This story is part of a two-day series on the growth of the high-tech, Internet and software industries in Scotland.

GLASGOW, Scotland -- The drive between Glasgow and Edinburgh is a fairly pleasant, though often overcast, 50-minute jaunt down the M8 motorway.

The road that links Scotland's two largest cities is lined with trees, beyond which one can make out supermarkets, golf courses and fields of grazing cows. A number of business parks sit quietly, their neat modern buildings floating in an ocean of parking lots.

The companies housed in these buildings underscore the dramatic transformation Glasgow and its environs have undergone over the last 20 years. Long known for its reliance on heavy industries such as steel and shipbuilding -- and the consequent social upheaval that the decline of such industries brought -- Glasgow today attracts companies like

IBM

(IBM) - Get Report

,

Hewlett-Packard

(HWP)

,

Canon

(CANNY)

,

Compaq

(CPQ)

,

Packard Bell

,

NEC

(NIPNY)

and

Sun Microsystems

(SUNW) - Get Report

.

The area has come to be known as Silicon Glen, a term that is more than just a passing allusion to its American namesake. It has the highest concentration of high-tech companies in the world outside of Silicon Valley and is responsible for the manufacture of 15% of Europe's semiconductors, 32% of Europe's branded PCs, 80% of Europe's workstations, 65% of Europe's ATMs and 51% of Europe's computer notebooks.

In 1998, Scotland attracted 87 foreign high-tech projects involving planned investment of $1.65 billion, the largest of which was a decision by American company

Cadence Design Systems

(CDN)

to set up a next-generation "system-on-a-chip" factory in Silicon Glen.

Yet the absence of the start-up companies that characterize Silicon Valley has always made comparisons between the two areas a little spurious. That, happily, is changing.

From makers of telecom-billing software to creators of invertebrate superheroes, there is at last a clutch of tartan technology companies emerging from the shadows of the international giants. Despite having a population of less than one-tenth of the U.K., a survey by the British accountancy firm

Deloitte & Touche

found that three of the U.K.'s 10 fastest-growing high-tech firms were Scottish, and 12 out of the top 50 were Scottish.

Cool Britannia, Techie Scotland

Scotland as a whole is undergoing something of a renaissance, in political, corporate and cultural terms. This rebranding of the country has its detractors, of course. Modern-day Scottish poet Francis Gallagher writes in

The Barrenness of Home

:

"My country is me I am my people and my loyalty is to my instinctive intelligence that tells me all this Scottish stuff is pure s***."

But malcontents aside, the country's revival is generally regarded as being made of less squishy matter. Scotland recently voted for its first parliament in almost 300 years. The tourist industry is thriving as interest in the country is kindled by films like

Mrs. Brown

and

Trainspotting

. The soccer team continues to disappoint, but unlike the English fans, Scottish supporters, known as the Tartan Army, are generally welcomed by people all over the world.

All this helps to create a positive impression of Scotland beyond its borders. However, companies are in the business of making money and have stricter parameters for setting up shop than a good dram of whiskey, the image of

Mel Gibson

with blue paint on his face and the sight of a drunken soccer fan lifting up his kilt and baring his buttocks.

Why does Scotland prove such an attraction for high-tech companies? It certainly can't be the weather.

English Spoken, American Understood

In 1951, IBM became the first large foreign firm to arrive in the area. It was attracted in no small part by generous government grants and a skilled, English-speaking work force (there are 14 universities in Scotland) which, brought up in the shadow of the declining industries of steel, shipbuilding and coal mining, was used to working hard.

The beginnings were humble, but by the 1970s and 1980s the U.S. companies were joined by Japanese firms and then by South Korean and Taiwanese firms in the 1990s. This "clusters" approach, an economic development model that explores the synergies between various businesses rather than just investing in promising sectors of the economy, was helped by a legal system that is very tolerant of intellectual property exchanges.

One of the elements of the clusters approach is start-ups that spring up around these large multinationals. In the 1980s,

Scottish Enterprise

, a semi-governmental economic development agency, took notice of the growing number of indigenous software companies.

"We had a nascent software industry then of about 250 companies, which were just doing solid work like servicing the banks, but we saw the potential there," says the agency's Robin Mair.

Scottish Enterprise, together with other industry groups such as the

Internet Society Scotland

, the

Scottish Games Alliance

and the

Scottish Technology Fund

(a fund set up with venture-capital money) as well as the local universities, have all to some degree helped Scotland evolve toward a so-called knowledge-based economy.

The Auld Enemy

The challenges ahead for Scotland's indigenous software, games and Internet sectors are much the same as those for most other countries: how to create a more entrepreneurial society; how to keep abreast of the rapid changes in technology; and how to cut the red tape that hinders development of start-ups.

In the U.K. government's Connectivity Indicator, which measures the usage of external networking applications, Scotland as a whole ranks seventh out of the 10 benchmark countries and regions. However the country's small companies (10 to 99 employees) were on a par with Italy, the lowest-ranked country in the overall index.

"It is embarrassing to ask delegates to local

Internet Society Scotland seminars, 'How many of you use e-commerce?' Out of a hundred companies, guess how many hands you need to help count the raised hands?" sighs Frank Binnie of Internet Society Scotland.

The matter of Scotland's sovereignty is also still very much at the fore. Much has been made about the new Scottish parliament and how it may lead to eventual independence from the rest of the U.K. Yet while the main independence party came second in the poll, the Scottish people still overwhelmingly voted for parties that do not want independence.

Even if independence comes about, it is hardly likely to be a violent affair. Indeed, it may be a good thing for business. The Scottish economy is much more dependent on manufactured exports and tourism, meaning it is more susceptible to fluctuating exchange rates. As such, the idea of joining the European single currency is much more popular in Scotland than in England.

The various industry organizations also have their fair share of detractors. Scottish Enterprise's Mair acknowledges that his organization is often criticized for helping the wrong companies and industries. And Mike Antliff, the CEO of

Digital Animations Group

, says he won't join the Scottish Games Alliance because he wants his company to be a global company based in Scotland, not a Scottish company involved in the global market.

Such disagreements aren't unusual, and all the people interviewed are striving in one fashion or another to put Scotland on the map as a center for technology and creativity in a fast-changing and uncertain world. The French philosopher

Voltaire

once wrote, "We look to Scotland for all our ideas of civilization." And now, perhaps, for some ideas on modern technology.