Top

Asia Pacific Journal of Management

Published in:

01-09-2012

Legal form of the firm and overseas market choice in India’s software and IT industry

Authors: Sumit K. Majumdar, Davina Vora, Ashok K. Nag

Published in: Asia Pacific Journal of Management | Issue 3/2012

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

Drawing upon the economics, international business, and law literatures, we hypothesize that variations in governance characteristics, associated with firms being public limited companies, private limited companies, or unincorporated enterprises, influence the internationalization patterns of the software and information technology (IT) companies in India. The results provide some support for our hypotheses, as variations in legal form were found to significantly impact regional sales in the US and Canada, Europe, Latin America, and the Middle East. Organizational size and business type were also significantly related to sales in a number of regions. Implications of our findings and directions for future research are discussed.

previous article Why do business groups continue to matter? A study of market failure and performance among Indian manufacturers

next article Environment, governance, controls, and radical innovation during institutional transitions

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Historically, the development of a unique form of commercial organization, the joint stock company, led to a major expansion of trade between Europe and Asia (Chaudhuri, 1985). Unlike individual proprietorships or partnerships that could only undertake limited ventures due to the close link between ownership and control, joint stock companies such as the British East India Company (EIC) and the Dutch Vereenigde Oost-Indiche Companie (VOC), increased trade between Europe and Asia by an order of magnitude by separating ownership from control and bringing in management by a class of professional merchants and salaried administrators (Chaudhuri, 1985; Keay, 1994).

Economic flows and policy cooperation, geographic proximity, and similarities in culture, language, and political systems are some appropriate ways to define a region. See Anderson and Norheim (1993), Fujita and colleagues (1999), Krugman (1991), Mansfield and Milner (1999), Nye (1971), Russett (1967), Suh and Khan (2003), and Thompson (1973). Within-location differences are smaller than between-location differences (Martin & Sunley, 1996).

These are based on Behrens (2005), Botelho, Stefanuto, and Veloso (2005), Breznitz (2005), CIA World Factbook, Commander (2005), Garcia-Murillo (2003), Hofstede (1976, 1980), James (2001), Khavul (2005), Sarkar and Sawy (2003), Saxenian and Quan (2005), Suh and Khan (2003), Tschang and Xue (2005), and Wilson and Purushothaman (2003).

We thank two anonymous reviewers for mentioning this issue.

Aggarwal, V. 2001. Analyzing European firms’ market and non-market strategies in Asia. In V. Aggarwal (Ed.). Winning in Asia, European style: Market and non-market strategies for success: 3–27. New York: Palgrave.

Amemiya, T. 1973. Regression analysis when the dependent variable is truncated normal. Econometrica, 41: 997–1016.CrossRef

Anderson, K., & Norheim, H. 1993. History, geography, and regional economic integration. In K. Anderson & R. Blakhurst (Eds.). Regional integration and the global trading system: 19–51. London: Harvester Wheatsheaf.

Arora, A., Arunachalam, V., Asundi, J., & Fernandes, R. 2001. The Indian software services industry. Research Policy, 30: 1267–1287.CrossRef

Athreye, S. 2005a. The Indian software industry and its evolving service capability. Industrial and Corporate Change, 14(3): 393–418.CrossRef

Athreye, S. 2005b. The Indian software industry. In A. Arora & A. Gambardella (Eds.). From underdogs to tigers: The rise and growth of the software industry in Brazil, China, India, Ireland, and Israel: 7–40. New York: Oxford University Press.

Behrens, A. 2005. Brazil. In S. Commander (Ed.). The software industry in emerging markets: 189–219. Cheltenham, UK: Edward Elgar.

Bhagat, R., McDevitt, A., & McDevitt, I. 2010. On improving the robustness of Asian management theories: Theoretical anchors in the era of globalization. Asia Pacific Journal of Management, 27(2): 179–192.CrossRef

Bhaumik, S., Driffield, N., & Pal, S. 2010. Does ownership structure of emerging-market firms affect their outward FDI? The case of the Indian automotive and pharmaceutical sectors. Journal of International Business Studies, 41(3): 437–450.CrossRef

Bonaccorsi, A. 1992. On the relationship between firm size and export intensity. Journal of International Business Studies, 23(4): 605–635.CrossRef

Botelho, A., Stefanuto, G., & Veloso, F. 2005. The Brazilian software industry. In A. Arora & A. Gambardella (Eds.). From underdogs to tigers: The rise and growth of the software industry in Brazil, China, India, Ireland, and Israel: 99–130. New York: Oxford University Press Inc.

Brazeal, D., & Herbert, T. 1999. The genesis of entrepreneurship. Entrepreneurship Theory & Practice, 23(3): 29–45.

Breznitz, D. 2005. The Israeli software industry. In A. Arora & A. Gambardella (Eds.). From underdogs to tigers: The rise and growth of the software industry in Brazil, China, India, Ireland, and Israel: 72–98. New York: Oxford University Press Inc.

Buckley, P., & Casson, M. 1993/1979. A theory of international operations. In P. Buckley & P. Ghauri (Eds.). The internationalization of the firm: A reader: 45–50. San Diego, CA: Academic Press, Inc.

Burgelman, R. 1983. A model of the interaction of strategic behavior, corporate context, and the concept of strategy. Academy of Management Review, 8(1): 61–70.

Chakraborty, C., & Jayachandran, C. 2001. Indian software industry: Structure, trends, and constraints. Journal of Services Research, 1(2): 73–93.

Chandler, A. 1962. Strategy and structure: Chapters in the history of the American industrial enterprise. Cambridge: MIT.

Chandler, A. 1990. Scale and scope: The dynamics of industrial capitalism. Cambridge: Belknap Press.

Chappell, D. 2001. Where software is king: IT in India. Application Development Trends, July: 16–17.

Chaudhuri, K. N. 1985. Trade and civilisation in the Indian Ocean. Cambridge: Cambridge University Press.

Chen, M., & Hambrick, D. 1995. Speed, stealth, and selective attack: How small firms differ from large firms in competitive behavior. Academy of Management Journal, 38: 453–482.CrossRef

Chhibber, P., & Majumdar, S. K. 1999. Foreign ownership and profitability: Property rights, control and the performance of firms in Indian industry. Journal of Law and Economics, 52(1): 209–238.CrossRef

Commander, S. 2005. What explains the growth of a software industry in some emerging markets?. In S. Commander (Ed.). The software industry in emerging markets: 1–31. Cheltenham, UK: Edward Elgar.

Davidson, W. 1980. The location of foreign direct investment activity: Country characteristics and experience effects. Journal of International Business Studies, 35: 128–152.

Davies, P. 2004. What’s this India business? Offshoring, outsourcing and the global services revolution. London: Nicholas Brealey.

D’Costa, A. 2003. Uneven and combined development: Understanding India’s software exports. World Development, 31(1): 211–226.CrossRef

Delios, A., & Beamish, P. 2005. Regional and global strategies of Japanese firms. Management International Review, 45(1): 19–36.

Demsetz, H., & Lehn, K. 1985. The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93: 1157–1177.CrossRef

Demsetz, H., & Villalonga, B. 2001. Ownership structure and corporate performance. Journal of Corporate Finance, 7: 209–233.CrossRef

Dunning, J. 1980. Towards an eclectic theory of international production. Journal of International Business Studies, 11(1): 9–31.CrossRef

Dunning, J. 1988. The eclectic paradigm: A restatement and some possible extension. Journal of International Business Studies, 19(1): 1–31.CrossRef

Durand, R., & Vargas, V. 2003. Ownership, organization, and private firms’ efficient use of resources. Strategic Management Journal, 24(7): 667–75.CrossRef

Economist. 2001. Back office to the world. 359(8220): 59–62.

Eisenhardt, K. 1989. Agency theory: An assessment and review. Academy of Management Review, 14: 57–74.

Eldenburg, L., Hermalin, B., Weisback, M., & Wosinska, M. 2004. Governance, performance objectives and organizational form: Evidence from hospitals. Journal of Corporate Finance, 10: 527–548.CrossRef

Fama, E., & Jensen, M. 1983a. The separation of ownership and control. Journal of Law and Economics, 26(June): 301–325.

Fama, E., & Jensen, M. 1983b. Agency problems and residual claims. Journal of Law and Economics, 26(June): 327–349.

Fama, E., & Jensen, M. 1985. Organizational forms and investment decisions. Journal of Financial Economics, 14: 101–119.CrossRef

Fernández, Z., & Nieto, M. 2006. Impact of ownership on the international involvment of SMEs. Journal of International Business Studies, 37: 340–351.CrossRef

Fujita, M., Krugman, P. R., & Venables, A. 1999. The spatial economy: Cities, regions and international trade. Cambridge: The MIT Press.

Garcia-Murillo, M. 2003. Patchwork adoption of ICTs in Latin America. Electronic Journal on Information Systems in Developing Countries, 15(1): 1–9.

Gau, G., Murray, J., Kotabe, M., & Lu, J. 2010. A “strategy tripod” perspective on export behaviors: Evidence from domestic and foreign firms based in an emerging economy. Journal of International Business Studies, 41(3): 377–396.CrossRef

Goffee, R., & Scase, R. 1985. Proprietorial control in family firms: Some functions of ‘quasi-organic’ management systems. Journal of Management Studies, 22(1): 53–68.CrossRef

Gubbi, S., Aulakh, P., Ray, S., Sarkar, M., & Chittoor, R. 2010. Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms. Journal of International Business Studies, 41(3): 397–418.CrossRef

Hansmann, H. 1996. The ownership of enterprise. Cambridge: Harvard University Press.

Heeks, R. 1996. India’s software industry: State policy, liberalisation and industrial development. New Delhi: Sage Publications.

Hofstede, G. 1976. Nationality and espoused values of managers. Journal of Applied Psychology, 61(2): 148–155.

Hofstede, G. 1980. Culture’s consequences: International differences in world related values. Beverly Hills, CA: Sage Publications.

James, A. 2001. Can Australia improve its software processes?. CrossTalk: The Journal of Defense Software Engineering, August: 12–14.

Jensen, M., & Meckling, W. 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3: 305–360.CrossRef

Johanson, J., & Vahlne, J. 1977. The internationalization process of the firm—A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1): 23–32.CrossRef

Kapur, D., & Ramamurti, R. 2001. India’s emerging competitive advantage in services. Academy of Management Executive, 15(2): 20–33.CrossRef

Keay, J. 1994. The honourable company: A history of the East India Trading Company. New York: MacMillan.

Khavul, S. 2005. Israel. In S. Commander (Ed.). The software industry in emerging markets: 133–188. Cheltenham, UK: Edward Elgar.

Kogut, B., & Singh, H. 1988. The effect of national culture on the choice of entry mode. Journal of International Business Studies, 19(3): 411–432.CrossRef

Krugman, P. 1991. Geography and trade. Cambridge: The MIT Press.

Kumar, N., & Joseph, K. 2005. Export of software and business process outsourcing from developing countries: Lessons from the Indian experience. Asia-Pacific Trade and Investment Review, 1(1): 91–110.

Kundu, S., & Katz, J. 2003. Born-international SMEs: BI-level impacts of resources and intentions. Small Business Economics, 20: 25–47.CrossRef

Landes, D. 1949. French entrepreneurship and industrial growth in the nineteenth century. Journal of Economic History, 9: 45–61.

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. 1999. Corporate ownership around the world. Journal of Finance, 54(2): 472–517.CrossRef

La Porta, R., Lopez-de-Silanes, F. & Shleifer, A. 2008. The economic consequences of legal origin. Journal of Economic Literature, 46(2): 285–332.CrossRef

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, 1997. Legal determinants of external finance. Journal of Finance, 52(3): 1131–1150.CrossRef

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, 1998. Law and finance. Journal of Political Economy, 106(6): 1113–1154.CrossRef

Mackie, R. 2001. Family ownership and business survival: Kirkcaldy, 1870–1970. Business History, 43: 1–32.CrossRef

Maddala, G. 1983. Limited-dependent and qualitative variables in econometrics. Cambridge: Cambridge University Press.

Madhani, P. 2008. Indian software success story: A resource-based view of competitive advantages. The Icfaian Journal of Management Research, 7(8): 61–83.

Majumdar, S. K. 2008. Foreign exchange legislation transformation and enterprise demography in India. European Journal of Law and Economics, 25: 39–56.CrossRef

Mansfield, E., & Milner, H. 1999. The new wave of regionalism. International organization, 53(3): 589–627.CrossRef

Martin, R., & Sunley, P. 1996. Paul Krugman’s geographical economics and its implications for regional development theory: A critical assessment. Economic Geography, 72(3): 259–292.CrossRef

Mathur, S. 2007. Indian IT and ICT industry: A performance analysis using data envelopment analysis and malmquist index. Global Economy Journal, 7(2): 1–40.CrossRef

Micklethwait, J., & Wooldridge, A. 2003. The company: A short history of a revolutionary idea. New York: The Modern Library.

Morck, R., Wolfenzon, D., & Yeung, B. 2005. Corporate governance, economic entrenchment and growth. Journal of Economic Literature, 43: 655–720.CrossRef

Nakamura, A., & Nakamura, M. 1983. Part-time and full-time work behaviour of married women: A model with a doubly truncated dependent variable. Canadian Journal of Economics, 16: 229–257.CrossRef

Nelson, F. 1976. On a general computer algorithm for the analysis of models with limited dependent variables. Annals of Economic and Social Measurement, 5(4): 493–509.

Nirjar, A. & Tylecote, A. 2005. Breaking out of lock-in: Insights from case studies into ways up the value ladder for Indian software SMEs. Information Resources Management Journal, 18(4): 40–61.CrossRef

Nye, J. 1971. Peace in parts: Integration and conflict in regional organization. Boston: Little, Brown.

O’Grady, S., & Lane, H. 1996. The psychic distance paradox. Journal of International Business Studies, 27: 309–333.CrossRef

Olsen, R. 1978. A note on the uniqueness of the maximum likelihood estimator for the Tobit model. Econometrica, 46: 1211–1215.CrossRef

Peng, M. W., Bhagat, R., & Chang, S. 2010. Asia and global business. Journal of International Business Studies, 41(3): 373–376.CrossRef

Porter, M. 1986. Competition in global industries. Boston: Harvard Business School Press.

Porter, M. 1990. The competitive advantage of nations. New York: The Free Press.

Pratt, J. 1981. Concavity of the log likelihood. Journal of the American Statistical Association, 76: 137–159.CrossRef

Pugh, D., Hickson, D., Hinings, C., Macdonald, K., Turner, C., & Lupton, T. 1963. A conceptual scheme for organizational analysis. Administrative Science Quarterly, 8(3): 289–315.CrossRef

Pugh, D., Hickson, D., Hinings, C., & Turner, C. 1968. Dimensions of organization structure. Administrative Science Quarterly, 13(1): 65–105.CrossRef

Pugh, D., Hickson, D., Hinings, C., & Turner, C. 1969. The context of organization structures. Administrative Science Quarterly, 14(1): 61–114.

Ramamurti, R. 2001. Wipro’s chairman Azim Premji on building a world-class Indian company. Academy of Management Executive, 15(2): 13–19.CrossRef

Reimann, B. 1973. On the dimensions of bureaucratic structure: An empirical reappraisal. Administrative Science Quarterly, 18(4): 462–476.CrossRef

Rugman, A. 2000. The end of globalization. New York: Random House.

Rugman, A., & Verbeke, A. 2004. A perspective on regional and global strategies of multinational enterprises. Journal of International Business Studies, 35: 3–18.CrossRef

Rumelt, R. 1974. Strategy, structure, and economic performance. Boston: Harvard Business School Press.

Russett, B. 1967. International regions and the international system: A study in political ecology. Chicago, IL: Rand-McNally.

Sahoo, P., & Patnaik, R. 2009. Emergence and growth of the Indian software industry: A strategic study. IUP Journal of Business Strategy, 6(3/4): 81–94.

Sarkar, M., & Sawy, O. 2003. The four tigers of global e-business infrastructure: Strategies and implications for emerging economies. Communications of the Association for Information Systems, 12: 1–22.

Saxenian, A., & Quan, X. 2005. China. In S. Commander (Ed.). The software industry in emerging markets: 73–132. Cheltenham, UK: Edward Elgar.

Shleifer, A., & Vishny, R. 1997. A survey of corporate governance. The Journal of Finance, 52(2): 737–783.CrossRef

Stevenson, H., & Jarillo, J. 1990. A paradigm of entrepreneurship: Entrepreneurial management. Strategic Management Journal, 11(Summer Special Issue): 17–29.

Stewart, W., & Roth, P. 2001. Risk propensity differences between entrepreneurs and managers: A meta-analytic review. Journal of Applied Psychology, 86(1): 145–153.CrossRef

Stiglitz, J. 2006. Making globalization work. London: Penguin Books.

Suh, T., & Khan, O. 2003. The effect of FDI inflows and ICT infrastructure on exporting in ASEAN/AFTA countries. International Marketing Review, 20(5): 554–571.CrossRef

Thompson, J. 1967. Organizations in action: Social science bases of administrative theory. New York: McGraw-Hill.

Thompson, W. 1973. The regional subsystem: A conceptual explication and propositional inventory. International Studies Quarterly, 17(1): 89–117.CrossRef

Tobin, J. 1958. Estimation of relationships with limited dependent variables. Econometrica, 26: 24–36.CrossRef

Tschang, T., & Xue, L. 2005. The Chinese software industry. In A. Arora & A. Gambardella (Eds.). From underdogs to tigers: The rise and growth of the software industry in Brazil, China, India, Ireland, and Israel: 131–167. New York: Oxford University Press Inc.

Vakil, T. 1996. Achieving excellence: Case studies of entrepreneurship and export success in six Indian companies. Bombay, IN: Tata McGraw Hill.

Walsham, G., & Sahay, S. 1999. GIS for district-level administration in India: Problems and opportunities. MIS Quarterly, 23(1): 39–65.CrossRef

Wilson, D., & Purushothaman, R. 2003. Dreaming with BRICs: The path to 2050. Global Economics paper no. 99, The Goldman-Sachs Group.

Title: Legal form of the firm and overseas market choice in India’s software and IT industry
Authors: Sumit K. Majumdar
Davina Vora
Ashok K. Nag
Publication date: 01-09-2012
Publisher: Springer US
Published in: Asia Pacific Journal of Management / Issue 3/2012
Print ISSN: 0217-4561
Electronic ISSN: 1572-9958
DOI: https://doi.org/10.1007/s10490-010-9223-7

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 3/2012

The impact of internationalization on performance and innovation: The moderating effects of ownership concentration

Longitudinal effects of job insecurity on employee outcomes: The moderating role of emotional intelligence and the leader-member exchange

The effects of social networks and contractual characteristics on the relationship between venture capitalists and entrepreneurs

Several key reasons why a paper is likely to be rejected at the Asia Pacific Journal of Management

Diversification and diffusion: A social networks and institutional perspective

Technological innovation of firms in China: Past, present, and future