Showing posts with label Irish Research and Development. Show all posts
Showing posts with label Irish Research and Development. Show all posts

Wednesday, August 21, 2013

21/8/2013: Ireland's Potemkin Village (Knowledge) Economy

This is an unedited version of my Sunday Times article for August 18, 2013.


This week two news items offered significant implications for the framing of the budgetary policy direction for 2014-2015 and beyond.

First there was the revelation that the Revenue Commissioners are setting up a specialist unit to monitor the use of R&D tax credits by Irish and international firms. The second item was the publication of the Times Higher Education league tables ranking universities on their ability to attract corporate research funding. Both items are linked to the flagship of Irish economic policy that aims to establish R&D and innovation as the drivers of our future economic growth. Both touch upon our sacrosanct Potemkin village: the knowledge economy.


Since the Finance Act 2004, and throughout the crisis, governments have been keen on expanding Irish R&D activities amongst the indigenous enterprises and within the MNCs-dominated sectors. Over the last ten years, the main mechanism for doing so has been through the tax credits that allow the firms to claim R&D related spending. In Budgets 2012 and 2013, the current government significantly broadened the scope and the size of the scheme, and allowed new tax relief for key employees engaged in R&D activities.

Major consultancy firms providing supports for inward FDI, our state development agencies and business lobbyists – all have heralded these tax credits as visionary and imperative to making Ireland an attractive location for R&D.  Such framing of the policy debate makes this week’s news from the Revenue Commissioners significant. In truth, R&D tax credits are long overdue some serious scrutiny. The little evidence we do have suggests that the policy has failed to foster a pro-innovation culture in Irish economy after a decade long application of the scheme.

Firstly, tax credits-supported R&D activities remain too small to make any significant difference at the economy level. In 2004-2010 use of credits rose from EUR80 million to EUR225 million and at their peak, the credits amounted to less than one sixth of one percent of the Irish economy.

This is hardly a result of the scheme being too restrictive. In Ireland, firms are allowed to claim up to 25 percent of their R&D expenditure in credit. In the UK, the maximum is set at just 10 percent for the SMEs. The UK scheme is even more restrictive for larger enterprises. Furthermore, the UK applies strict criteria for SMEs that can qualify for such credits. Yet, UK R&D tax credits cover five times the share of GDP compared to Ireland.

Secondly, our tax credits scheme, along with the rest of the existent R&D and innovation support systems have failed to deliver any serious uplift in the R&D and innovation activities. Instead, these support systems have become a magnet for tax arbitrage by the multinationals and business cost optimization by Irish SMEs.

Take a look at the latest data on private sector R&D spend. Total R&D Expenditure by all enterprises in Ireland in 2012 stood at just EUR1.96 billion or 1.5 percent of our GNP. Between 2009 and 2012 this share of GNP has barely increased, rising only one percentage point, despite the large-scale increases in tax credits and other supports. The miracle of our 'knowledge economy' is, put frankly, quite feeble.

The achievements of 'Innovation Ireland' programmes are even less impressive when we consider what types of activities the R&D investments are being backed by tax credits. In 2007-2012 labour costs and current expenditures associated with R&D activities went up 29-31 percent, just as the economy was undergoing the alleged 'internal devaluation' normally associated with declines in these costs. In 2009-2012, costs associated with Payments for Licenses on Intellectual Property rose 357%. Total capital spending on R&D activities has fallen 30 percent over the same period. All in, CSO data shows that there might be significant cost shifting taking place via R&D tax credits being used to fund companies labour expenditures, as well as to optimise transfer pricing.


From economy's point of view, tax credits are one of the least efficient tools for stimulating investment in R&D and innovation. Research from the EU, published in February this year, examined the effectiveness of special tax allowances, tax credits and reduced income tax rates on R&D output. In assessing the quality of R&D projects, the authors looked at the R&D innovativeness and revenue potential. Using data on corporate patent applications to the European patent office, the authors found that a low tax rate on patent income is instrumental in attracting high quality innovative projects. In contrast, R&D tax credits and tax allowances were not found to have a significant impact on project quality.

International evidence shows that in general, all three forms of incentives are effective in raising the R&D activity. Ireland is one exception. Here, spending on R&D did not increase significantly in 2009-2012 period, rising in nominal terms by just EUR93 million for all companies and in real terms by 1.5 percent. The share of indigenous enterprises in total spending remained relatively stagnant at under 29 percent of total R&D spending. Total increase over 2009-2012 period in R&D spending by Irish-owned firms was only EUR14.5 million.

Tax credits are also reducing the overall transparency in the Irish economy when it comes to our firms performance and Government policies. Irish Government routinely references R&D tax credits as an example of pro-growth enterprise-focused policies. Yet there is no evidence directly linking economic growth, employment and enterprise outcomes to the tax credits.

In a welcome departure from our usual group-think, New Morning IP, the intellectual capital consultancy firm, recently published a report that argued that data shows no link between the introduction of the R&D tax credit and increased patenting activity by indigenous Irish companies. New Morning IP went on to state that “in our experience this tax credit has been used as a way of getting 'free money'…" It was a rare moment of truth in Ireland’s policy Byzantium, where interest groups routinely game the system for quick fixes, subsidies and protection, while ritualistically claiming unverified successes for such policies.

More distortions to the assessment of R&D tax credits effectiveness are induced by the fact that more than three quarters of R&D spend in Ireland is carried out by the MNCs. In some international studies, world-wide R&D investments by MNCs-based in Ireland are counted as if they take place here. One good example is the EU Industrial R&D Investment Scoreboard which ranked Ireland in top 10 EU countries for R&D investment in 2012. Per report, Ireland was host to 14 of the top-spending companies for R&D, but 11 of these were foreign companies and these accounted for 88.5 percent of all R&D spending attributed to Ireland.

In contrast to such reports, the European Patent Office data for 2012 put Ireland in 26th place in terms of total number of patent applications and in per-capita indigenous innovation terms, right between New Zealand and Cyprus. Not quite the achievement one finds promoted in Irish Government speeches and promotional brochures extoling the virtues of ‘Innovation Ireland’.


The above data on R&D investments and patenting activities in Ireland, correlates with the poor performance by the country academic institutions in attracting private sector research funding. The two problems are conjoined twins, born out of the lack of real innovation culture in Irish business.

This week's study by the Times Higher Education, ranked Ireland at the bottom of global league table in terms of private sector funding per academic researcher. Irish academics get an average of just over €6,000 from business research grants and general funds, or 12.5 times less than the world leader, South Korea. These numbers, of course, should be taken with a grain of salt. Lower rankings for Ireland, as well as for a number of other countries, can be in part explained by much broader academic research taking place in our universities, as well as in the bias in funding volumes in favour of specific technical disciplines. They are also reflective of the anti-innovation ethos of Ireland’s domestic enterprises. However, it also highlights the simple fact that Irish academics are often lacking policy and regulatory supports necessary to attract larger research grants.

The main point of all the data is that Irish policy supports for these high value-added activities are excessively focused on targeted tax incentives and are insufficiently aligned with the needs of the innovation-intensive sectors, businesses and entrepreneurs. Over-stimulation with targeted tax credits and exemptions is no substitute for the creation of a real culture of entrepreneurship and innovation.

To develop such culture, Ireland needs more flexible, more responsive public policy formation capable of supporting knowledge-intensive and rapidly evolving sectors, such as biotech, stem cells research, content-based ICT, remote medicine, human interface technology, customizable design and development technologies and so on. While we do have a benign corporate taxation regime, we also need a benign income tax regime to attract and anchor professional researchers and investors in innovation. Equally important are active state policies promoting start-ups and early stage enterprises. These require agile state systems for helping enterprises with issues relating to access to markets, IP, legal and regulatory matters and so on. Last, but not least, Ireland requires more streamlined and investor-friendly equity funding systems, tax laws and regulations and more open systems of IP and business ownership.



Box-out:

The latest report on the European construction industry, published this week by the German Ifo Institute shows that the residential construction sector in Europe will remain on course for further cutbacks with activity expected to hit a 20-years low in 2013-2014. The Institute forecasts show no pick up in residential building sector in Europe until 2015 and the market for new construction bottoming out at 45% below the level in 2006. The proverbial silver lining in the report comes in the Ifo forecasts for Ireland. Ifo experts see residential construction sector here switching to a 5.5% growth in 2014, followed by a 10% expansion in 2015. According to the report, “…it is encouraging that Ireland, which also had to overcome a major crisis in residential construction, is no longer a problem child.” Lets put these seemingly rosy forecasts into perspective. Currently, residential construction in Ireland is down 93 percent on peak year activity, marking the largest drop of any country in the EU. If the Ifo projections hold, by the end of 2015 Irish residential construction sector will be returned to the activity last seen in 2011. Not exactly encouraging, is it?

Monday, July 2, 2012

2/7/2012: Sunday Times 24/06/2012: Pharma Cliff is Here

This is an unedited version of my Sunday Times article from June 24th.


Since the beginning of this crisis back in 2008, Irish Governments have been quick to point to our exceptional and exemplary trade performance as the sole hope for the recovery. As we know, five years into the crisis, that recovery is still wanting. However, our exports have expanded significantly.

The latest Irish trade in goods statistics, released this week by the CSO and covering the period through April 2012 come on foot of the last week’s release of the more detailed trade statistics for Q1 2012. Both are presenting an alarming picture.

April 2011 Stability Programme Update (SPU), the official Government report card to the Troika, envisioned exports growth of 6.8% in 2011 and 5.7% in 2012. Budget 2012 revised 2011 exports growth estimate to 4.6%. By April 2012 – the latest SPU publication – actual 2011 growth outrun was 4.1%, down a massive 2.7 percentage points on a 9 months-ahead forecast from April 2011. April 2012 SPU also revised 2012 projected exports growth to 3.3%. More realistic IMF is now projecting exports growth of 3.0% this year as per its latest Article IV report on Ireland released last week.

As poor as the above prospects might be, the reality is even more alarming. For trade in goods only, January-April 2012 period total volume of imports was down 7.2% on the same period of 2011, while the volume of exports was down 0.9%, not up 3.3% as forecast in the Budget and the latest SPU. So far, average rate of growth in exports in the first four months of 2012 is -0.6%, down from the same period 2011 average growth rate of 7.4%.

Our trade surplus in goods is up 7.7%, but that is due to the fall-off in imports, especially in Machinery and Transport Equipment and in Chemicals and Related Products categories. The decline in imports, while boosting temporarily our trade balance, can mean only two possible things: either imports will accelerate much faster than exports in months ahead as MNCs rebuild their diminishing stocks of inputs, or MNCs will cut back their exports output even further. Either way, there will be new pressure coming from the external trade side.

The latest decreases in exports are driven by the rapid shrinking of two sub-sectors.

In the first four months of 2012, Medical and Pharmaceutical Products exports have fallen to €7.93 billion from €9.01 billion a year ago – a decline of almost 12%. And this trend is accelerating with 21% drop in April 2012 compare to 12 months ago. The patent cliff, or in common terms, production cuts as drugs go off patent, is now biting hard with blockbuster drugs, such as Lipitor and Viagra either going or scheduled to go soon into competition with generics.

Organic Chemicals have also shrunk in April compare to a year ago, although the first four months of the year exports are still up on 2011.

These two sectors are the giants of Irish exports. In 2010, exports of Medical and Pharmaceutical Products and Organic Chemicals accounted for 49% of our total shipments of goods abroad. By 2011 this number rose to 50%. At the same time, in 2010 and 2011 the two sectors trade surplus (the difference between the value of exports and imports) was close to 88% of our total trade surplus in goods. So far, in the first 4 months of 2012, the same holds, with two sectors contribution to trade surplus now reaching above 95%.

Given the on-going contraction in the sectors activity revealed in April data, and given steady, even rising, share of their contribution to our overall trade in goods, one has to ask a question as to why other sectors of exporting activity are not taking up the slack created by declining pharma sales?

The answer is, unfortunately, as worrying as the stats above.

Since about 2007, when the effects of the upcoming patent cliff started to feed into the decision makers’ diaries, Irish trade development and FDI policy has shifted in the direction of promoting bio-pharmaceutical and biotechnology investment and trade. Much hope was placed on these two sectors stepping up to the plate to replace revenues that were expected to be lost in the pharma sector.

These are yet to bear fruit and, given the accelerating competition worldwide for biotech business and investment, our time maybe running out. The main obstacles to the bio-pharma and biotech sectors development here in Ireland are regulatory, policy and institutional.

One key focus of biotechnology sector research pipeline worldwide is on stem-cell research – the area restricted in Ireland by the lack international (rather than national) standards. The same applies to a number of other areas of R&D intensive sector. Analysis by Pfizer, published two years ago, spelled exactly why Ireland is not at the races when it comes to clinical research, an area that covers huge R&D related spends of major pharmaceutical and biotech companies. We lack competitiveness in terms of providing unified and transparent research infrastructure, absence of a systemic ‘knowledge-sourcing’ opportunities, protracted and unpredictable research approval and trial processes, high cost of sourcing patients for trials, cost and bureaucratic burden relating to regulatory inspections and compliance, and lack of PR and communications platforms that can be used outside Ireland.

Back in 2010, the Research Prioritization Steering Group was set up to review priorities for Ireland’s research funding. Published this March, the Group report marks a significant departure from the previous funding approach for bio-medical sciences, re-focusing funding toward commercialization and jobs creation, away from ‘pure’ science and early stage research. This shift in the approach is both radical and reflective of the realities in the biotechnology and other core high technology sectors to-date. During the previous decade, the state spent €7.3 billion on R&D supports under Government Budget Appropriations or Outlays on R&D, helping to employ some 340 PhDs and 171 non-PhD researchers in the state sector alone in 2010 (down from 431 and 197, respectively in 2008). Yet there is preciously little in terms of exports generation that came from these programmes, and today Ireland has no serious indigenous or FDI-supported start-ups culture in bio-pharma or modern medicine and healthcare.


As competition for the sector investment heats up, and as MNCs-led pharma exports continue to shrink, Ireland needs to move fast to create institutional and regulatory systems that can make us attractive to biotech firms. One simple step would be to reinstate a national bioethics council and integrate organizational systems relating to biotech R&D. The role of the Government’s Science Advisor should become more assertive, outputs-focused and linked directly to providing better information to the Government and policymakers on both the strategic aspects of R&D policies and actual outcomes. Alongside, we need to put in place systems for better assessment of returns on investment in R&D as well as processes that would allow us to act on such evaluations. If entrepreneurship and jobs creation were to become core objectives for R&D backing, we should consider merging commercialization functions of the Science Foundation Ireland with exports development capabilities of the Enterprise Ireland. This should leave SFI dealing solely with pure research, reducing duplication in the system of commercialization supports.

The latest trade figures, taken on their own, should sound an alarm bell in the corridors of power.





Box-out:

In an economy that is importing pretty much everything it uses for capital investment, having an investment ‘stimulus’ is equivalent to taking each euro of Government spending and sending over a half of it abroad – in aid of imports manufacturers in Germany, France, the UK and further afield. The end result of such a transaction would be a gross gain to the economy from employing lower-skilled domestic workers installing imported capital, minus the value of imports, plus the returns to the installed capital. Given the low value-added of low skilled labour, the net result would most likely be a loss to the economy due to close-to-zero returns on the above transaction and high cost of financing such a stimulus in the current funding conditions. In Ireland, the above negative return is likely to be increased further by the politicized nature of our public ‘investments’. Thus, in my view, the ESRI is correct in its assessment, published this week, of the undesirability of a fiscal stimulus in the current conditions. Minister Howlin, in his response to the ESRI arguments claimed that “…the social imperative of getting people back to work is … a far more important [priority] in the current climate.” His statement betrays disdain for evidence and economic illiteracy of frightening proportions. The Government should not and can not be in the business of wasting people’s resources, including the resources of the unemployed taxpayers, on feel-good ‘policies’. Yet Minister Howlin disagrees, even when the wastefulness of his own belief is factually evidenced by research. The Government should have economically sensible programmes for dealing with the curse of long-term unemployment. These, however, should not come at the expense of creating apparent waste.

Saturday, November 5, 2011

05/11/2011: Patents and 'sticky' ROI on academic investment

In the previous post I covered some interesting data on hotspot universities (high impact academic institutions) around the world based on OECD data for 2009. Here is the data on high impact patents (EPO top 1 percent) through 2005 against data for the same through 2000.

About the only interesting trend in the above data, other than the one that reinforces the trends highlighted in the previous post is that there is tremendous 'stickiness' or resilience or historical dependence in the data. In other words, there is a 0.994% positive correlation between past performance in terms of highly cited patents and the later performance.

The above trend is of interest because it suggests that overall, league tables changes are difficult to achieve over the shorter period of time and also that ROI in academic research is itself relatively 'sticky', stretched over time.

The good news is that for the two periods, Irish patents applications have increased from 5 in 1996-2000 to 14 in 2001-2005 - a rise of 180%. The bad news, the average for 36 most advanced economies is 226% improvement over the same period of time.

Sunday, October 18, 2009

Economics 18/10/2009: Soros-Nama, R&D spending, Pat McArdle v Morgan Kelly

Update 1:
Karl Whelan is very good on McArdleism - read here.
As does Stephen Kinsella (first hand account) - here.

Update 2: What Apple's latest numbers tell us about R&D investment

Apparently, our Montrose journos have no respect for both - the basic right of freedom of speech and expression and the basic premise that true patriotism is about telling the truth, not about donning 'green jerseys'... This is why I stopped watching majority of RTE programmes long ago - at least BBC (for all its biases) has balls to support freedoms of speech and expression.


Couple of housekeeping items... one on Nama and another one on Knowledge Economy, plus Pat McArdle on Morgan Kelly and more...


Reading through September 2009 interview George Soros gave to Bloomberg Markets magazine, I can across the following quote from the legendary speculator:
Q: "Is this economic contraction something new or something we've seen before?"
GS: "No, you haven't seen it before. Historically, you have the 1930's, the Depression, but since then, whenever you had a financial crisis, the authorities always took care of it and stimulated the economy, extended credit and got it going again. And that just made the bubble grow bigger. (Emphasis is mine) This time it is the end of an era and this is different from any of the financial crises that you have experienced in your lifetime."

The interviewer did not pursue any of the points made by Soros above in any detail. He moved on to the next question. This is a sad opportunity missed because what Soros was saying here (or hinting at) is of potentially great significance. If the current crisis is an end of an era of credit-fulled bubble then:
  • Restarting a new credit cycle is not a solution to the systemic problem, but another attempt to temporarily re-inflate the bubble. In terms of Nama, why are we assuming that the Irish economy needs another credit expansion, especially the one that is (hoped) to be restarted on the back of purely domestic credit injection? Ireland is a tiny drop in the ocean of global finance and an idea that we can, at the expense of our own taxpayers, relaunch a credit mechanism in this country's banking sector is patently absurd. It is equivalent to pouring a cup of water into a desert of quick sands in hope that life will return...
  • Even more fundamentally, if this is an end of an era of credit expansion-driven growth, then what will be the new paradigms for future growth? A topic worth exploring before we commit to a futile effort of reigniting lending in one of the world's most indebted economy.
  • Lastly, if credit-financed growth is the thing of the past, then will new growth path be steep enough to achieve returns on peak-of-valuations loans Nama is taking in? Most likely, the answer will be no.
The next question asked of Soros is even more significant:
Q: "Are we trying to have a pain-free crisis? Is a consolidation needed?"
GS: "I'm afraid that is the case. We should have taken the pain and recapitalized the banks. Instead of that, we kept them alive and gave them hope that they can rebuild their balance sheets, and that is going to drag and weigh on the economy for a long time to come. We suffer from an inability to face an unpleasant reality. We expect our politicians to effectively deceive us, to tell us things are better than they are. That is our weakness."

A brilliant statement, reflective much more of the Irish realities than of those of the US.
  • Nama is par excellence a 'repairing of balancesheets' exercise, not a recapitalization one (hence the Government is now committed to post-Nama recapitalization). My article in the current issue of Business & Finance magazine clearly shows that a recapitalization via direct purchase of equity is more cost efficient than Nama. It will also address the problem of capital adequacy, while leaving the banks to manage the loans. Soros is talking about this type of a solution. And yet, official Ireland remains indifferent to any proposals other than Nama.
  • We really do, culturally, ethically and economic policy-wise look into Government's mouth in hope of hearing them utter something re-affirming, something positive. We take distorted estimates for hope, half-truths for optimism and huge tax bills for 'necessary corrections'. If Nama will drag this economy down for many years to come, our innate desire to rely on the state for 'tough solutions' while we avoid the truth is going to hold us in this crisis for decades.
Oh, and there is an interesting note from Crimson Observer blog (here) - it looks like some old bubble-time hawks are jostling to position themselves as the buyers of distressed properties in Ireland as Nama bites into the market... Interesting. But taking this further - will Nama trigger re-transfer of defaulted properties back to the, pretty much the same, hands of old developers at a knock-down price? Possibly...


Short note from the land of high R&D spending (sorry 'investment'):

"The 908 million euro ($1.3 billion) goodwill write-down on Nokia Siemens Networks, ...certainly contributed to the unexpected 559 million euro ($833.9 million) loss reported by Nokia in the third quarter. However, Nokia had forewarned that it would be writing down the value of the business after successive quarterly losses. A more worrisome and unexpected trend, however, is the lackluster demand for Nokia's smart phones, essentially phones that double as mini computers such as the N97 and the E60. The company's share of that market globally fell to 35% in the quarter ending in September, from 41%."

So (quote above is from Forbes magazine) Nokia (aka Finnish economy) is suffering from:
  • Lagging position in smart phones (despite Finland having higher civilian R&D spending as a share of GDP than it's closest rival in smart phones market - the US);
  • Lagging strategy to the market - Nokia unveiled details of its forthcoming N900 phone in the middle of the third quarter, well after new launches by Google and Apple;
  • heavy competition in China and India from low-cost producers (despite Nokia's vast outsourcing and off-shore production network, partially financed by Finnish taxpayers).
Run through the above 3 points and you can see that R&D spending on labs and technicians has nothing to do with Nokia's woes. Simple business management, marketing, strategy and business processes flexibility are behind it losing ground to its rivals.

In contrast to Nokia, Apple just posted (Monday) a 46% increase in its fiscal Q4 earnings and higher revenue than a year ago led by better-than-expected sales of iPhones, Mac computers and iPods (here). You can read about Apple strategy in terms of introducing new products at higher frequency than its rivals and launching upgraded software to coincide with new products offerings in the above-linked article. But what actually put Apple back into the global competitiveness game was not just product innovation - it was i-Tunes concept for selling music and then Apple Store concept for selling hardware, followed by, yes - i-Phone APS online 'store'. It is retailing that reinforced product innovation for them - something that Nokia with its government-supported R&D spending programmes can't replicate to date.

Still want to chase Finns in putting more R&D spending onto the Exchequer books?..


The news that Pat McArdle (reported here) had a total meltdown in his challenge of Prof Morgan Kelly did surprise me. I have deep respect for Pat's work back in the Ulster Bank - he was one of the most knowledgeable bank economists of recent times and I always valued his research notes for an inimitable ability to link intuition and data. Ditto for Prof Kelly.

Hence, I was shocked to learn that Pat McArdle questioned Morgan's right to express his views. I certainly hope that Pat will publicly apologise to Morgan for this outburst. And I certainly hope that Kenmare organizers would have guts to openly defend Morgan's liberty to say what he wants on the subject of economics and economic policy when he wants to say it.

One would expect censorship to be despised and rejected in academic setting and amongst social scientists. Alas, I know first hand that this is where it is practised. For example, a birdie chirped to me recently that one department of economics in Ireland has recently explicitly banned its junior members (senior faculty of course said 'Non' to the ban) from speaking to the press or expressing their opinions in public on the matters of economic policy unless they obtain a prior consent of the Department Head. How's that for 'democratic' and 'socially active or relevant' academia? Standard job descriptions for academic posts in this country state that one of the parts of our work involves service to a broader community outside the halls of academic institution.

This is precisely why I hope my colleagues who attended Kenmare and were first hand witnesses to Pat's attack on Morgan (alongside Kenmare organizers) issue a clear statement as to the value of the freedom of speech and expression and the value of freedom of thought.

For now, I am saddened by the fact that an economist for whom I have nothing but respect had joined a pack pursuit of independent thought...

Friday, July 3, 2009

Economics 03/07/2009: Ireland's Research Sectors - a net positive

CSO released their latest data on R&D spend in Ireland for 2007/2008.
Chart above shows overall R&D expenditure by type of firm in 2007 and 2008. In both 2007 and 2008 larger firms dominated overall R&D expnditure in Ireland, but there was a marginal increase in the share acruing to small firms as well. There has been only marginal growth in terms of overall spend between 2007 and 2008. Still a net positive, when compared to the rest of economic activity.
Total capital spending on R&D declined for larger firms, but rose for smaller firms. Ditto for foreign owned enterprises as opposed to domestic enterprises. Across the board, foreign owned companies vastly dominate R&D spending space in Ireland, though domestic enterprises are closing the gap. Again, a net positive. Capital spending overall declined, as expected, given the fall in the value of land and buildings.
Current expenditure on R&D (inclusive of labour costs) rose for all categories of firms. The smallest percentage increase was for foreign owned enterprises and manufacturing. Again, net positive, albeit marginal. And in the long run, this might be signalling rising pressure on R&D competitiveness. No analysis is provided in terms of off-set in R&D Capital spending savings agains Current spending inflation.Labour costs rose at a significant margin for all players, except for manufacturing enterprises. Net negative for the 'knowledge' economy. Apparently - doubling PhDs output does little to reduce their cost.Own funds are dominant as a source for R&D financing, with small firms, expectedly, leading larger firms in the importance of public funding. In general, public funding is extremely marginal. Again, this is good news. This is true in relative - percentage - terms (above) and in absolute terms (below).
Table below shows the sectoral breakdown of total R&D spending:
Predictably, MNCs-led sectors account for over 70% of the total spend. This is ok in the short run, but must be reduced in the long run if we are to lower the risk of significant withdrawal of one or two leading MNCs from the market.