Bangalore’s Software Cluster in the 1990s

A key insight of the institutional approaches to industrial dynamics is that specific models of economic organization may combine the institutional arrangements of markets, hierarchies, and networks in different ways, resulting in inter-firm relations that are complementary to different types of "business systems" or "varieties of capitalism." This chapter sets out to examine and discuss the particular local and global models of industrial organization that underpinned India’s software industry during the "take-off phase" in the 1990s. As one of the most celebrated cases of rapid integration into the world economy this case holds important insights for the ongoing debate on local institutional dynamics in the age of deepening globalization. Is the increasing transnational coordination of economic activities overriding local organizational structures and institutional arrangement combinations? If so, what are the implications for the process of industrial upgrading in new growth regions? This chapter delves into the debate on global-local interaction, by using the concepts of "global value chains" and "local market organization" to assess the case of the software cluster in Bangalore in southern India during its establishment on the world economic map in the period between 1991 and 2001. The central questions addressed are the following: (1) How was the character of local market organization in Bangalore related to the industry’s export success? (2) What was the role of global value chains in shaping local market organization? (3) How have global value chains and the local variety of market organization impacted upon Bangalore’s industrial development trajectory? The chapter explores these questions by focusing on Indian-owned firms based in Bangalore, their interrelations as well as relations to firms external to the cluster