European software clusters vary widely in terms of both size and growth dynamics.

European ‘Silicon Valleys’ – Mere Copies or Fresh Originals?

The growth of IT services and software firms has proved to be a key factor in European economic dynamism, helping to drive the large-scale transition to digital. Along the lines of Silicon Valley, the most obvious example of how to build a competitive hub, Europe boasts a number of regions specialising in the IT sector, including software development. Of the 270 ‘basic’ regions in the European Union, 15 are listed as Software Clusters in a recent report drawn up by the Fraunhofer Institute for Systems and Innovation Research based in Karlsruhe, Germany. The report, entitled ‘EU Software Cluster Benchmark 2013’, uses various criteria, including the dynamism of the region and the number of firms specialising in IT there. The Fraunhofer researchers show that these clusters vary in a number of respects and attempt to carry out a qualitative analysis of the 15 regions in order to highlight their respective advantages.

A handful of Software Clusters

The 15 designated regions include the Ile de France region around Paris, Madrid and its surrounding area, the Berkshire, Oxfordshire, Buckinghamshire region in the UK, plus also London. In addition there are seven regions in central Europe, plus Berlin, and three regions in Scandinavia/Finland. Any superficial homogeneity disappears when we take a detailed look at the characteristics of the individual clusters. The Ile de France, London and Stockholm regions turn out to be the most competitive, scoring high marks in the indicators used, which range from company turnover to human capital. Berlin by contrast, which is ranked second in terms of growth dynamics, drops to mid-table on the other indicators. The report reveals that the historically metropolitan regions have greater advantages as a venue for IT clusters than rural clusters that have been built up from scratch more recently. It also points out that heavily industrialised regions which are heavily dependent on a few large companies, that have usually been in business there for quite some time, need to make an effort to remain adaptable and dynamic. Meanwhile, the East European clusters, which are quite close together, show some highly positive features including strong growth potential.

Silicon Europe?

Despite the differences between these European regions, they are among the most economically dynamic in the 28 EU member states. In fact no less than half of all the companies listed in the Truffle Top 100 – which ranks and analyses the top 100 European software companies – have their headquarters in one of the 15 regions, where the average job creation rate in the IT sector has stood at 2.11% per year since 2004. The Fraunhofer figures show however that IT/software specialisation among European regions is still fairly low, especially so when compared with Silicon Valley in the United States, where growth in IT sector employment has for a number of years exceeded 7.5% per annum. The authors finally point to the structural diversity across Europe in terms of culture, geography, demographics and financing between the clusters and conclude that if European regions try to copy the US model they will only be able to catch up on some of the indicators.  They ought rather to develop individual growth paths that build on existing local and regional assets, the report argues.

By Quentin Capelle