Entrepreneurs, Multinational Enterprises and Policy
Edited by Maureen McKelvey and Sharmistha Bagchi-Sen
Chapter 14: Problem-framing in new innovation spaces: insights from software outsourcing
This chapter examines how emerging innovation spaces are created, by focusing upon problem-solving and problem-framing tasks in the Indian software industry. Over the last three decades, outsourcing has had a major influence on the international division of labour. It is clear that it has been an important reason for the enormous build-up of production capabilities in the developing world, in particular in the export platforms of Asia. While there is increasing acknowledgement that the globalization of research and development (R & D) and innovation is following production, it is not clear how this process unfolds and whether it extends to advanced innovation. Until recently, the literature on outsourcing and global value chains maintained that only certain stages of the chain was outsourced to low-cost economies, mainly manufacturing and standardized services. Innovation activities, on the other hand, remained in so-called advanced economies (Mudambi, 2008). Outsourcing should merely strengthen suppliers’ existing position in the global division of labour – where competitive advantage is defined primarily by low cost. Innovation activities were ‘detached’ from outsourced tasks and they remained centralized in and around lead firms and global buyers residing in advanced economies.
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