In previous two posts, I have covered the broader trends for R&D spending in Ireland over 2007-2012 and more specific trends in terms of R&D-related employment. In this, last, post I will illustrate some trends in relation to R&D spend and activity by nationality of the firm ownership.
First, two charts:
The charts above clearly show that for indigenous firms (Irish-owned):
- Use of own company funds has declined in overall importance between 2009 and 2011, although the category still plays more important role in 2011 than it did in 2007 in funding R&D activities. This longer-term trend is most likely a result of a combination of factors at work: 1) reduced availability of credit and equity investment as the result of the crisis, 2) reduced emphasis in R&D on tangible IP that can be used to raise equity funding.
- Meanwhile, public funding (despite the fiscal austerity) rose in overall importance in 2007-2011 period, although 2011 result is showing some moderation in overall reliance on public purse sources for R&D funding. This is also consistent with the points raised above.
- All other sources funding share accruing to the Irish-owned enterprises is volatile (per second chart above), but overall these sources of funding are becoming less important to the Irish-owned firms (first chart above). It is unclear whether supply (bust financial system in Ireland and collapsed investment) or demand (firms struggling with already massive debt overhang and facing the prospect of multi-annual Government deleveraging) drives this. My gut feeling – both.
The contrast between the Irish-owned and non-Irish-owned enterprises is difficult to interpret outside the simple realisation that the latter are predominantly MNCs and as such have no difficulty in sourcing internal funds for R&D activities. Public funding for these types of enterprises is ca60 percent less important than for Irish-owned enterprises.
Table below summarises the data:
I guess the main lesson here is that we need to more aggressively stimulate the use of ‘other’ sources of funding for the Irish-owned enterprises. I have been speaking about the need for enhancing Ireland’s tax system to increase use of employee equity shares as a major tool for raising funding for indigenous firms, especially medium-sized ones (see presentation here).