May 2001 Ireland's winning industrial formula protects economy against effects of US down

Fears that the Celtic Tiger economy will be severely affected by the downturn in the US economy are unfounded according to research carried out in NUI, Galway and just published by the OECD. Irish Government policy of creating 'clusters' of similar type industries and embedding foreign firms within the local economy has proved to be a winning formula in the development and sustainability of Ireland's extraordinary economic metamorphosis,' says Professor Roy Green of the Department of Management at NUI, Galway and leader of the research team. The research project is entitled, Boundaryless Cluster: Information and Communications Technology in Ireland.What has happened in Galway in the 1990s, according to Professor Green, is a microcosm of the success of Ireland as a whole in the information and communications technology (ICT) sector, as well as healthcare, financial services and pharmaceuticals. The emergence of a powerful software sector in Galway in the wake of the Digital closure of 1993, resulted from a combination of measures to attract foreign investment and build local supply chains into a 'boundaryless' cluster.

'This regional cluster is boundaryless in the sense that its global character defies traditional stereotypes of domestic rivalry and collaboration,' explains Professor Green. There are at present sixty ICT companies in the Galway region. "Although Ireland is not completely protected against market conditions, the integration of investors within local clusters, the emphasis on linkages within research and educational institutions and the shift of firms higher up the value chain, all militate against closure or relocation", says Professor Green.

The main findings of Professor Green's research include the following:

The globalised nature of Irish ICT, the influence of the multinational sector and the niche operations of indigenous firms suggest the need for a new, more outward-looking approach to the advent of the "boundaryless" cluster.

The presence of at least one large ICT operation provides a useful catalyst and focus for cluster development. This presence affords the opportunity to build local capacity in new technologies and skills both within the operation itself and more widely in the emerging cluster through outsourcing, vertical supply chains and ultimately, horizontal inter-firm linkages.

The development of the regional skills base is cumulative and parallels the scale and sophistication of the industry cluster, whose growth patterns are themselves path dependent.

The Galway experience suggests that appropriate regional business support structures are the final major local ingredient in successful cluster development. Without such structures, skilled personnel would be unemployed or underemployed, or alternatively would emigrate.

Enterprise Ireland's role in developing an indigenous, entrepreneur-driven technology sector has been complimented with a newly-announced commitment to create 'clusters of new knowledge-intensive enterprises in regional centres'. The instrument of intervention will be a series of technology hubs known as "Webworks", whose task will be to 'generate a critical mass of high potential start-ups in the regions – companies that are high R&D and export performers. The first Webworks Facility is to be established in Galway.

The sustainability of the ICT cluster will derive from constant innovation, which in turn must be based on leading-edge research and research training.

Professor Green says that the cluster dynamic is supplied in the case of Irish regions by 'a unique mix of inter-firm collaboration, interaction and rivalry, by the development and constant replenishment of common pools of skilled labour, by the localised support of research and educational institutions, by the commitment of local business organisations and unions and by the strategies of national and regional development agencies'.Professor Green is available for interview on his research

Information from: Máire Mhic Uidhir, Press Officer, NUI, Galway. Tel. 091-750418