Do Domestic Firms Benefit from Foreign Presence and Competition in Irish Services Sectors? ESRI WP395. July 2011

This paper examines whether domestic firms benefit from foreign competition through imports and from the presence of foreign-owned firms via spillovers in three Irish market-services sectors between 2001 and 2007. Import competition enhances the productivity of domestic firms in two out of three market-services sectors (transport and business activities). The effects from foreign presence are more varied. Foreign presence enhances the productivity of domestic firms in one sector (transport) when using standard output-based measures of productivity. After taking into account the degree of absorptive capacity of the domestic firms this spillover effect only accrues to domestic non-importers. Using input-based measures of productivity, the paper points to adverse effects of foreign presence as it is associated with lower capital-labour ratios and higher part-time-to-full-time employee ratios among domestic firms in wholesale and retail trade