Learning from the Indian Experience
Edited by Tojo Thatchenkery and Roger R. Stough
Chapter 7: Development through Knowledge: Capability Replication in Global Innovation Communities
Gita Surie* Micro studies on development and technology transfer to emerging economies suggest that cross-national differences in productivity and performance may be inﬂuenced by national systems, institutions, and policies that affect the innovative capabilities and aspirations of ﬁrms (Nelson, 1993; Dahlman et al., 1987; Enos and Park, 1988). However, while economists remain interested in cross-national differences at the industry level, the role of the ﬁrm in building capabilities is underemphasized. Hence, the processes that shape the development of national capabilities and facilitate innovation are not well understood. This chapter aims to address this lack by developing a framework for capability creation and diffusion in emerging economies such as India, which links ﬁrms with industries, the institutional environment, and with global markets. In the absence of well-developed indigenous markets and the latest developments in manufacturing technologies, ﬁrms in emerging economies seek external markets and alternative sources of new technology. This fact is well documented in research on the development of the newly industrialized countries (NICs) and also evidenced by the diffusion of manufacturing technology from the UK to the USA in the early days of industrialization (Licht, 1995). We focus on how cross-border interactions with multinational ﬁrms catalyze local learning, adaptation, and innovation; and by inducing competition in the domestic environment, increase specialization, and align domestic ﬁrms with the global economy in an evolving international division of labor. Evidence from case studies in the software industry suggests that capability building and learning through knowledge creation is a feasible development strategy...
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