Comparing IT industries in India, China and Philipines

F. Ted Tschang of Singapore Management University writes this nice paper on the topic.

He looks at how IT industry  has developed in the 3 countries:

The contrast between the experiences in each country highlights subtle and important differences, particularly with regard to latecomer countries. The PRC case shows that it is conceivable to have a successful latecomer in the software industry, a field in which India has built a commanding lead in both technical and process capability at the firm level. However, PRC firms have done this both in cooperation with foreign MNEs to service the PRC’s domestic market, and also independently by working in Japan, a culturally similar market. The Philippine case shows that a latecomer can flourish by bringing in MNEs as providers—following a pure labor arbitrage model of operation (i.e. based on large suppliers of lower-wage but skilled labor), and with the additional advantages of similarities between the workforce’s native language and the clients’ language of work. In this model, one option for domestic firms looking to enter the industry is to emphasize lower-skilled work at lower wages than the competitors’ wages.

Second IT’s impact on economy. Both China and Philippines can take some lessons from India:

The second objective was to illustrate the broader implications of the IT services (i.e., outsourcing or offshoring) industry. As can be seen from combining the case-level and higher-level evidence for India, the sector’s contribution to overall GDP and exports can be considerable over time. The multiplier effects on output and employment are not unlike those of other sectors. In a large, rapidly expanding economy like India’s, the industry’s effects on employment may be less significant than its effects on growth. However, due to the high value added and higher wages (on average), the effects on the economy are greater when considered on a per-person basis.

In addition, while the benefits of direct employment will tend to go to the highly educated, the industry can still benefit from the creation of a vibrant middle class, at least in selected cities where the IT industry had a good start. Through natural evolution and policy assistance, these benefits can also be brought to other, secondary cities. Finally, the IT sector has the potential (and indeed, may be necessary) for cultivating productivity increases in domestic sectors (such as manufacturing) and in technologically sophisticated firms. However, as the case of India demonstrates, the usage of IT to improve productivity in other sectors of the economy, such as manufacturing, as well as the rural parts of economies, still has a long way to go.

Superb paper especially the first part of how IT industry has developed in the three regions. Gives you a different perspective…



Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: