sustained investment in R&D of the last decade, Ireland has been able to join the top 20 countries for scientific output and scores remarkably well in a number of innovation output indicators.”

Research image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years