  Despite the key role of multinational enterprises (MNEs) in both
international markets and domestic economies, there is no consensus on whether
or how they positively impact their host economy. In particular, do MNEs foster
the creation of new domestic firms through knowledge spillovers? In this study,
we look at the impact of the presence of related MNE industries on the entry
and exit of domestic export industries in Irish regions before, during, and
after the 2008 financial crisis. Specifically, we are interested in whether the
presence of MNEs in a region results in knowledge spillovers and the creation
of new domestic export activities in related sectors. To quantify how related
an industry is to a region's current export basket we deploy an existing
cohesion variable, closeness, that measures the relatedness of a new industry
to existing industries within a region. We also introduce a new variable,
strategic closeness, which captures not only the relatedness of industries
within a region but their own connectivity or embeddedness. We use a dataset
containing all government-supported export firms in Ireland between 2006-2018.
We find that the presence of related MNE industries is associated with the
entry of new domestic activity, suggesting that Irish regions benefited from
domestic-MNE linkages. However this relationship was temporarily lost after the
financial crisis and only recently re-established, with domestic entry
dependent on the presence of highly embedded MNE sectors. Furthermore, we find
that related MNEs help protect domestic industries against exit after the
crisis and thereby play a role in enhancing regional resilience.
