The report finds multinationals continued to thrive here during the crisis, but the productivity of indigenous SMEs continued to falter despite the collapse of the construction industry, which typically had low levels of innovation and production.
It notes that the trend of falling productivity for smaller companies is common across most OECD countries for some time.
“Strengthening competition in sectors including legal services and ports, further improving the regulatory environment for business and encouraging innovation are all policy priorities,” it states.
Ireland’s support for businesses “is skewed” towards providing research and development (R&D) credits, which only larger companies may be in the best position to exploit fully, the report says.
“Even if R&D tax incentives contain carry-over provisions and refunds as in Ireland, young firms may not fully benefit from the schemes if they lack the upfront funds to start an innovative project, and in these cases public funding may be more beneficial.”
The OECD favours “rebalancing” Government incentives towards direct aid.
It wants the Government to be more flexible in its use of work permits for international graduates to plug skills shortages.