Irish direct investment in the US: evidence and further issues

Abstract

This paper presents evidence and discusses possible implications for Ireland of the increasing level of Irish outward direct investment in the United States. Data available from the US Department of Commerce show that the relative position of outward FDI to the US to inward direct investment received from the US has increased considerably since the early 1980s, as has employment associated with Irish affiliates based in the US. We find evidence that the development witnessed in Ireland is consistent with its moving from Stage 2 to Stage 3 in the Investment Development Path, a concept due to Dunning (1981) and discussed in this paper. The possible effects of outward FDI on the home country are also discussed, introducing some of the potential issues a home country may face. They range from increased profits for investing firms, to labour market effects, spillovers for the investing firm and suppliers, to effects on the balance of payments. While an increase in profits is unambiguously positive for the home country, the other effects may turn out to be either positive or negative. This brief discussion, while being by no means exhaustive, hopes to stimulate interest in the issues involved and to prompt further research in these areas.