Networking, Innovation and Agglomeration in the Irish Furniture Manufacturing Industry

1. Networking, Innovation and Agglomeration in the Irish Furniture ManufacturingIndustry Kevin Heanue

2. Overview • Background & Rationale • Methodology • Findings • Conclusions & Recommendations

3. Background & rationale (1) • PhD research: series of 4 papers • Why the furniture industry? • ‘High-tech’ policy obsession • Resilient • Dispersed

4. 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

5. 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)

6. 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)

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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?

13. 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

14. 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.

15. 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)

16. 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)

17. Findings – Agglomeration (3)

18. 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

19. 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

20. Thanks