Despite weakening sentiment globally towards the tech sector, indigenous investment in Irish high-tech firms increased marginally last year, according to the Irish Venture Capital Association (IVCA).

More than three quarters, 77 per cent, of the €124 million invested by its members in the State last year went to the high-tech sector, according to the association's annual report. Of the €95.3 million invested in high-tech companies, €68.6 million, 72 per cent, went to software companies.

Association chairman, Mr Conor O'Connor said Ireland now had "proportionately the highest level of investment in the technology sector in Europe".

"This is significant as technology and the creation of economic return from it will remain a key driver for the economies of most countries, especially Ireland," he said.

The environment for technology firms remained difficult in 2002, but the reaction by Irish tech companies to the global slowdown had been swift, he said.

"Because of this we are hopeful that the attrition rate amongst Irish technology companies may not be as severe as might have been expected."

One-third of Irish venture capital investment in 2001 went to start-up companies compared with a European average of 15 per cent. Overall, Irish venture capital investment in 2001 fell to €124 million from €208 million in 2000.

Mr Andrew Doyle, corporate partner in Matheson Ormsby Prentice, which produced the IVCA's annual report, said given worsening economic conditions globally the drop in overall levels of venture capital investment in Ireland could have been much worse.

"To put this in context, investment in 2001 was more than three times the 1997 level [of €39 million]," he said.