Input-Output Linkages and Foreign Direct Investment in Ireland

This paper investigates the backward linkage structure of the Irish economy using a set of techniques developed to identify key sectors in input-output tables. The distribution of sectors with strong backward linkages is compared to the distribution of grant-aided foreign firms. Foreign firms are predominant in those sectors which are weakly dependent on national inputs. The low level of integration of foreign firms may therefore be quite typical of national behavior. Tests are made to determine the relationship between linkage and growth. The results suggest that significant relationships do not exist. Concern for improving linkages may in fact be shortsighted given more pressing policy objectives.