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Industrial Clusters & the Software Industry in Ireland.

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Industrial Clusters & the Software Industry in Ireland The introduction of industry cluster: In the time of globalization, every product, service or business activity faces global market opportunities and global competitors as well. As most small and medium- sized enterprises (SMEs) have been depending on their own market segment or niches, global competition can not only threaten their existing base and competitive strength. They may find their potential market chances and business partners in unknown countries or territories. Nevertheless, it must be understood that their existence and competence were also strongly supported by regional or local business concentration and networking, which is based on deep social division of labour and specialisation, including typical subcontracting system controlled by a big manufacturer, as well as industrial districts where small manufacturing or trading firms come all together. Mostly SMEs cannot survive if they simply depend on own limited resources and specialised skill and technological capabilities alone. Empirical research works on the importance of regional industrial agglomeration and local networking. Among them, the most popular one is M. Porter's ''industrial cluster' thesis, which is based on his own 'diamond theory' and economic geography principles. According to Porter's (1990, p. 149) definition," a cluster consists of industries linked through vertical (buyer/supplier) or horizontal (common customers, technology, channels) relationships". Key features of clusters are internal networking, linkages and formal and informal interactions. A common strand in both the economic and sociological literature is the notion of local linkages forming a defining geographic basis of a cluster. ...read more.


New key opportunity sectors being targeted by Ireland are Informatics, digital media, E-business and Health Sciences and to facilitate them a digital cluster has been set up to create a center of excellence for innovation, creativity, research and learning focused on developing new and existing media enterprises. In terms of electronics sector, although indigenous firms has achieved significant growth rates the electronics sector continues to be dominated by large multinational companies, employment in software products and services is more evenly divided between overseas and indigenous companies. Most of the software multinationals in Ireland are packaged software or product companies selling to mass markets, though the growing emphasis on localization requires a higher level of software engineering skills and is more reliant on outsourcing and indigenous supply chains, including translation, fulfillment, packaging, manual printing, transport and technical support. Irish public policy has recognized that 'the full benefit of the presence of foreign production firms depends on the extent to which they can be integrated into their environment. Such relationships are not only beneficial for local suppliers that benefit from technology transfer foreign firms will be anchored to the regional economy, merging local and global interests, and making sudden divestiture less likely than before' (OECD 1998a). As a result, indigenous software producers tend to be more specialized in terms of both types of products and types of customers. The experience of the Irish ICT cluster seems to demonstrate that skills and training are a necessary but not sufficient condition for success in global markets. ...read more.


They have demonstrated a capacity to meet these requirements and in most cases to sustain their momentum, not only by benefiting from technology transfer but also by originating software applications, including for e-business. This capacity is based on institutional support, training and education, workplace flexibility, increased venture capital availability and the remarkable growth of R&D expenditure in the software sector during the 1990s of more than 40 per cent a year, with over three-quarters of this growth accounted for by indigenous firms. Foreign TNCs - particularly in the software sector, but also in other sectors - were employing people with software programming skills and helping to develop those skills. This type of employment is similar to employment in R&D in another industry, in terms of its effect in developing high level labour skills. It is likely that there have been more people employed in software programming in foreign TNCs than there ever were in R&D in any of the other high technology sectors.5 In addition, foreign TNCs, again in a range of different sectors, helped to generate sophisticated and rapidly growing domestic demand for indigenous software, no doubt to a greater extent than the demand generated by foreign TNCs for products from indigenous producers of computers, telecommunications equipment, pharmaceuticals or medical instruments. individual national ICT industries have benefited from the formation of regional cluster groups. As regions become aware through learning what other economies have achieved they recognize the potential to become involved with the result that the global ICT industry will spread further around the world. ...read more.

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