Role of transnational corporations in the evolution of a high tech industry: The case of India’s Software industry; A Reply

Abstract

India’s software industry presents the case of an internationally competitive high-tech industry from a developing economy. This paper takes the evolution of the industry in terms of human capital accumulation. The initial stock of human capital leads to entry of transnational corporations (TNC), which triggers a cumulative process of further human capital accumulation through a process of externalities (spillovers) governed by ?rm-level and market structure dynamics. Spillovers from TNC operations are more e?ective when TNCs operate at higher end of technology and build backward linkages with local ?rms and institutions in a developing economy. The empirical exercises, based on the analysis of qualitative information collected through ?eld interviews and econometric analysis of ?rm-level panel data, provide evidence of the positive contribution of TNCs for the evolution of the industry.