Módulo 3. Traducción de las palabras del chino al español

Bangalore is known worldwide for its achievements in the high technology domain. Almost every multinational company has located some of its global activities in one of the technology parks around the city thereby integrating Bangalore in their global value chains. Moreover, many indigenous software firms that sprouted during this process over the last decade or so have themselves developed capabilities and reached reputation levels rather uncommon to Indian companies before.

The Indian IT industry mainly consists of a broad spectrum of software development enterprises. The figures for software exports show an astonishing annual growth of roughly 50 % p.a. for the 1990s. Having started with basic programming India now delivers services and products, on a globally competitive level that has not been seen in any other industry since independence. There are

several factors contributing to this extraordinary development and there is hardly any uncertainty pertaining to the purely economic aspects. Over the last few years a number of studies have analyzed the Indian software industry ranging from perspectives focused on innovative capabilities (D’Costa 2002; Tschang 2001) and quality considerations (Banerjee and Duflo 2000), emphasizing the involvement of multi-national firms (Patibandla and Petersen 2002) as well as an eventual development impact (Arora and Athreye 2002).

Although the Government of India (GOI) has been criticized for its ‘benign neglect’ (Arora et al. 2001) rather than an active stimulation of business, it did recognize the importance of supporting the software sector in general, and exports in particular – as early as 1972 with the establishment of an export processing zone (Evans 1992). Other – indirect – supportive policies like establishing the prestigious Indian Institutes of Technology (IIT) have been of critical value to the evolution of the software industry. Subsequently, the first Software Technology Parks (STP) were established in 1990 (Bajpai & Shastri 1998). The quality of software-exporting firms is assessed at high levels. In 2001, for example, India had more than half of ISO 9000 certified companies and the largest number of enterprises assessed at Level 5 of Carnegie Mellon University’s Software Engineering Institute Capability Maturity Model worldwide (Arora et al. 2001).

Nevertheless, the innovative capabilities of the Indian software industry are viewed rather skeptically as being still rather low in the value chain (Arora et al.

2001; D’Costa 2002). The relatively unimportant domestic market is generally identified as another major shortcoming (Bajpai and Shastri 1998).

In spite of this, almost all multinational companies (MNCs) increasingly locate not only low-level tasks but also research and development (R & D) centers or laboratories in India; many already have more than one research lab. However, the most advanced research continues to cluster in Bangalore. Overall, one finds an uneven distribution of the software industry locations which is clustered in the South (Bangalore, Hyderabad and Chennai), West (Mumbai and Pune), and around the capital New Delhi in the North (see map 1). Yet, almost all studies claim to cover the entire software industry and there is no explicit treatment of the geographical concentration in South Indian centers, most of all Bangalore. Thus,

the question addressed in this dissertation is why some regions are more successful than others?

Figure 1.1: Map of spatial distribution of the Indian IT industry (own representation; sources:Thomson Financial; Software Technology Parks of India, STPI and National Association of Software and Services Companies, NASSCOM)

The historical evolution of the Indian IT can be visualized in the following stylized way (figure 2). Note that the absence of an explicit ordinate is intentional;

possible measures would include variables such as the number of IT firms or software exports which result in a highly similar shape for the Bangalore context, or IT employment for which, unfortunately, no data are available. Moreover, phase 3 is not terminated with the start of phase 4, because foreign MNCs continue to flock to India opening up Indian subsidiaries. Lastly, ‘going global’

refers to corporate strategies, mainly cross-border acquisitions (which are not part of this study, but rather of future research). On an operational level this industry has been highly global since its inception with its basic business model based on the so-called body-shopping – the physical sending of software programmers to clients’ premises mainly in the US.

Source: Thomson Financial FDI 1985-2004

Exports 2002 Companies 2003

70%

42%

49%

Figure 1.2: Historical evolution of the Indian IT industry

Since this thesis is mainly concerned with analyzing the above development in the case of Bangalore, in the following this case will be exemplified by enumerating the developments that took place there; the main events are summarized in table 1 below. Independence Research Institutes 1940–Hindustan Aeronautics, HAL

Late 1960s-

Since 1990s MNC wave 1991–Liberalization

Table 1.1: Important milestones in the development path of the Bangalore IT

1.5.1 Early foundations: a culture of learning and knowledge

Initial historical conditions leading to path-dependencies that evolved later on can be traced back at least to colonial times, and even before the arrival of foreign (political) powers. An extensive study of anthropological literature revealed considerable differences between North and South India in terms of appraisal of education. This led to a number of college formations under Sir M.

Visweswaraiah, a famous South Indian engineer. After an early retirement he became the Divan (first Minister) of the Kingdom of Mysore, an important autonomous Princely State under the British Empire and pursued his vision of broad-based education witnessed by the early founding of the Indian Institute of Science (1909), University of Mysore (1916), the sixth-oldest in India and modeled after Chicago, Oxford and Cambridge, and the important Regional Engineering College of Bangalore (1917).

There has been a strong research base, in particular in electrical engineering and manufacturing of machine tools even before independence. With the early location of military, hence defense research Hindustan Aeronautics, HAL (1940) and later also space research (1972), i.e. the concentration of research-intensive technology industries Bangalore became the prime location for high-tech equipment in an economy rather left behind in terms of technological development due to a prohibitive import tariff structure. Co-evolution of these research and training institutions perhaps best reflects the systemic character of what led to the initial competitive advantage (cf. Murmann 2003).

Many employees of these research institutions later trained the graduates of the numerous engineering colleges in the city and the state. The number of these graduates has been much higher than in other Indian regions since the late 1970s, when the privatization of higher education in the state of Karnataka witnessed a first boost. It has been the first state to privatize higher education, several decades back. Many of these privately funded colleges received not only the regular fees, but also a capitation fee for a quota of the student intake. These funds enabled the establishment of computer labs required for teaching students in IT.

1.5.2 Openness

Interestingly, one factor which came out very clearly during fieldwork interviews concerns the social composition of the IT industry. Virtually no one found the industry to be really dominated by South Indians. On the contrary, most interview partners even argued in the opposite way. They claimed, it is very much the cosmopolitan nature of the city and the historical and traditional openness towards foreigners, both Indian and from abroad which had a high impact on the IT industry. Compared to other states in India, the investment climate has eventually been much more hospitable to foreign direct investment. The city has grown even more cosmopolitan due to the central government’s policy to locate national institutions there. These national institutions were staffed with people from the Indian Administrative Service (IAS), or researchers employed after nation-wide job announcements and recruitment processes. The following relocation of many Indians from other parts of the country after independence and a realignment of state boundaries in 1956 enhanced the already established cosmopolitan nature of the city. More recently, due to the prospects of a booming economy and job market there is a continuous inflow of foreigners (for non-economic factors motivating migration in India see Gidwani and Sivaramakrishnan, 2003).

Therefore, it was no surprise to find a similar pattern in the primary data collection with a total of 54,5% among the randomly sampled respondents not being from Bangalore. Apparently Bangalore has reached a level of diversity that allowed benefiting more from the positive effects thereof than suffering from its negative impact.

1.5.3 The impact of policy: benign neglect?

Interestingly the initial decades of the Indian IT industry were characterized by a complete absence of targeted policy measures. But despite many scholars arguing for a benign neglect GOI did introduce a couple of – theoretically – stimulating policies. As early as 1971 India established a Department of Electronics particularly addressing electronics production, which was larger than Korea’s at that time. But the overall philosophy of Indian polity until at least 1984, or rather even through to 1991, was one of import-substitution led industrialization (ISI) that culminated in 1978 with the expulsion of MNC that did not want to conform to minority ownership regulations for their Indian operations such as Coca-Cola

and, more importantly, IBM. At that time, no effective Indian software industry existed.

In 1984, after Rajiv Gandhi’s victory in federal elections, first measures were introduced to stimulate the growth of the software industry, which was also formally recognized as an industry through the “Computer Policy”. These measures included an easing of imports and exports by lowering tariffs and other incentives explicitly encouraging software exports as a priority. This helped attracting investment such as the one by Texas Instruments in Bangalore mentioned above. In 1988, software firms themselves formed an industry association to further their interests. This quickly resulted in the establishment of the Software Technology Parks of India, as export-processing zones with dedicated satellite links, other service provisions and incentives. Bangalore was one of the first three STPI units that have been set up in 1990 – again resulting in a first-mover advantage of Bangalore over comparable locations in other cities.

1.5.4 The role of transnational linkages

Following a macroeconomic crisis in 1991 further liberalization policies led to the inflow of MNCs that located primarily in Bangalore which had already gained an international reputation. There is no agreement in the literature about the role of international, or foreign, influences on the development of the Bangalore cluster.

Whereas some argue that Multinational Corporations MNCs (directly) contributed in favorable ways to later-stage development through triggering a cumulative process of human capital formation (Patibandla and Petersen, 2002) others argue that rising wages caused by competition through MNCs induced firms to upgrade their capabilities. However, even in the latter case there is an indirect positive influence of MNC entry. Moreover, for a successful subsequent development of clusters an entirely localized structure of networks seems not sufficient, for it might lead to a lock-in or suboptimal equilibrium (March, 1991). Hence, clusters need some form of external linkages in order to provide a continuous inflow of knowledge (Chiarvesio et al., 2004; Wolfe and Gertler, 2004; Yeung et al., 2006).

An important related characteristic is the increasing significance of transnational networks, primarily between the US-American high-tech cluster of Silicon Valley and Bangalore, although in the context of Silicon Valley the influence of culture

seems to be negligible. Saxenian (1999) found that Indians in Silicon Valley share a common Indian identity that transcends the boundaries of caste or ethnicity.

While in the context of Silicon Valley, where Indians are trying to integrate into the US business mainstream ethnicity in the narrow sense loses its importance, the geographical origin or ethnicity seems to play a very important role as regards the flows through transnational networks that are directed towards South India. This positive feedback process increases the regional concentration of the Indian software industry. This process seems to be already well under way providing in particular Bangalore, and to a lesser extent diffusing to Hyderabad and Chennai, with the competitive advantage in knowledge-intensive industries.

The importance of local social networks itself has not been estimated by many respondents as highly as one would have expected from cluster and network literatures. Since they often spun off from leading MNCs, they have accumulated the necessary technological (but less business) know-how in order to access the more advanced Western markets. Since their major clients are located in overseas markets, a local networking does not make much sense for these companies. They normally do not interact with captive development centers in India, but rather with headquarters or other research units directly. However, there have been a couple of reports of local networking in the Indian IT industry. Right from the start it was even at the highest levels and quite informal. But with the growing industry it becomes more formalized, and it diffuses to different, lower levels. Those participating in such networking events report mostly positive experiences. And those who do not have the time regret not being able to spend some time for socializing. However, whether this local networking takes place to an extent that comes anywhere close to the inter-firm relationships so important to Silicon Valley is questionable. It seems to be rather the cultural and professional proximity to (Indians in) the leading Western markets than the spatial proximity to other Indian companies, that allows for an innovative environment in the Indian IT industry of Bangalore. More than inter-firm collaboration, university-industry relationships and a regional culture of learning seem to play an important role.

Some of the interview partners, on the contrary, suggested that indigenous firms were responsible for the growth of the Indian IT industry without much involvement of overseas Indians at all.