Internationalization of Indian software firms through establishment of global development centers

Abstract

Purpose – The purpose of this paper is to examine the inter-firm variation in the opening of international global development centers (GDCs), in a high commitment entry mode, by Indian software firms as a function of their past performance, degree of internationalization, possession of a valuable resource in the form of CMMI Level 5 certification and rivals’ establishment of GDCs. Design/methodology/approach – The authors draw on the organizational learning theory, the resource-based view and the strategic behavior theory to analyze the variation in the number of GDCs opened by 32 leading Indian software firms between 2000 and 2009. Findings – The authors find that strong past performance of Indian software firms leads to the establishment of a greater number of GDCs. The authors further demonstrate that non-financial resources, such as the possession of CMMI Level 5 certification, positively moderate the above relationship. Research limitations/implications – The research is conducted in the context of a single industry and a single home country. The authors also focus on a subset of firms (large, listed firms) in the industry. The authors recommend future research to examine other knowledge-intensive industries. Practical implications – An increasing number of Indian software firms and other emerging market firms wish to locate close to their overseas customers by choosing a high commitment entry mode. The research suggests that, prior to internationalizing, managers should build up critical and relevant resources through deployment of high commitment entry modes. Originality/value – The research has many unique aspects including a rigorous model development, a robust empirical approach as well as an interesting empirical context. The authors believe that the results will be useful to academics and practitioners alike.