Ireland's focus and over-reliance on foreign direct investment conceals a poor record fostering innovation among small and medium-sized enterprises.
This is according to the Irish Venture Capital Association in its pre-budget submission.
The association claims that Ireland has one of the weakest innovation records among small, advanced economies.
However, it is masked by the success of the country in attracting FDI (Foreign Direct Investment).
The report warns against an over-reliance on revenues from FDI at a time of an "evolving international tax landscape".
"We need an increased focus on developing a dynamic SME sector," Sarah-Jane Larkin, Director General of the Irish Venture Capital Association said.
"But indigenous, innovative enterprises and entrepreneurs with global ambition face considerable challenges in accessing risk finance to scale their businesses."
She referenced European countries including Denmark, France and the UK that have already generated scaling finance for start-ups and SMEs through access to pension and sovereign wealth funds.
The report calls for a mandatory 'opt in' to invest in Irish companies or funds by participants in the new auto enrolment pension scheme.
"Since the introduction of a similar scheme in France in 2008, the amount of capital allocated to French funds grew to €6bn from €200m between 2002 and 2016," the submission states.
Other schemes in the UK and Denmark have unlocked billions of euro in fresh capital to invest in venture capital and private equity.
The association said a similar move here could "unleash a wave of investment, allowing innovation to drive our indigenous economy and our most promising companies to scale from Ireland."
The IVCA has also called for changes in the EIIS (Employment Investment Incentive Scheme), which is a tax relief vehicle which offers individual investors tax relief of up to 40% as an incentive to encourage investment in small and medium sized companies in Ireland.
The association
