RERC Athenry, January 12 th 2009 Networking, Innovation and Agglomeration in the Irish Furniture Manufacturing Industry Kevin Heanue

RERC Athenry, January 12 th 2009 Overview  Background & Rationale  Methodology  Findings  Conclusions & Recommendations

RERC Athenry, January 12 th 2009 Background & rationale (1)  PhD research: series of 4 papers  Why the furniture industry? ‘High-tech’ policy obsession Resilient Dispersed

RERC Athenry, January 12 th 2009 Background & rationale (2)  Context Supplier-dominated (Pavitt, 1984) Mature; price sensitive, labour-intensive yet quality conscious in some sectors NIC competition yet, paradoxically, European manufacturers world leaders

RERC Athenry, January 12 th 2009 Background & rationale (3)  Concepts and theory Post Fordism (Piore and Sable,1984; Best, 1990) Innovation studies (Pavitt, 1984; Lundvall, 1988; 1992) Location (Krugman, 1991; Becattini 1990) Trust (Cooke & Morgan, 1998) embeddedness (Granovetter, 1973; 1985); proximity (Boschma, 2005)

RERC Athenry, January 12 th 2009 Background & rationale (4)  Policy Networking – Forbairt Pilot Inter-firm Co- operation Programme (1996); EI Industry- Led Networks Initiative (2006) Innovation – STIAC (1995); Strategy for Science, Technology and Innovation (2006) Agglomeration/clustering/networking - Culliton Report (1992); Ahead of the Curve (2004)

RERC Athenry, January 12 th 2009 Methodology (1)  Industrial economics – firm behaviour; industrial organisation and industry structure  Heterodox approach – eclectic use of theoretical and conceptual perspectives and also variety of methodologies (Lawson, 2006)  Primarily case-study based, but also statistical analysis  Pragmatic realism

RERC Athenry, January 12 th 2009 Methodology (2)  Why case studies? ‘How’ and ‘why’ questions Context dependent Contemporary phenomenon No control over behavioural events  Papers presented as produced, i.e. chronologically

RERC Athenry, January 12 th 2009 Findings – Networking (1)  Why would geographically dispersed competitors with no history of personal relations initially decide to come together, be willing to share sensitive commercial information and begin to engage in co- operative projects?  Methodology: Case study of TORC horizontal network of 3 furniture firms (firms, Enterprise Ireland Network Programme, Network Manager).  Focus on network formation: Trust – transaction and agency costs

RERC Athenry, January 12 th 2009 Findings – Networking (2)  Need for cooperation among furniture manufacturers (CIO, 1964 → NESC, 1996)  Differentiates between formation of ascribed trust between firms that are and are not spatially proximate  Organisational proximity as opposed to spatial proximity identified as alternative context within which ascribed trust can develop even in the absence of direct interaction

RERC Athenry, January 12 th 2009 Findings – Networking (3)  Contribution to the theoretical understanding of network formation  Raises questions about support for individual companies in industrial agglomerations  Evidence of organisational integration (Lazonick, 1991; Lazonick and West, 1995) in contrast to agglomerated firms

RERC Athenry, January 12 th 2009 Findings – Innovation (1)  What role does location play in the innovation processes of low- and medium-technology firms?  Methodology: Case studies of four firms – furniture (x2) and fabricated metal products (x2) – all rural locations  Relationship between embeddedness and innovation. Is deep, local, embeddedness important for innovation? Inverted u shape? Does the relationship change over time?

RERC Athenry, January 12 th 2009 Findings – Innovation (2)  First – identify innovation processes of case study firms Type of network relationships Interactive learning processes Variety and sources of knowledge bases  Location is becoming a less important driver of innovation for these furniture firms (not so for the Fab Metal firms)  Wide variety of relationships between embeddedness and innovation is possible

RERC Athenry, January 12 th 2009 Findings – Innovation (3)  Mixture of: Local and non-local linkages Market and non-market relationships Formal and informal networks  Support (from furniture) for critics of simplistic arguments about clustering (e.g. Uzzi, 1997; Boschma, 2005; Maskell et al. 2006) but contradiction from Fab Metal.

RERC Athenry, January 12 th 2009 Findings – Agglomeration (1)  Cost-reducing and/or innovation-promotion benefits  Furniture manufacturing – Denmark; Italy etc  Localised concentrations identified for Ireland – Dublin, Cork, Meath, Monaghan – but never formally tested  Scepticism about agglomerative benefits in Irish furniture industry (Heanue & Jacobson, 2005; 2008)

RERC Athenry, January 12 th 2009 Findings – Agglomeration (2)  Is there evidence of industrial agglomeration (and therefore agglomeration economies) in the Irish furniture industry?  Ireland generally – dispersal – agglomeration - dispersal since 1920s (Strobl, 2004)  Methodology – Standardised Location Quotients (O’Donoghue & Gleave, 2004)

RERC Athenry, January 12 th 2009 Findings – Agglomeration (3)

RERC Athenry, January 12 th 2009 Conclusions & recommendations (1)  Theory Existence and complexity of innovation in LMT sectors Relationship between location and innovation for LMT sectors is heterogeneous both within and among sectors Spatial limits to industrial agglomeration more ‘stretched’ than conventionally viewed Literature on ascribed trust outside of geography

RERC Athenry, January 12 th 2009 Conclusions & recommendations (2)  Policy Cluster promotion may not be the best strategy Encouragement of networks and linkages Complex variety of policies necessary Positive impacts of policies might take a long time – gestation period for TORC at least 10 years Policy towards LMT innovation

RERC Athenry, January 12 th 2009 Thanks