Survival and Growth Strategies on Europe’s Geographical Periphery
Edited by Helena Lenihan, Bernadette Andreosso-O’Callaghan and Mark Hart
Chapter 7: MNE Subsidiaries, Productivity Spillovers and SMEs
7. MNE subsidiaries, productivity spillovers and SMEs Rita Buckley INTRODUCTION Prior to 1990, the Irish economy was considered to be one of the weakest peripheral economies of the ‘old’ EU15 with per capita GDP below 80 per cent of the EU average. This was combined with slow growth rate in GDP, high inflation and unemployment and a heavy debt burden. In 2007, the Irish economy was among the most vibrant, globalized economies in the EU, with GDP per capita second only to Luxembourg’s at 143 per cent of the EU average (Eurostat, 2008). The ‘Celtic Tiger’ period of the mid-tolate 1990s saw several years of double-digit GDP growth, driven by a progressive industrial policy that boosted large-scale foreign direct investment and exports. Since 2004, GDP growth has averaged around 5 per cent, the best performance for this period among the original EU15 Member States. This extraordinary growth record of the Irish economy has led to considerable interest in the Irish development model. Ireland’s economic performance since 1990 is primarily attributed to the presence of foreign-owned multinational enterprise (MNE) subsidiaries, especially in high-technology sectors. This sector is made up of a relatively small number of large foreign-owned multinational enterprises and a large number of indigenous small- to medium-sized enterprises (SMEs). A key issue here is how the indigenous SME sector has coped with the challenge of coexisting with a highly productive ‘foreign’ sector and whether this has had an impact on their overall level of growth and in particular whether it...
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