Regional Skill Supplies and Location of Firms: The Case of Information Technology Industry in India

Abraham, Vinoj (2010): Regional Skill Supplies and Location of Firms: The Case of Information Technology Industry in India.

Abstract

The “new economic geography” of the IT industry is shaped by two characteristic features of the industry, smaller size of the firms and zero transportation costs of its products that provide its ability of being a ‘footloose’ industry. The IT industry could locate itself in a region on the basis of two factors, namely, the nearness to large markets that ensures steady demand for its products, and the nearness to its factors of production. The importance of proximity to large markets in the case of Indian IT industry is only marginal as the IT industry, mainly dominated by the computer software segment, is a highly export oriented industry. There are reasons, however to believe that the location of firms in the ICT industry would be based on the supply of its crucial factor of production, namely, skilled labour. The IT industry being a skilled-labour-intensive, export-oriented industry it is by reducing the cost of labour, relative to capital, that it can reap comparative advantage benefits. Moreover, the skill requirement of this industry being very flexible and is subjected to fast rate of obsolescence it remains important for the firm, in order to have uninterrupted production, to locate itself in large pools of skilled labour. Correlations drawn between the location of firms and regional supply of skills tend to support the hypothesis that the quantity and quality of skills supplied in a region could determine the location of firms in a region and clustering of firms to a city.

• Item Type: MPRA Paper
• Language: English
• Keywords: Skill Supply; Information Technology Industry; Location; Region; India; Economic Geography; Agglomeration Economies.
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics; J - Labor and Demographic Economics > J4 - Particular Labor Markets > J44 - Professional Labor Markets ; Occupational Licensing; L - Industrial Organization > L8 - Industry Studies: Services > L86 - Information and Internet Services ; Computer Software; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

References

Carlton, D.W. (1983); The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables; Review of Economic and Statistics; 65:400-9

Census of India, 1991;Government of India.

Education in India, Vol 1(s), 1995-96, 1990-91, Ministry of Human Resource Development, Government of India

Electronics Industry Information System; 2000, Ministry of Information Technology, Govt.of India

Henderson, J.V. (1974); The size and Type of Cities; American Economic Review; 64: 640-56

Istv´an K´onya (2001), Endogenous Mobility, Human Capital and Trade, Discussion Paper, Boston College, October

Joseph K.J. and Vinoj Abraham (2002), “Moving up or Lagging behind in Technology? An Analysis of Firms’ Strategies in Indian ICT Sector” Paper Presented in the International Seminar: ICTs and Indian Development- Processes, Prognoses and Policies Organized by the IHD-New Delhi and ISS-The Hague, Dec 9-11, at Bangalore.

Kohli, Rajan (1986) Differences in Educational Attainment of migrants and non-migrants in Class1 cities of Maharashtra in Tilak, J.B.G (1986) (ed), Education and Regional Development, Yatan Publication, New Delhi,

Krugman, P. (1991); Increasing Returns and Economic Geography; Journal of Political Economy; 99:483-99.

Lucas, R.E. (1988); The Mechanics of Economic Development; Journal of Monetary Economics; 22:3-42

Mathur , Ashok;(1993) The Human Capital Stock and Regional Economic Development in India in Sheel C. Nuna (ed) Regional Disparities in Educational Development ,NIEPA , New Delhi , 110016.

Nakamura,R. (1985),Agglomeration Economies in Urban Manufacturing Industries : A Case of Japanese Cities; Journal of Urban economics, 17:18-24

NASSCOM, Indian Software and Services Directory, 2001, New Delhi

Out turn of Scientific and Technical Manpower in India, 1984-89; Vol2;HRD group; CSIR, New Delhi, 1993

Raza, Moonis ;(1986) (ed) Educational Planning; A Long term perspective; NIEPA and Concept Publishing Company, New Delhi

Selected Educational Statistics, 1992,1995;Ministry of Human Resource Development, Government of India

Sheel C. Nuna (1993) (ed) ; Regional Disparities in Educational Development ,NIEPA , New Delhi , 110016.

Technical Manpower Profile 1995;IAMR, New Delhi;1998

Tilak, J.B.G (1986) (ed), Education and Regional Development, Yatan Publication, New Delhi,

Tsang, Ted(2001), The Basic Characteristics of Skills and Organizational Capabilities in the Indian Software Industry, ADB Institute working paper 13, ADB Institute, Tokyo