Mapping the multi-tiered impacts on the growth of IT industries in India: A combined scale-and-scope externalities perspective

Abstract

Externalities occur among agglomerated firms. Scale externalities occur between firms in the same industry. Scope externalities occur when heterogeneous industries are collocated. Combined scale-and-scope externalities exist when the scale of one industry is beneficial to the growth of another collocated industry. In the Sein and Haridranath (2004) framework of information technology (IT) impacts on development, scale externalities correspond to second-order impacts, while combined scale and scope eternalities correspond to third-order impacts. We use an agglomeration perspective to explain the growth of IT industries in India. We study growth patterns of four specific IT industries: computer and peripheral equipment manufacturing, semiconductor and other electronic components manufacturing, software, and IT-enabled services. Our analysis of the IT agglomerations of Bangalore and Hyderabad in India suggests the existence of scale, scope and combined scale-and-scope externalities played an important role in IT industry growth. We also show that the growth of IT industries has second- and third-order impacts on national development. © 2008 Wiley Periodicals, Inc.