Abstract

This chapter analyses the features of firms in the sizable, fast-growing and export-oriented Indian software industry that differentiate them from firms in the equally sizable and fast-growing but domestically oriented Chinese software industry. It provides a similar analysis to explain how firms in the very large and export-oriented Chinese hardware industry differ from firms in the small and domestically dominated Indian hardware industry. Firm-level variables are under the control of the firm’s management. Agglomeration or geographical clustering is associated with strength for knowledge-intensive industries because it facilitates the transfer of tacit knowledge. Software and hardware are high-technology industries, but few Indian or Chinese firms are at technological frontiers, and therefore it is not clear whether technology could be a decisive difference between the two countries’ firms. Capital is a small input in software production, and its availability and cost should not be decisive.

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