"We try to ignore the 'R' and focus on the development part, " he said. The Monaghan-based forklift manufacturing company perhaps isn't the first to spring to mind as an example of Ireland's future as a "knowledge-based economy".

Sectors such as software, pharmaceuticals and biotechnology are generally held up as the way forward. At Enterprise Ireland's Innovation Forum in Dublin last week, however, McVicar illustrated how Combilift's approach to R&D has helped it carve out a profitable niche in the world of heavy manufacturing.

There are over 300 companies making forklifts, according to McVicar, many of them doing so in low-cost economies in locations such as Eastern Europe and China.

But low-cost competition is not hurting the Clontibret company in the way it has affected other manufacturing concerns in Ireland. Combilift passed the 50m turnover barrier last year, up 27% on 2004, and made a chunky pre-tax profit of 9.5m.

Over the last 12 months the company invested 5.4m, just over 10% of its turnover, in research and development.

That investment is essential to keep it ahead of its competitors.

"If we want to stay in Ireland we need to be offering innovative solutions, something different to everyone else, " said McVicar.

Combilift produces forklift trucks that can move sideways and backwards without having to turn around, allowing them to operate in much tighter spaces than conventional forklifts.

McVicar prefers to think of them as "warehouse solutions" since they enable Combilift's customers to operate from smaller premises and make better use of the available space. The company steers clear of the high-volume, low cost end of the market, instead developing bespoke forklifts to cater for customers tailored to cope with the space available and the type of loads they need to carry.

"We try to get very close to the customers and develop what the customers want, " said McVicar. "We have actually sold the design and the concept of a product before we ever put it into development." That's the starting point for any research and development activity the company undertakes and he feels it is a message that Irish companies need to take on board.

Combilift could serve as an example for companies in other sectors. Bernie Cullinan, chairperson of the Irish Software Association, said Irish companies need to be more focussed in their R&D efforts. "We've got to develop our market execution skills.

Innovation for innovation's sake doesn't help the knowledge economy, " she said. Cullinan praised the efforts of bodies such as Science Foundation Ireland (SFI) in encouraging and supporting firms in undertaking research but said the guiding principle of any research was that it "must have a market focus".

Brian Hanly of Irish IT consultancy Exoftware, another attendee at EI's innovation forum, said this is an area where many software companies, in particular, are falling down. Hanly identifies software development as one of the sectors where Irish companies can succeed on the world stage. But at present, he said, many compare poorly with truly innovative firms. "There is definitely a spirit of entrepreneurship but is there a spirit of innovation?

I don't know. I don't see a lot of it, " he said.

A major fault in Irish software companies is the length of time it takes to get new products to market, according to Hanly. Companies need to identify quickly what prospective customers need and move quickly to satisfy that need.

Too often Irish companies fall down because either they aren't fast enough to complete the process or they waste resources by being too slow to axe development work which is going nowhere. "In innovation, failure is positive but if you're going to fail, fail quickly, " said Hanly. He cited the much-criticised PPARS software programme purchased by the Department of Health as a classic example of a software development project that should have been identified as a failure and canned but instead "went on and on".

On a more positive note Hanly identified Curam Software, a developer of applications used by charities and not-for-profit organisations to improve efficiency, and electronic payments company Valista as examples of Irish companies which have succeeded in innovating. Their secret? Streamlined processes, fast time to market and a customer-centric approach to development, Hanly said.

Those lessons are as true for manufacturing forklifts as they are for developing software, according to Combilift's Martin McVicar. He said as long as his company continues to innovate it will continue to grow at over 20% per annum as it has done for the last three years, and will continue to do so from its Monaghan base.

"We could do this in any country in the world but I don't see any reason why we can't stay here".