National Innovation System and the Emergence of Indian Information and Software Technology Multinationals

Abstract

The dramatic growth of outward FDI from India over the past decade is significantly led by Indian information and software technology (IST) firms. These IST firms have aggressively adopted outward FDI as a competitive strategy for seeking overseas markets, networks, skills and technologies. This study analyzes the factors leading to the emergence of these Indian IST firms as multinationals in the global market. Applying the theoretical framework of national innovation system (NIS), the study establishes that origin of Indian IST multinationals are critically linked to the overall policy environment and strategic government intervention in skill formation, development of supporting institutions, proactive role of Indian households in undertaking human capital investment and providing risk taking entrepreneurs, and also to the firm-level business strategies. The Indian experience shows that the development of a suitable NIS is required if other developing countries are aspiring to build their capability in the IST industry.

Keywords: Indian FDI, Indian Multinationals, Indian Software Industry

JEL Classification: F23, L86