The roles of interaction and proximity for innovation by Irish high-technology businesses: policy implications

Abstract

This paper presents new survey-based evidence on the increasingly topical question of what drives innovation in Irish high-technology businesses. The extraordinary performance of the Irish economy since the 1990s has been inextricably linked to highly successful foreign-owned businesses, in sectors such as pharmaceuticals, electronics and computers (Gallagher, Doyle and O'Leary, 2002). It might be expected that innovation in these multi-nationals is largely sourced in other group companies located abroad. It is therefore pertinent to ask, in the context of the recent policy recommendations of the Enterprise Strategy Group (ESG) (2004), the extent to which these Irish subsidiaries source innovation in Ireland. This may be through their own research and development efforts and/or through interaction for the purposes of promoting innovation with other locally or regionally based businesses, Third Level Colleges and innovation support agencies, such as IDA Ireland and Enterprise Ireland. Moreover, it may be equally important to ask, in the context of the long-standing emphasis on improved performance of indigenous industry, whether indigenous high-technology businesses interact locally or regionally in order to promote innovation. Beginning with Culliton (1992) and continuing to the present, through, for example, Forfás (2004a) and the ESG (2004), Irish industrial policy has consistently promoted and supported clusters and networks. In recent years substantial State funding has also been devoted to research and development. The National Development Plan 2000-2006 (2000) allocated €2.5 billion and the government established Science Foundation Ireland. The ESG (2004) has proposed further State investment in research and development as well as new initiatives including building enterprise capability, funding collaboration between industry and Irish Third Level Colleges, introducing tax credits for research and development. There is a consensus in the Irish, and indeed the European, policy community that developing innovation through clusters and networks will be important for future Irish and European competitiveness (Bergin et al., 2003; Forfás, 2003; National Competitiveness Council, 2003; European Commission, 2003). By presenting survey based evidence on the sources of innovation in Irish high-technology industry, this paper makes an important contribution to this debate. It begins by outlining the design of the survey instrument and then presents the results. The policy implications of the results are then discussed.

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