Dr. Conor O'Toole:

One of the big challenges with the SME sector is that it is really heterogeneous. There are loads of different types of firms doing an awful lot of different things. For many of those, particularly in domestically non-traded sectors, or services sectors providing the kinds of services we consume daily, it is very difficult to achieve high productivity. When we talk about a research and development gap or a productivity gap for SMEs, we are talking much more about the type of firm that could be oriented towards export-ready internationally traded firms. What is clear from that group of firms is that investment in intangibles in Ireland is lower definitely than in other assets and there is some evidence that it is lower than other countries. The real challenge is to understand why. We definitely need more research on this because, as I mentioned earlier, there are supply-side factors involved. Access to credit can be much more difficult when you are trying to become an exporter because there are big sunk costs to exporting. That is a risky business decision so without a lot of collateral, third-party investors or the financial sector find it more difficult to allocate credit. They are the type of enablers that we can help with when we are trying to build a business environment to help firms to export. We can help with State supports around financing activity. It is much more difficult on the demand side. Some of the things that our report tried to look at were investor appetite, the role of uncertainty and the role of risk aversion. Some of the evidence we have is that after the financial crisis many firms just lost the risk appetite to invest, perhaps because of their past experience about how challenging the environment was when they expanded too much. Without commenting too much on the paper the Deputy mentioned but more broadly on how we think about how we set out the policy enablers that help to build an enterprise base domestically that can support jobs growth and indigenous exporters, it is about trying to unpick what those factors are. On the supply side, it may be a question of credit issues or other barriers to exporting, such as information or market access, or it may have something to do with risk appetite, which is much more difficult to deal with.