The computer software industry as a vehicle of late industrialization: lessons from the Indian case

Abstract

Scholars have emphasized the role of the state, acting in partnership with private industry, for late industrialization in the twentieth century (late-late industrialization). While the state provides subsidies to build comparative advantage, industry must learn to deploy borrowed technology efficiently in production and compete internationally. The state must also curtail consumption to build physical and educational infrastructure. However, current theories of late-late industrialization, which mostly draw from the East Asian manufacturing experience, demand reexamination thanks to the characteristics of information and communication technologies, especially software. These characteristics include rapid technological change, which can preclude learning from borrowed technology, and the need to encourage consumption, since information and communication technologies are general purpose technologies that can potentially enhance aggregate productivity. Further, as the marginal cost of production of software is negligible, efficient manufacturing is not an issue. This paper shows how our understanding of late-late industrialization may be broadened by drawing on the experience of the Indian software industry.