What Determines the Location Choice of Foreign Investment in R&D ?

There is an ongoing discussion on this blog about attracting foreign investment in R&D in Ireland. In a recent research paper we analysed the location decisions of foreign affilates in the R&D sector incorported in the European Union over 1999-2006. Our research results suggest that, on average the location probability increases with market potential, agglomeration economies, R&D intensity and proximity to centres of  research excellence.  The determinants of the location choice of R&D foreign affiliates vary depending on the country of origin of the foreign investor. Thus, it appears that agglomeration externalities and business R&D intensity had a higher positive effect on the propensity to locate in an EU region in the case of multinationals from North America in comparison to European based multinationals. Proximity to centres of research excellence had a positive and significant effect on the location choice for North American R&D multinationals but no significant effect in the case of  European R&D multinationals.

Our research results suggest a number of policy implications. First, policy aiming at increasing the R&D intensity of regions are likely to foster the attractiveness of regions to R&D foreign investment. Second, positive externalities from clustering of R&D foreign affiliates outweigh competition effects. Third, given the heterogeneous behaviour of foreign investors, differentiated policy depending on target partner countries can increase the success of such policies.

Debate on Wage Cuts

The Irish Times features a debate on wage cuts between representatives of IBEC and ICTU: you can find it here.

It is open to question whether framing the policy issue as involving adversarial conflict between employers and workers is especially useful. Rather, it involves primarily a trade-off between lower current average incomes for higher future average incomes.  If the ‘debate’ format is to be followed, a more interesting lineup might be to include a representative of those not currently working (today’s unemployed, emigrants, students and others not participating in the labour force).

The Science of Spending Stimulus Money Wisely

The New York Times carries an interesting article on the role of spending on science projects as part of a stimulus package.

Energy Policy Issues for Ireland

The ESRI held a conference on this topic this week: you can download the presentations here.

Annual statement on the euro area

The European Commission has released its annual report on the euro area  – this is very helpful in providing a comparative perspective on Ireland in relation to the other member states of the euro area and in communicating the ‘Brussels view’ on economic events.

The full report and other materials are available here.