REYKJAVIK, Iceland -- This island nation just below the Arctic Circle, once a remote fishing center, has now become a thriving hub for all kinds of technology ventures.

Although Iceland has only 283,000 people, its software industry boasts 356 companies, double the number from five years ago. The biotech, genetic-research and telecommunications sectors also are burgeoning. This largely uninhabitable land of glaciers and volcanoes has the highest per-capita Internet and cellular-phone usage in the world, according to the Organization for Economic Cooperation and Development.

"Our parents were isolated, not us," says Hjortur Olafsson, the 25-year-old chief executive of Salt hf, which creates software to design Web sites. "It's the threat of isolation that has made us so high-tech," he adds. "Technology keeps us connected."

Mr. Olafsson notes that Iceland's geographic position places the country squarely between the markets of Europe and the U.S. By air, Iceland is three hours from London and less than six hours from New York, and Salt recently opened offices in both cities.

Economic diversification has lured many Icelanders home after decades abroad. Leaving a Harvard professorship in neurology five years ago, Kari Stefansson returned here to found Decode Genetics Inc., a gene-hunting company researching some 60 diseases. "People thought I was crazy," Dr. Stefansson recalls. "They said, `Nobody leaves tenure at Harvard to found a biotech company in Iceland.' But this is my country."

Foreigners are coming, too. Western Wireless International, a subsidiary of cell-phone operator Western Wireless Corp. of Bellevue, Washington, five years ago bought a majority stake in telecommunications company Tal hf here. Scott Alderman, vice president of finance at WWI, says Iceland's tech-savvy citizens and sparsely populated rural areas made it fertile ground for cell-phone business.

Privatization has spurred much of the recent growth here, Icelanders say. Fifteen years ago, government agencies controlled everything from wholesale fish prices to bank interest rates. But with the growth of world trade, the government decided it had to create a competitive business environment, says Geir Hilmar Haarde, Iceland's finance minister. Authorities moved to privatize industries from alcohol to banks, and cut tax rates.

But that doesn't mean there aren't still problems. Iceland's tiny size, coupled with its reliance on trade, makes it particularly vulnerable to slowdowns in the global economy, says Edda Ros Karlsdottir, an economic analyst at Bunadarbankinn, a major bank. Ms. Karlsdottir says companies in Iceland are already seeing demand for their products soften abroad as the global economy slows.

But the new tech-based businesses span a variety of sectors -- biotech, software, smelting, even fishing -- helping to blunt the impact of the global Internet industry's decline. Three-year-old biotech company Prokaria Ltd., for instance, is mining unique thermophilic bacteria around Iceland's many hot springs, hoping to engineer new medicines. Columbia Ventures Corp. of Vancouver, Washington, started an aluminum smelter here three years ago to tap Iceland's abundant hydroelectric and geothermal energy.

And the difficulties Iceland-based companies have long faced in attracting venture capital now may help to cushion them from a global pullback in funding. The country's isolation and small market meant the companies have traditionally struggled to catch the eye of deep-pocketed venture-capital firms. Software developer Oz.Com had to incorporate in San Diego to attract venture capital, says founder Skuli Mogensen. Many companies here work with Iceland's two universities to attract research funds. As a result, venture-capital funding didn't reach the heights seen elsewhere.

Even as Iceland turns to the global high-tech economy, it isn't neglecting the humble fish. Marel hf, a manufacturer of fish-processing equipment, sees its technology used around the world, including in Mississippi's catfish industry.

"It's not easy to branch out," says Hordur Arnarson, Marel's chief executive. "But Icelanders are innovative people. We've had to be."