The Clustering of Software Firms around the SAP Industrial Centre in Germany

Abstract

Recent developments in the competitive landscape of the management support software industry sub-sector — characterised by saturation, consolidation and defragmentation — have also attracted attention to the phenomenon of cluster formation. Layers of SMEs forming satellite systems centred on large players in this industry fill in structural holes in the competitive fabric of the market which are left open — at least temporarily — by the large ‘incubator’ company, while at the same time also acting as a type of capacity buffer or technology spearhead for the larger player which does not need to invest its own capacities into certain niches. This paper discusses the significance of clustering in the management support software sector and aims to offer explanations predicated on intangible constructs which may retrofit traditional agglomeration economies approaches. The findings of a pilot study corroborate the implications of clustering in relation to knowledge spillover effects, labour mobility, network formation, the generation of social capital, reputation building and effects of the urban ambience as factors potentially moderating the competitive environment within clusters vis-à-vis outside. Moreover, effects of the density of cluster labour pools and spin-off are considered. Simultaneously, the unique efficacy of these effects by means of mitigation of the idiosyncratic growth constraints affecting SMEs in this industry context — such as high levels of customer dependence, lack of legitimacy and the importance of reputation as well as customer references — is proposed.

Citation

Viehoever, J. (2013), "The Clustering of Software Firms around the SAP Industrial Centre in Germany", Oakey, R., Groen, A., Cook, G. and Van Der Sijde, P. (Ed.) New Technology-Based Firms in the New Millennium (New Technology Based Firms in the New Millennium, Vol. 10), Emerald Group Publishing Limited, Leeds, pp. 141-160. https://doi.org/10.1108/S1876-0228(2013)0000010010