Linkages, agglomerations and knowledge spillovers in the Irish electronics industry: the regional dimension

Examination of the extent of regional agglomeration of foreign and indigenous electronics firms and research and development (R&D) activity in the Irish electronics industry suggests that there is a low probability of successful knowledge spillovers from foreign to indigenous firms.

Abstract

This paper examines the extent of regional agglomeration of foreign and indigenous electronics firms and research and development (R&D) activity in the Irish electronics industry. In particular, we are interested in whether indigenous R&D activity is concentrated in the same regions and research areas as foreign R&D, which is necessary to facilitate successful knowledge spillovers between the two groups. While there is evidence that there are regional clusters of indigenous and foreign-owned firms, the data suggest that there is a low probability of successful knowledge spillovers from foreign to indigenous firms. This is because foreign-owned firms undertake R&D primarily in different regions and in different research areas than indigenous firms. This suggests two policy implications. First, the scale of indigenous R&D needs to be increased in order to improve indigenous absorptive capacity for spillovers. Second, the research areas of foreign and indigenous firms need to be highly correlated to optimise the potential for successful knowledge spillovers.