RERC Athenry, January 12 th 2009 Networking, Innovation and Agglomeration in the Irish Furniture...

RERC Athenry, January 12th 2009

Networking, Innovation and Agglomeration in the Irish Furniture Manufacturing

Industry

Kevin Heanue


Overview

Background & Rationale

Methodology

Findings

Conclusions & Recommendations


Background & rationale (1)

PhD research: series of 4 papers

Why the furniture industry? ‘High-tech’ policy obsession Resilient Dispersed



Context Supplier-dominated (Pavitt, 1984)

Mature; price sensitive, labour-intensive yet quality conscious in some sectors

NIC competition yet, paradoxically, European manufacturers world leaders



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)



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)


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


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


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



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



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


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?



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



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.


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)


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)


Findings – Agglomeration (3) SLQ 1982 SLQ 2006

Change in SLQ 1982 – 2006

Carlow -0.01 0.34 0.35 Cavan 0.40 0.56 0.16 Clare -1.14 -2.13 -0.99 Cork -0.13 -0.11 0.02 Donegal -0.47 -0.60 -0.13 Dublin -0.45 -0.83 -0.38 Galway 0.21 -0.34 -0.55 Kerry -2.39 -1.87 0.52 Kildare -0.66 -0.11 0.55 Kilkenny -0.98 -0.21 0.77 Laois 0.35 0.40 0.05 Leitrim 1.55 1.35 -0.20 Limerick -0.81 -0.81 0.00 Longford 0.75 1.14 0.39 Louth 0.78 0.48 -0.30 Mayo 0.22 -0.77 -0.99

Meath 2.33 1.71 -0.62 Monaghan 1.75 2.05 0.30

Offaly 0.87 0.43 -0.44 Roscommon -1.18 -1.53 -0.35 Sligo -0.35 -0.14 0.21 Tipperary -0.20 -0.22 -0.02 Waterford -0.10 0.28 0.38 Westmeath 0.42 0.58 0.16 Wexford -0.73 0.61 1.34

Wicklow -0.01 -0.22 -0.21


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


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


Thanks

RERC Athenry, January 12 th 2009 Networking, Innovation and Agglomeration in the Irish Furniture...

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