Wednesday, August 08, 2007

Indian Diaspora & Indian Software Firms


Being a regular reader of Harvard Business Review articles, I recently came across a very unique study conducted by two HBS professors, Ramana Nanda and Tarun Khanna. Titled "Diasporas and Domestic Entrepreneurs: Evidence form the Indian Software Industry" the paper examines the relations between the Indian diaspora which is estimated close to 18 million and spread over 130 countries and the Indian software industry.

It tries to answer two key questions
  1. Are entrepreneurs who are based in cities where matching with prospective clients, new referrals and monitoring is easier, less likely to rely on the diaspora than entrepreneurs based in cities where this is harder?
  2. do entrepreneurs who rely on the diaspora have better performing firms than those who do not tap into the expatriate community?
The study is unique because it gives a new dimension to way smaller software firms in India are expanding their businesses by tapping into the diaspora of Indians. Not just that, it also reveals that the opposite might actually be more true. The Indian diaspora might be tapping back into the Indian local, small scale software companies for mutual benefit.

With data from the NASSCOM, the two professors have done detailed mathematical regression analysis to arrive at their findings. The paper can be downloaded here.

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