Embeddedness, knowledge transfer, industry clusters and global competitiveness: a case study of the Indian software industry

Abstract

This paper develops a dynamic theoretical framework for global competitiveness. The framework is used to assess competitiveness of organizations in the Indian software industry. Behavioural drivers of transaction cost economics like trust and experience influence embeddedness that describes the relationships among organizations in an industry cluster. The spiral for knowledge transfer, culture variables and embeddedness influence knowledge transfer. Embeddedness and knowledge transfer are key determinants of industry clusters that lead to global competitiveness. Industry clusters are characterized by external economies, generalized reciprocity and flexible specialization. Generalized reciprocity describes the relations between constituents of an industry cluster that are based on trust. Flexible specialization facilitates the production of a variety of products for specific markets using general-purpose resources. Global competitiveness is achieved by increased productivity, focussed direction and increased pace of innovation and growth. The implications of the framework for organizations in the Indian software industry are creating trust and encouraging inter-organization relationships. These organizations also need to design processes for tacit knowledge transfer, implement mentoring programs and build general management capabilities.