Since the mid-fifties, Ireland has drastically altered her trade policy in favour of freer trade. This has been accompanied by a massive programme of incentives to attract Foreign Direct Investment (FDI). This thesis documents the magnitude and structural composition of FDI. A detailed analysis is made of the characteristics of foreign owned projects, their impact on the development of the domestic sector and on the external trade of the host country. The share of the foreign firms' value added which remains in Ireland (Retained Value) is calculated. This is supplemented by . two methods of cost benefit analysis 5 Domestic Resource Cost analysis, which values all costs and benefits in international price equivalents and a calculation of the net return on the input of Government funds. The major benefits of FDI are the creation of new employment (over 40,000 jobs up to 1972) and the increase in industrial exports (46% of manufactured exports were from foreign owned firms in 1970). Other secondary benefits have been small but FDI has contributed positively to the Irish balance of payments. Costs have arisen from payment of subsidies and constraints placed on the growth of the domestic sector by the competition for resources. The introduction of a large foreign sector has resulted in dualistic development and the weakness of linkage effects makes this endemic. Policy conclusions are that a more formal and structural system of appraisal, properly valuing benefits should be implemented. The inflow of FDI would be somewhat reduced and resources should be devoted to developing the domestic sector, through both public and private enterprise. FDI should be regarded as a 'bridging loan' for those sectors where mobilising domestic resources is difficult. More effort should be made to exploit the benefits of FDI by increased selectivity and closer integration with the domestic economy.