The electronics industry is a rapidly changing technology driven industry. Intensive research and development activity in electronics has been partly responsible for the emergence of Japan as an economic superpower and the rapid development of the Korean economy. Following the publication of the Telesis Review of Industrial Policy in 1982, the Irish Government undertook a gradually more interventionist policy towards the indigenous electronics industry. In the ten years since Telesis there has been significant growth in business expenditure on R&D in electronics but this growth has come exclusively from multinational companies. Indigenous expenditure on R&D has remained static but has become concentrated in specific sectors. These sectors are industrial control, security systems and electronics for the building industry where economies of scale are not important and in the power supply sectors where economies of scale are not possible. Factors critical to effective research and development in the Irish electronic industry have been identified as: (1) The availability of skilled people (2) Knowledge of the market (3) Interaction with customers A university ethos supportive of industrial development and R&D intensive multinational companies have been found to contribute to the development of R&D intensive indigenous companies. Gorvemment intervention has lacked focus and has not been effective in improving the competitiveness of the industry. A model of a national system of innovation, based on that proposed by Mjoset, has been developed. The policy changes required to make such a model work have been identified as focused state support for specific industries, focused state support for the development of related technologies, inclusion of the banking system into the system of innovation and the encouragement through the use of R&D grants user producer cooperation in the development of new producer cooperation in the development of new products. It is proposed that such a national system of innovation could be used to create a self sustaining virtuous circle of economic development in electronics.