"Why Is Software from India and Hardware from China?"

Kevin Donovan provides a posting (April 20, 2009) in his blog, Blurring Borders, summarizing a talk he heard by by Stanley Nollen and Neil Gregory on their new book, “New Industries from New Places. The book and lecture appear to have focused on the interesting question of why India and China took such different paths in exploiting the Information Revolution for economic growth.

Indian software is predominently written for exportation while Chinese software is for the domestic market. And although India does not have a similarly developed hardware industry, when that sector is analyzed, Chinese hardware is overwhelmingly exported while what hardware India does make is for domestic consumption......

Their research suggests that Indian management, not labor, and their pool of larger, better educated professionals were largely responsible. The management can be applauded for seeking quality certifications for Indian software firms and utilizing the diaspora ties. Further, they strategically partnered with far more American software companies than the Chinese did - 60% of surveyed Indian firms had Western partners, compared to only 12% in China.....

During the Q&A, Professor Mike Nelson offered some helpful insights from his time with the American IT industry:

• In hardware, you can thrive with 2-3 clients whereas in software, you need many more. Therefore, overcoming the “foreignness” of China is more of a factor than in India where multiple Western clients can be easily courted due to the relative institutional familiarity.
• Timezones shouldn’t be discounted - India is apparently much easier to schedule with than China.
• Given India’s relative governance instability, software (with lower fixed costs) is a more flexible industry - Wipro or Infosys can leave localities more easily than OEMs.

Comment: There are of course a number of people studying this phenomenon, and I am not up on the research. Still, I wonder whether the difference does not stem from the fact that the Chinese have successful export promotion policies focusing on manufacture of physical goods, while the Indian software industry and Internet mediated service industry got exemptions from their government's policies that were promoted import substitution. JAD