Culture, Innovation, and Economic Development: The Case of the South Indian ICT Clusters

Abstract

The Indian software industry has often been cited as an example of a 'role model' for other developing countries trying to catch up, or leapfrog certain stages of industrial development. Having started with basic programming services India has climbed the value chain in IT industries. The question remains, whether such a model could be exported so easily. Therefore it is useful to understand the basic ingredients of this 'model'.

Certainly, there are numerous factors contributing to such an extraordinary development many of which could be subsumed under a system-of-innovation-approach taking account of a variety of factors like science-related education and R & D or finance-oriented venture capital and fiscal policy etc. The focus, however, will be on why and how the successful firms have concentrated primarily in a few specific regions predominantly in South and West India.

This question pertains to economic geography, but my approach stresses the relationship between different cultures and forms of economic activities. There might be diverse cultural attitudes towards (technological/economic) change or development in different parts of India. In order to investigate whether the social system allows for such changes one should study the relationship between the origin of the successful entrepreneurs and the society they live in. The main hypothesis is that at least some (regional) cultures of India are more apt to social and economic development depending upon these contingencies, the latter being important for other developing countries.

The scope of this chapter is to analyse the impact of cultural factors that are supplementing the competitive advantage of regions or countries thereby being supportive to economic growth. More precisely, the transmission for such cultural influences is supposedly taking place through human capital formation. I do not wish to explain such growth solely through culture.

Keywords: India, regional agglomerations, culture, social institutions, human capital

JEL Classification: A13, L86, O33, R12, Z10