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Journal of Evolutionary Economics

, Volume 28, Issue 2, pp 225–243 | Cite as

A conduit for knowledge? demonstrating the strength of technology improvements in Indian firms that buy outsourced information technology

  • Grace Kite
Regular Article

Abstract

The literature on the role of information technology outsourcing (ITO) and on knowledge intensive business services only rarely considers purchasers in developing countries and includes few wide-scale studies. This paper reduces that gap in that it quantifies the effect of ITO on total factor productivity using a sample of 10,100 firms in India. The results show that ITO purchasing brings strong returns and outperforms in-house IT. A comparison with studies from elsewhere reveals that Indian ITO also outperforms IT in a range of circumstances in developed countries. Taken together, these findings support the idea that ITO firms, just like other knowledge intensive business services, can act as a conduit for best practices and tacit knowledge, and that this role is very useful in a developing country context. The implication is that more ITO projects would be good for catching up in developing countries. In India, policy support for the ITO sector should be re-designed to incentivise domestic work.

Keywords

Information technology Outsourcing India KIBS Innovation Catching up 

JEL classification

O14 O33 O31 O53 

Notes

Acknowledgements

With thanks to Simon Commander, Chrisanti Avgerou, Fredrik Tell, Ben Groom, Duo Qin, Arlene Luck and participants at International Conference on Applied Economics 2012 and Social Study of ICTs Workshop 2010 for feedback on earlier drafts.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.School of Oriental and African StudiesUniversity of LondonLondonUK

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