Foreign Direct Investment and Institutional Co-Evolution in Ireland

Abstract

Ireland was one of the first countries in the world to adopt an FDI-oriented development strategy. It remains to this day the most FDI-intensive economy in Europe. These factors have helped configure the institutional structure of the economy to be able to respond rapidly to changes in the nature and requirements of the type of global FDI that an economy with Ireland's advantages (and disadvantages) could reasonably hope to attract. This paper analyses the changing characteristics of European-bound FDI since the 1960s and the co-evolution of Irish development strategy.

Multinational Firms’ Motivations and Foreign Direct Investment Decisions: An Analysis of the Software and IT and Financial Services Sectors in the Irish Context

“…English language ability has been critical to this point in national software success. English skills appear on consultants’ checklists as a key criterion used to decide on the capabilities of software firms and software nations (Barry, ; Carmel, ; Collins, ). This is achieved by a high literacy rate, which is sustained in Ireland by an education system compulsory from ages 6 to 15.…”

“…The second most important motivation exhibited by firms in our sample is linked to market‐seeking considerations. Access to Irish and regional markets through the use of Ireland as an export platform (Barry, ) is one of the main factors contributing to the large presence of multinationals in Ireland. IDA Ireland specifically identified software as an internationally traded service possessing significant employment potential and as a result began targeting American companies that required large workforces and that did not have existing European manufacturing or R&D operations (Coe, ).…”

“…Rapid growth of exports, output, and employment have led market analysts to describe Ireland as the “Celtic Tiger.” This success would not have been possible without the Irish government gearing its education and industrial policy toward attracting knowledge‐based industries. Thus far, a number of studies on Ireland (Barry, ; Barry & Bergin, ; Barry & Kearney, ; Brennan & Verma, ; Monaghan, ) have demonstrated how a small country can attract foreign direct investment (FDI) because of an educational system that is tightly integrated with the country's FDI‐oriented development strategy; a low standard corporate tax rate; excellent regulatory, economic, and people infrastructure; its EU membership; the skills and experience of the country's Industrial Development Agency (IDA); and the quality of the telecommunications infrastructure. The creation and effective evolution of government policies designed to develop skilled labor and enhance the quantity and quality of physical and social infrastructure, combined with the ability of subsidiary managers to effectively access these resources due to the flexibility in the labor markets (Gunnigle & McGuire, ), has also been found to be important for attracting FDI in small countries (Barclay & Gray, ; Hood & Taggart, ).…”

Skills shortages are not always what they seem: migration and the Irish software industry

“…Within this an important role was played by non-university third-level institutions (the Institutes of Technology), which concentrated on sub-degree level courses. In other words, even if the system failed the minority lacking the literacy skills, and even if other countries could provide better educated cohorts overall, there was a critical mass of reasonably educated and cheap graduates available for employment (see also Barry, 2007).…”

Ireland's Foreign‐Owned Technology Sector: Evolving Towards Sustainability?

“…After the restructuring of Ireland's development agencies in the early 1990s, IDA Ireland placed greater emphasis on developing TNC subsidiaries and worked closely with their management to support efforts to win mandates in higher value‐added activities such as advanced manufacturing, research and development (R&D), supply chain management (SCM), and shared services (Barry 2007; Begley, Delaney, and O'Gorman 2005). The agency identified the key priority for future development as: “The expansion of existing clients .…”