Creating information technology industrial clusters: Learning from strategies of early and late movers

Interest in industrial clusters as a means to accelerate regional development has attracted renewed attention in recent years, particularly after the boom in the information technology (IT) industry in Silicon Valley (Sturgeon, 2003). At the same time, efforts by several states and countries to recreate Silicon Valley-type regions have had mixed results. Why does it happen so? Our enquiries through case studies of two Indian states produce four sets of factors central to the successful formation of IT clusters. While the role of industry attractiveness and factor conditions are well known, the role of the local entrepreneurship pool is less well discussed. Our findings suggest that the role of state as an entrepreneur in attracting and encouraging entrepreneurship is important in the creation of IT clusters. Indian IT Industry Technological revolutions sometimes bring unexpected opportunities for countries. India, a laggard among developing countries in terms of economic growth, is demonstrating a high degree of competitiveness in knowledge-intensive software development and IT-enabled services and is a favoured location for investment. The Indian IT industry has experienced a major boom over the last decade and has emerged as a major player in the Indian economy. The software industry in India grossed an annual revenue of US$ 12 billion during 2002–03, up from US$ 10.1 billion in 2001–02, registering an overall growth of 18.8 percent in dollar terms. More than 8 000 firms, located in cities like Bangalore, Chennai, Hyderabad, Kolkata, New Delhi and Pune...