The Tangible Contribution of R&D Spending Foreign-Owned Plants to a Host Region: a Plant Level Study of the Irish Manufacturing Sector (1980-1996)

Why would an R&D-active plant have a higher commitment to the
host region than a non-R&D active plant? Essentially much of the
investment in R&D is a sunk cost, to which there are two elements. First,
there is the percentage of annual R&D investments that are undertaken in
capital goods, such as specialised buildings and equipment for research
purposes. There is a high probability that these items are location specific,
so that if a plant withdrew, much of the value of these facilities would be
lost. The second element is the employment of R&D personnel. Although
labour is considered to be mobile, a certain percentage of R&D personnel
in a plant will not move with the plant.²⁰ In effect, for an R&D-active
plant, there is a cost to exiting from operating in the host region that does
not exist for non-R&D active MNCs.

Why would foreign-owned plants which undertake R&D in Ireland
be expected to create more employment and higher quality employment in
Ireland relative to non-R&D-active MNCs? Companies which are
undertaking R&D are for the most part adapting products for export
markets. The Forfas survey indicates that, on average, 63 per cent of all
R&D spend by MNC plants in Ireland is for experimental development.
The quantity of employment in a plant is a function of its output. We
assume that the greater the quantity and range of products produced at the
plant, the greater the scale of adaptation required of those products for the
local markets. Thus plants undertaking experimental R&D are
hypothesised to have higher production levels than a plant which does not,
and, by extension, greater employment.

²⁰ de Arcos et al (1997:4) cite a MERIT interview where the manager of a plant concluded that key
R&D personnel would not be willing to move to the US with the firm, thus the firm would not
relocate.

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