The transformative potential of inward investment on industrial cluster development: the case of the semiconductor industry in Wales

This paper examines the transformative potential of inward investment on cluster development. It undertakes this through the lens of the evolving semiconductor cluster in South Wales (UK) and within a context whereby the semiconductor industry is under pressure with government interventions to improve prospects being implemented at a time of increasing global tension in the industry. The paper reveals the potential of inward investors as agents of regional economic change and cluster development. It shows that the emerging South Wales cluster distinguishes itself in terms of investment motivation, commodities and services produced. These factors result in growing embeddedness in relation to elements such as joint research with higher education and intra-firm collaboration to develop new products and processes. The paper concludes that investments based on risky and fast-changing technologies in industries such as the semiconductor sector necessarily create challenges for policy makers. These are best managed by placing greater emphasis on developing the conditions to satisfy the needs of such knowledge-intensive industries in relation to labour market conditions, factor conditions and market access.