Origins and Growth of the Software Industry in India By

The paper explains the evolution of India's software industry since its origination in 1974. Unlike the offshored software outsourcing industries of Ireland and Israel, in which multinationals started the industry, in India, local conglomerates began the industry by sending programmers to clients' sites overseas. We argue that these outcomes were due to government policies that were intended to obstruct the private sector. In the mid-1980s, work shifted to India and was done mainly by domestic firms. This was due to a new technology for software development and was despite new policies friendlier to foreign firms. The shift of work to India was responsible for Bangalore's development and the relative decline of other centers, notably Mumbai. Since the 1990s, value-addition has increased and domestic firms have become less dominant. This was due to the evolution of multinational firms' response to new policies. The contribution of the paper is to show the importance of the institutional environment and how the entrepreneurial response to it shapes the evolution of an industry.

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