Proximities and Innovation: Evidence from the Indian IT Industry in Bangalore

Abstract

Abstract:Much has been written on the success of the Indian software industry, enumerating systemic factors like first-class higher education and research institutions, both public and private; low labour costs, stimulating (state) policies etc. However, although most studies analysing the 'Indian' software industry cover essentially the South (and West) Indian clusters, this issue has not been tackled explicitly. This paper supplements the economic geography explanations mentioned above with the additional factor social capital, which is not only important within the region, but also in transnational (ethnic) networks linking Indian software clusters with the Silicon Valley. In other words, spatial proximity is complemented with cultural proximity thereby extending the system of innovation. The main hypothesis is that some Indian regions are more apt to economic development and innovation due to their higher affinity to education and learning as well as their more general openness, which has been a main finding of my interviews. In addition, the transnational networks of Silicon Valley Indians seem to be dominated by South Indians, thus corroborating the regional clustering of the Indian software industry Earlier versions of this paper have been presented at conferences at the London School of Economics, the Center for International Development (CID) at Harvard University, Cambridge (MA) and at the European Summer School on Industrial Dynamics, Cargèse, France, among others. Thanks are due to all the participants in these events, and in particular Stefano Breschi, Paul David, Dominique Foray and Jan Vang-Lauridsen for helpful comments and suggestions. Of course, all remaining errors are mine.

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