Outsourcing and Innovation in the Indian Software Industry

Software exports from Bangalore have risen sharply, from $2 million in 1991 to $6.2 billion in 2005. This makes Bangalore the largest and fastest growing software-export platform in India and in the developing world. The 1990s was a phase of rapid accumulation of basic software development capabilities in Bangalore and in the wider Indian software industry. This project aims to investigate whether the capabilities associated with the basic 'production' of software has led to increasing 'innovation' capabilities after the turn of the millennium. Firms in the West are no longer just outsourcing production activities. Increasingly they also outsource parts of their innovation activities to select partners and suppliers. To what extent and in what circumstances did this contribute to Indian firms' efforts to become innovators? What were the wider circumstances in which 'software production' capabilities were transformed into innovation capabilities?

The direct impacts of outsourcing on developing countries, in terms of jobs and prosperity, are widely debated. Less attention is given to the wider implications, in terms of learning and knowledge accumulation. Filling this gap is of great importance, not least because current trends of outsourcing of innovation may be changing the international division of labour in fundamental ways. It is not clear how this is affecting the efforts and abilities of firms in developing countries to develop innovation activities. The project will therefore be of importance to both private sector actors and policymakers eager to build knowledge-based competitiveness in developing countries.

The project feeds into ongoing research at IDS on 'global value chains' and 'Asian drivers of global change'. In particular this project forms part of the research programme on the Changing Knowledge Divide in the Global Economy (IDS and University of Marburg).
Project Dates:
January 2006 - June 2008
Project Status:
Danish Agency for Science, Technology and Innovation
Research Themes / Programmes:
Innovation and value chains