Irish-owned businesses account for one-third of €4.6bn R&D spending

Domestic firms spent 36pc of the €4.6bn invested into innovation here in 2016, with multinationals responsible for the balance.

Out of the €1.7bn spent by Irish businesses, just under half the spending, or €793m, went to in-house research and development (R&D), to according to data from the Central Statistics Office (CSO).

The tax system is structured to promote investment in R&D, seen as the driver of economic well-being by policymakers.

The data shows foreign -owned enterprises, which make up fewer than one in five of all relevant businesses, accounted for 64pc of innovation-related expenditure in 2016 in Ireland, including €1.4bn of expenditure on in-house R&D.

According to the CSO, this distribution of innovation expenditure between Irish and foreign-owned enterprises, all of which employ a minimum of 10 employees, has stayed broadly consistent over the six-year period between 2010 and 2016.

The total spend on innovation in Ireland in 2016 represented a 22pc increase on the 2014 figure of €3.8bn, with the CSO stating that just under two in five enterprises reported innovation expenditure in 2016.

The increase in innovation spend was driven by a 15.5pc increase in expenditure for in-house R&D, which in 2016 accounted for nearly half of all innovation expenditure for companies.

External R&D at €619m represented 13pc of total spend for the relevant businesses.

External R&D spend includes contracting-out R&D to research organisations or to other enterprises.

Meanwhile, acquisition of machinery, equipment and software at €1.4bn represented just under a third of total innovation spend in 2016 for businesses.

Perhaps unsurprisingly, two in three larger enterprises reported innovation expenditure between 2014 and 2016, while only 36pc of small and medium enterprises said that they had spent on innovation during the period.

Separating the data by sector, the industrial sector accounted for €2.7bn of the innovation spend compared to €1.9bn for the services sector.

The bulk of the spend by the industrial-sector businesses went on machinery, equipment and software, while in contrast, businesses in selected services spent €1.1bn on in-house R&D.

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