Research and development (R&D) activities in Ireland are mainly carried out by foreign multinationals with little spillover to SMES, according to a new report from the European Commission.

The study also shows Irish R&D intensity - that is expenditure on research and development divided by sales - is below the EU average.

In 2014, the last year for which figures are available, Irish R&D intensity was 1.52 per cent versus a 2 per cent EU-wide target.

The study, which was conducted by the European Commission’s Research and Innovation Observatory (Rio) shows that multinationals account for over two-thirds of business R&D carried out in Ireland.

According to the report, some 400 companies accounted for 65 per cent of all research and development in Ireland in 2013.

The report added that most of the expenditure undertaken by Irish-owned firms is done by companies that are not significant exporters.

Rio’s report says that the economic crisis has left its mark on public support for R&D with Ireland’s research and development expenditure in the public sector as a percentage of GDP, below both the EU average and the OECD median.

Improvements

The study notes moves to improve the R&D landscape through measures such as the introduction of a Knowledge Development Box scheme, the Innovation 2020 strategy for Research and Development, Science and Technology, and the latest capital investment plan, which includes an allocation for research activities.

“Thanks to the strategic sustained investment in R&D of the last decade Ireland has been able to join the top 20 countries for scientific output and scores remarkably well in a number of innovation output indicators,” the report said.

While noting general improvements, the study also highlights a number of challenges for R&D in Ireland. These include increasing the level of research and development activities by indigenous companies, offering more public sector funding and improving better business-academia collaboration and knowledge transfer.

“Ireland has implemented measures on innovation procurement much later than other EU countries, also taking into consideration the strength of its high-tech and ICT sectors. The Small Business Innovation Research (SBIR) calls launched in 2014 and 2015, together with the plan to engage in a learning process of other countries’ procurement practices can be considered as positive developments,” the report said.

“Nevertheless, Ireland could benefit from a comprehensive strategy to boost innovation procurement,” it added.