Initiatives for Information Technology (IT) Sector Development and the Location of Data Centers
11 Pages Posted: 11 Oct 2013
Date Written: September 25, 2013
We examine a variety of steps that governments might take to encourage foreign investment in a particular country’s information technology (IT) sector. The Information Age is a global phenomenon that is reshaping economies and blurring geographic borders. IT significantly increases the range of potential activities for businesses, enabling entrepreneurs to become actors in the global economy. Many countries have also experienced substantial growth in Internet penetration rates in the last decade, bringing many new opportunities for citizens to expand their knowledge of the world outside a country’s borders. However, many other countries have not experienced as much growth in Internet penetration and the IT sector, prompting national governments to weigh available options for attracting IT investment. Regulatory approaches can focus on either “carrots” or “sticks.” A “carrot” approach would make doing business in a country desirable based on incentives, like low effective tax rates. A “stick” approach would impose requirements as a condition of doing business in the country, such as requiring a company to operate a data center within a country in order to provide services to the country’s citizens. Some research raises doubts about the effectiveness of financial incentives, but a purely “stick”-based approach is not likely to be successful on its own either. Thus, governments must continue to carefully examine the options for attracting foreign investment.
Keywords: information technology, IT sector, cloud computing
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