Globalisation of Knowledge Production and Regional Innovation Policy: Supporting Specialized Hubs in Developing Countries

This paper sheds light on the role of the regional innovation system facilitating the transition from competing on low cost activities/services towards competing in innovation, using Bangalore software industry as an example. Recent research has documented that Bangalore has become one of the most important IT clusters outside the US. According to this stream of literature a combination of easy access to qualified and relatively cheap technical human capital has attracted a number of transnational corporations (TNCs) during the nineties (eg. IBM, Motorola, Hewlett-Packard, Siemens, 3M, Texas). The TNCs have stimulated a tremendous development of the IT software industry either through outsourcing of routine activities or though establishing offshore subsidiaries. This literature however has not yet paid much attention to the evolutionary aspects of the system of innovation, that is, how the system of innovation emerges and evolves encompassing the changes in the strategies of the indigenous firms. This chapter attempts to contribute to reducing these omission by paying specific attention to the evolutionary aspects of the system of innovation, analyzing the emergence and evolution of the regional system of innovation of the software industry in Bangalore, India. <p> The case clearly illustrates that the move from cost competition to innovation base competition of the Bangalore firms is seriously compromised by the existing weaknesses in systemic aspects of the regional system of innovation. The interactions with Universities are weak and so are the interactions among the indigenous firms. Furthermore, the connections with the final users and lead users are also quite limited. The paper concludes suggesting some policy measures that take the specific systemic propensities of the Bangalore cluster into account.