Sectoral specialisation in the EU a macroeconomic perspective

Box 1

THE EVOLUTION OF THE ICT MANUFACTURING SECTORS IN IRELAND, FINLAND AND SWEDEN

Among the most notable changes in European industrial structure during the 1990s was the

expansion of the information and communication technology (ICT) sectors in Ireland, Finland

and, to a somewhat lesser extent, Sweden. The ICT sector tends to be characterised by the

production of technologically intensive, high value added goods and, accordingly, is usually

associated with strong productivity growth.
This box presents some stylised facts relating
to the expansion of the technology sectors in
these countries as well as a description of
some of the factors underpinning these
developments¹. Some of the spillover effects
of the technology booms in Ireland, Finland
and Sweden are also discussed.

The Chart shows the evolution of the share of
gross value added for ICT manufacturing
sectors in total manufacturing gross value
added since 1980. The relative importance of
the ICT manufacturing sectors in Ireland,
Finland and Sweden relative to the European
average is evident, although the share in
Sweden has declined relative to the average in
more recent years. It is also clear that the three

Chart Share of ICT manufacturing sectors,
gross value added as % of total
manufacturing GVA

(current prices'

— Sweden
..... Finland
- - ■ Ireland
--- EU

Source: NCBs.

countries have experienced quite different paths of development. In Ireland, there has been an
expansion of the sector, from a high base, since the 1980s. The ICT sector in Finland started
from a low base in the 1980s but expanded extremely rapidly during the 1990s. The sector
developed less spectacularly in Sweden, although the share of the technology sectors also
increased during the 1990s.

Table A gives some indication of the composition of the technology sectors across the three
countries. Most of the activity in Finland is concentrated in the production of
telecommunications products, and one company (Nokia) dominates. In Sweden the
telecommunications sector also dominates, centred on one individual company (Ericsson), but
there is more diversity than in Finland. In Ireland there is considerable diversity across all sub-
components of the overall ICT sector, including computers, telecommunications and medical,
precision and optical instruments.

The development of the ICT sector in Ireland was driven by inward direct investment by US
companies. In 2000, the latest year for which details of ownership by sector are available, US
firms accounted for around 85% of the total net output of the Irish ICT sector. A number of
factors have made the Irish economy an attractive location for US multinationals in technology-
intensive sectors, including generous corporate tax incentives, the development of the European

1 Note that the ICT-sector here is defined as the sum of sectors 30 to 33, which is a broader definition than the one used, for instance,
by the OECD. A lack of data availability meant it was necessary to keep the definition of the ICT-sector on a two-digit level.

ECB

Occasional Paper No. 19

July 2004

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