Diasporas and Domestic Entrepreneurs: Evidence from the Indian Software Industry

Abstract:     
This study explores the importance of cross-border social networks for entrepreneurship in developing countries by examining ties between the Indian expatriate community and local entrepreneurs in India's software industry. We find that entrepreneurs located outside software hubs - in cities where monitoring and information flow on prospective clients is harder - rely significantly more on diaspora networks for business leads and financing. Relying on these networks is also related to better firm performance, particularly for entrepreneurs located in weaker institutional environments. Our results provide micro-evidence consistent with a view that cross-border social networks serve an important role in helping entrepreneurs to circumvent the barriers arising from imperfect local institutions in developing countries.

Number of Pages in PDF File: 29

Keywords: Diasporas, Informal Networks, Institutions, Entrepreneurship

JEL Classification: F22, L14, L26, L86, O17, O19

working papers series