This chapter builds on Venkataraman’s work of the entrepreneur as an input completer and the Austrian approach which attributes a central role to the entrepreneur in explaining economic development. We aim to build on a new approach for cluster analysis and to build further upon this the- oretical perspective which argues that local social conditions (‘intangibles’) play an important role in the genesis and assimilation of technology-based entrepreneurship in a region.
Using the case of Dublin, Ireland as our focal point, the results of the study indicate that the Irish owned technology sector in Dublin did not appear overnight – it took 30 years to accomplish. In contrast to previous studies on this topic we demonstrate in fact that Ireland’s transformation was largely a ‘bottom-up’ story of successful early enterprising individuals, who played a central role acting as role models for budding entrepreneurs looking to start promising new ventures. These early stage ventures provided a feasibility proof (‘If that person can do it, I can do it, too’) for other peers to seek entrepreneurial success. The implications of our research suggest that regions with cultures that support commercialization activity with a tacit approval of entrepreneurs is a key factor in explaining the rise of regional entrepreneurship in Dublin. This finding highlights the role of social norms, expectations and local group norms in cluster formation.
Second, the early entrepreneurs who founded the technology sector and created the dynamic were not technologists, but business people. Typically, they had sales and marketing backgrounds, experience of working in tech- nology companies in Ireland and overseas and they had a deep appreciation of the technology. Thus they came from the population that was most likely to produce the entrepreneurs who could spot the opportunities in the rele- vant niches. As Irish owned entrepreneurial companies became established an increasing number of entrepreneurs came from these technology com- panies. The pure technology enterprises that emerged in the late 1980s and 1990s were initially set up by people leaving multinational companies in Ireland and later by people working on EU funded projects in universities.
Some of the most prominent new firms set up since 1995 were founded by entrepreneurs who had previously built and exited successful technology companies. The evidence suggests that most entrepreneurs were ‘pushed’
into entrepreneurship. The evidence also shows that the opportunities for
also changed over time.
Third, the role of informal personal networking is a key feature of the technology cluster in Dublin, but there is little by way of formal network- ing. However these informal meeting points, like bars and restaurants, appeared to play an important role for Irish entrepreneurs to exchange ideas, meet role models and acquire the wish to create and finance ventures.
As argued by many authors, including Saxenian (2000), personal network- ing plays an important role in accessing resources, such as finance, people, specific skills and space. Personal networks were also used extensively to gain access to potential customers in Ireland, the USA and other European countries, and in many cases existing networks were used to leverage other networks and thus extend their influence. The access to role models mostly occurs in informal forums.
Fourth, the role of government in the development of the software and technology cluster in Dublin was that it initially attracted multinational companies to locate in Ireland, including Dublin, but without any partic- ular thought for the development of a software sector. As the sector emerged, and at critical points in its development, the government responded with specific policies and activities to support what GEM (Bygrave and Hay, 2005) describe as the entrepreneurial infrastructure or framework conditions. A key elements of government policy included introducing policies in the late 1970s to support start-ups in attractive market segments and in good areas of technology. This is now known as the High Potential Start-up Program. In 1984 software was included among other internationally traded service activities which qualified for low rates of taxation on corporate profits (10 per cent) similar to those applied to manufacturing companies. This was followed in the early 1990s withfinancial and other specially targeted support to help interna- tionalization. In the post-1995 period of skill shortages the government significantly expanded the output of the education sector to meet the increase in demand for graduates. Ourfindings also support the work from Bresnahan et al. (2001) that suggest accommodative government policies that enable conditions like the creation of suitable demand and markets can be an important part of cluster development.
Fifth, the vast majority of software firms in Dublin did not use venture capital to develop their businesses. To a large extent this reflects the nature of the businesses established, particularly in the earlier periods which were dominated by bespoke software followed by the gradual development and marketing of products. These businesses did not, typically, require significant up front funding. The funding required generally came from the entrepreneurs themselves or their families and friends, and in some
instances from an outside investor. Once started, ongoing development was funded from revenue. This changed in the 1990s as the opportunities to exploit global niches with high-technology-based products arose. The development of these products required significant upfront investment and time to market was critical to success. These businesses required significant venture capital to develop and in the period between 1995 to the present a number of venture capital firms were set up in Ireland to respond to the opportunities. These firms are now complemented by a number of UK and US venture funds that are active in Ireland. The technology type software firms would not have developed in Dublin without venture capital.
Finally, our chapter highlights the central role of research led universities in stimulating Schumpeterian type high growth and knowledge intensive companies from university research. Much has been documented about how formal research activities of universities, such as MIT in Cambridge, contributed to emerging industries and clusters, such as Kendall Square in Boston (O’Shea et al., 2005, 2007). It is noteworthy from a Dublin context that most successful firms did have their origin in university grounded research and were an important component in the stimulation of high- technology entrepreneurship in the region. The government has allocated over 4.7 billion euro over the period to 2010 to develop Ireland as a center for world class research excellence in strategic niches of biotechnology and information and communications technologies.
The Dublin technology cluster exhibits all the characteristics of a dynamic innovative cluster. Driven by rapid growth in market demand, a number of technology driven entrepreneurs set up new firms and many achieved conspicuous success as a result of major trade sales or IPOs. The compounding effect of this success created a self-reinforcing dynamic or virtuous circle where the accumulation of entrepreneurs, human capital and networking all contributed to collective learning and innovation, thus fueling growth in the Dublin region. The study finds that multinational companies can play a very positive role in the development of a cluster. In the Dublin technology cluster the multinational companies contributed significantly as early customers. The impact of FDI (Foreign Direct Investment) in the transformation of Ireland’s entrepreneurial economy cannot also be underestimated. It has been a major source of knowledge transfer in technology and management know-how, international market trends, global investment trends and financial expertise. An increasing number of entrepreneurs responded by setting up or help scale new firms.
They were the core training ground for the early entrepreneurs and are still an important source. In addition, the multinational companies formed a part of the collective system of learning along with the entrepreneurial companies as people moved back and forth among various firms. This
vation, and positioned Dublin as a very important center for software and technology internationally.
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