Role of Transnational Corporations in the Evolution of a High-Tech Industry: The Case of India's Software Industry (original) (raw)
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This paper analyzes the role of multinational corporations (MNCs) in the growth of the software industry in three emerging economies -India, Ireland and Israel. The paper examines the evolution of MNCs' activities over time and their linkages with domestic software firms, by drawing on different sources of data The empirical analysis leads to two final conclusions. First, it shows that the role of MNCs varies considerably across these three countries. The second final conclusion is that the overall impact of MNCs on the development to the domestic software industry in the three examples analysed appears to be quite controversial.
The IUP Journal of Applied Economics, 2015
The concept of ‘technology regime’, featured by technological opportunity, appropriability of technology, cumulativeness of knowledge and properties of knowledge base, has become immanent in the process of the manufacturing sector undergoing changes in its nature of organization and process of production as a sequel to the globalization of information, knowledge and technology. Liberalization of the Indian economy has put up challenges before its manufacturing sector to reap the opportunities of new technology and knowledge becoming available by the entry of Multinational Companies (MNCs) and increasing volume of Foreign Direct Investment (FDI) flowing into the economy. The present paper, on the basis of data collected from the Capitaline Corporate Database for the 14 manufacturing industries of India, for the period from 1996-2009 attempts to discern how far and to what extent the expenditure on R&D by these industries is influenced by the various factors, since R&D appears to be a...
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China and India are emerging as major new entrants in the international software industry. Both are rapidly learning through outsourcing with multinational enterprises from advanced nations. Yet, their paths to this dynamic sector are very different. Chinese software firms have focused on their domestic market by working with foreign MNCs, while they move cautiously abroad. Indian firms, despite already being large, continue to expand overseas as well as to climb the value chain. We show that a macro perspective on the global movement of work can be gained by utilizing concepts from different approaches to the MNC. At the same time, the innovation systems perspective is necessary to explain the foundations of the industry. The paper provides hypotheses and performs an initial validation of them. It concludes that the internationalization and learning processes are somewhat different in the Chinese and Indian MNCs, and provides explanations for the different patterns.
isid.ac.in
This paper is about technological spillover effects from FDI. It questions some of the well established assumptions of conventional views on this topic. In particular it questions the assumption that the main source of FDI-related spillovers derives from the technological assets created by parent companies. Instead, we hypothesise that any significant spillover effect is likely to reflect the active accumulation and creation of knowledge on the part of subsidiaries themselves. It follows earlier work by Marin and Bell (2006) in Argentina which indicated that, in contrast to much recent research, FDIrelated spillovers did arise during the 1990s (Marin and Bell, 2006). Our purpose in this paper is to extend and deepen the analysis, to another country (India) and another set of circumstances. In this paper, we investigate the importance of this subsidiary-centred perspective by exploring empirically four models of FDI-related spillover effects: a 'Pipeline Model': where spillover effects arise from FDI independently of the industry, the absorptive capabilities of domestic firms or the knowledge-creating and accumulating activities of subsidiaries in the host country. (ii) an 'Absorptive Capability' model: where potential spillover effects arise from FDI, but are captured only by domestic firms with high absorptive capabilities. (iii) an 'Industry Model': where spillovers arise only in the more 'advanced' industries, such as the electronics or capital goods industries. (iii) a 'Subsidiary-Driven' model: where the existence of spillover effects depends on the intensity of the technological activities of subsidiaries themselves in the host country. As it is common practice, we model FDI spillovers within the familiar production function framework. Change in FDI participation in the same or vertically linked industries is treated as an additional 'input' explaining the productivity growth of domestic firms and its coefficient is taken as evidence of spillover effects from FDI. We estimate both the horizontal and vertical spillover effects. The estimation use data from two Innovation Surveys in Argentina (INDEC), from the PROWESS in India (CMIE). The estimation of inter-industry FDI linkages uses the input-tables from both the countries. These are provided by the Central Statistical Organisation in the case of India (1998-1999), and by INDEC in Argentina (1997). The Argentinian data provided detailed economic and technological information about around 1600 domestic and foreign subsidiaries manufacturing firms between 1992-2001; the PROWESS about 5000 firms operating in India between 1994-2002.
SSRN Electronic Journal, 2000
India, Ireland and Israel have experienced a high growth in the software industry especially during the 1990s. This paper aims to analyze the role of multinational corporations (MNCs) in the development of the software industry in these countries. The study is centred on software production and IT-related services -software development, chip design and electronic devices design, computer and Internet services such as web design and maintenance, and call centres. The empirical analysis leads to two final conclusions. First, it shows that the evolution of software activities and the role of MNCs vary considerably across these three countries. The main differences concern the time of entry of MNCs relative to domestic firms and the type of activities conducted by MNCs, which appear to reflect different regional comparative advantages. The second final conclusion is that the overall impact of MNCs on the development of the domestic software industry in the three examples analysed is quite controversial. Ireland is the only case where many MNCs entered before the domestic industry started and contributed on various grounds to its emergence, mainly as customers and sources of competencies. In Israel and India, the positive effects of MNCs on domestic firms, such as reputation, access to capital and managerial capabilities, have become apparent only in recent years. This suggests that analysts of MNCs' linkages and policy makers in emerging regions should devote attention to MNCs' entry timing in new industries.
Research Policy, 2010
One of the most intriguing aspects of the recent empirical literature on FDI-related spillover effects is the increasing identification of mixed results. A few studies, particularly in advanced countries have found positive effects; however, a more common scenario in recent studies is the prevalence of insignificant or even negative effects. This is despite the fact that theory predicts substantial positive effects in association with a supposed technological superiority of MNCs relative to domestic firms, particularly in the context of less advanced countries. In this paper, by distinguishing subsidiaries according to their orientation to carry out creative vs. exploitation activities in the host economy, we are able to distinguish situations with positive and negative spillover effects, and we explain why they may be emerging. More specifically, we find that only subsidiaries that are oriented to technologically creative activities have significant and positive effects in India. In contrast, subsidiaries oriented mostly to technologically exploitative activities generate negative effects in some circumstances. The implications for theory and policy are discussed.