Published: February 2006
PURPOSE OF THE STUDY
InterTradeIreland has identified the critical importance of Business Networks and Regional Business Clusters to sustaining investment and competitiveness in an increasingly global marketplace.
InterTradeIreland therefore, commissioned this study to establish the scope, range and extent of business networks and clusters on the island of Ireland and to identify the key factors associated with the establishment, development, and success of such networks and clusters. The project partners were also asked to make recommendations on how to effectively support the networking of networks across the island of Ireland.
WHAT IS A NETWORK?
It became apparent during the study that the term ‘business network’ is used in a number of different ways to describe both different forms, and variations in the extent, of inter-firm collaboration. Therefore, one of the initial challenges of this study was the necessity to clarify and categorise ‘business networks’ for the purpose of the mapping project. The following categorisation was agreed, and only those networks and clusters that fell within these three categories have been mapped in this study:
Category 1 – Business Networks
This involves firms collaborating for specific purposes where the results of the activity will have some identifiable and measurable impact on their business. Specifically a business network is
(a) a group of firms, (b) with restricted membership, (c) who have agreed to co-operate in some way, (d) to achieve specific business objectives that are likely to result in enhanced competitive advantage and/or mutual financial gain.
Category 2 – Development Networks
This is the most basic form of network consisting simply of firms associating with other firms where the activity may often be confined to networking, the exchange of information, or shared services. These networks will usually be informal and unstructured and may meet the first three of the four key elements of a Category 1 business network but typically will not have a purpose linked directly to financial gain or competitive advantage for the members.
Category 3 – Regional Business Clusters
These are geographically concentrated groups of interconnected companies, educational institutions, local authorities, local economic development agencies, national government agencies and related institutions that arise out of linkages or externalities across sectors. Clusters share a common regional location, where ‘region’ is defined as a geographic area,
labour market, or other functional economic unit. Though they often result in gain for companies,
clusters are not always established solely with that end in mind and are often motivated by broader goals that have to do with regional and national economic development for the greater public good.
NETWORKS AND CLUSTERS MAPPED
A total of 110 networks and clusters were identified during the study, broken down as follows:
Category 1 – Business Networks - 74
Category 2 – Development Networks - 18
Category 3 – Regional Business Clusters - 18
The total number of participating firms in these networks and clusters is 9860 (according to figures submitted by the networks themselves).
Most of the firms involved are SMEs with 9132 employing less than 50 employees. Large Firms account for 7 per cent of the total or 728 firms. Most of these networks and clusters have been
established in the past 5 years.
KEY SUCCESS FACTORS
The following were the key success factors as identified by the project partners:
- Strong business leadership and involvement
- Establishing and maintaining trust
- Network facilitation
- Supportive environment
- Good communication and information flow
- Common purpose and meeting business needs
- Strong activity focus
- Use of technology
The following are the general conclusions of the study:
- Incidence of Networks and Clusters is Widespread
Contrary to previous estimates there are a considerable number of networks and clusters on the island of Ireland – 110 currently identified.
- Significant Numbers of Companies are Involved in Networks and Clusters
Interest by firms in networks and clusters is significant with 9860 firms currently involved in networks and clusters across the island.
- Companies Appear Convinced of the Value of Networks and Clusters
The business sector seems wholly convinced of the value of networks and clusters with 74 per cent of these partnerships driven by the firms themselves. This also shows that, for the most part, this is a ‘bottom-up’ or business led phenomenon.
- Networks and Cluster Formation is a Current Phenomenon
The fact that most of the networks and clusters identified in the study have been established within the past five years indicates that this is a current phenomenon.
- Public Agencies Play an Important Role in Networks and Clusters
The study shows extensive and beneficial involvement by public agencies in networks and clusters at a range of different levels which is welcomed by the companies.
- Networks and Clusters Impacting MNCs and SMEs
With over 90 per cent of members employing less than 50 workers there is evidence that
networks are helping SMEs to raise their competitiveness. The involvement of over 700 large companies is also significant - many larger companies take the lead in developing the network or cluster.
- Resources are Essential for Networks and Clusters to Grow
Networks require time and commitment to succeed and this needs to be supported both in cash and in-kind by the network participants and others.
- Intangible Factors are Important for Network and Cluster Success
Among the most important of the key success factors of networks and clusters identified by the respondents point to the importance of strong business leadership and commitment, establishing trust and effective communications and information flow.
- Independent Facilitation is Crucial for Sustainability
The role of the facilitator in network and cluster development emerges as a crucial element in the success of networks and clusters and in sustaining them over the long-term. Funding, and a supportive environment and facilitation for a number of years is necessary.
- Networks Require Critical Mass
Networks and clusters need a critical mass of companies as well as other actors to grow and prosper.
The following are the main recommendations of the study:
Recommendation No 1:
Implement an awareness raising campaign of the potential benefits from networks and clusters designed to increase their numbers on the island of Ireland.
Recommendation No 2:
Establish a programme for the training and professional development of network facilitators designed to improve the range and scope of network and cluster facilitation.
Recommendation No 3:
Establish a network information repository to improve the flow of information between networks and clusters.
Recommendation No 4:
Establish a standardised system for the evaluation of networks and clusters which will develop credible data on network and cluster performance.
Recommendation No 5:
Provide Funding for Networks and Clusters to enable them to -
a. engage the services of qualified facilitators for a 2 year period
b. provide funding to support the network management structure (companies will more easily contribute to financing activity rather than structure).
Recommendation No 6:
Establish an All Island Network/Cluster Linkage Programme to support collaboration between networks and clusters.
Recommendation No 7:
Establish a Network/Cluster Internationalisation Support Programme to support international collaboration for Irish networks and clusters.
Click here to download the full report: Business Networks on the island of Ireland