The Politics of High-Tech Growth: Developmental Network States in the Global Economy (review)

Over the past two decades, the Republic of Ireland has undergone one of the most astonishing economic and social transformations in recent history. The familiar image of a poor, agricultural and traditional country has become simply obsolete as this relatively tiny island inhabited by 4 million people has surpassed the United Kingdom, its former colonizer, in per capita income, joined the big leagues in some high-tech industries, and reversed decades of migration. Sociologist Seán Ó Riain argues in this book that Ireland has managed high rates of economic growth thanks to the success of its developmental "network" state, one deeply embedded in "networks of innovation and in international capital." (p. 5) He contrasts the recent development successes of Taiwan, Singapore, Israel and Ireland with those of the "bureaucratic" developmental states of South Korea and Japan, which placed the emphasis on heavy industrialization as opposed to light manufacturing and the service sector. Rather than using trade protectionism and direct subsidies favoring a few chosen firms, network developmental states focus their efforts on building a national system of innovation and linking local firms to global customers and partners.

An important aspect of the argument about developmental network states such as Ireland rests on the observation that high rates of investment do not necessarily play the most important role in generating economic growth. Ó Riain cites the secondary literature to show that the recent surge in Irish economic growth (about 10 percent each year from 1998 through 2000), owed more to additions of labor rather than capital as well as to productivity increases. During the 1990s the numbers of scientists and engineers, and the expenditures on research and development, grew more quickly in Ireland than in any other country within the Organization for Economic Cooperation and Development. The industries responsible for such growth were electronics, instruments, pharmaceuticals and software. A key contribution of the book is to demonstrate that Irish-owned firms are responsible for much of the new research and development capabilities in the country. In particular, the generous corporate tax breaks that attracted massive foreign investment during the 1980s and 1990s resulted in very different outcomes by industry. In electronics and pharmaceuticals, the Irish subsidiaries of foreign multinationals not only created many more jobs than Irish-owned firms, but also made more important contributions to the national system of innovation. By contrast, in instruments and, especially, software, Irish-owned firms continue to be much more research intensive.

Ó Riain devotes four of eleven chapters to the striking rise to global prominence of the Irish-owned software industry. The story starts with a recognition of the country's "natural" endowments, including a well-educated, English-speaking and relatively cheap workforce with the appropriate technical skills. Over time, however, Irish firms in the industry have had to upgrade their capabilities in order to compete with the equally competent Indian software programmers, who are willing to work for much lower wages. As many as seven Irish software firms have successfully gone public on the NASDAQ. Using a wealth of quantitative and qualitative information drawn from industry sources as well as interviews, Ó Riain demonstrates that these firms flourished thanks to the initial backing of various state agencies, both financially and in terms of securing access to networks in the global software industry. Also important have been the networks connecting Irish engineers and computer scientists who migrated to the United States during the 1980s with those who decided to stay. It turns out that the Irish state played a key role in nurturing and developing such linkages.

The last chapters in the book offer a systematic comparison of the network developmental states of Taiwan, Singapore, Israel and Ireland, and contrasting analyses with South Korea. Ó Riain makes a very important contribution to comparative studies of development by arguing that the same model of network development can be inspired by very different political ideologies. He focuses the attention on neo-liberalism, conservatism...