the Evolution of Internal and External Networks within Bangalore IT Cluster **
3.3 Explorative and exploitative networks
3.6.2 Managerial and policy implications
Considering the world-wide growth of offshoring phenomenon, the dynamic race for acquiring new sources of competitive advantage other than a mere, fast-shrinking cost-driven benefits, the managerial implications of our study are several. Most important, this work clearly highlights the possibility to leveraging the local domain with a strategic, exploration-based intent, thus unfolding the advantage of being located in an offshore high-tech cluster such as Bangalore. All the companies surveyed can be considered as success stories: all of them independently have developed a degree of exploration of the local cluster, which goes far beyond the seek for local skills or cost advantages documented by the literature so far.
Despite what previous studies have claimed, Bangalore shows to offer an increasingly rich systemic environment, which leverages on inter-firm cooperation and cross-reference to enhance both local and global value. Considering previous empirical evidence, our findings can also witness a further stage in the development of the local cluster, which has now managed to trigger the proper mechanisms to enhance its attractiveness for both domestic firms and MNC subsidiaries.
3.6.3 Limitations and directions for future research
We need to point out several limitations of this study, which can be considered as starting points for future research. First of all, a generalizability issue arises, due to the specificity of the six case studies and the idiosyncrasy of the context. A relevant effort has been made, in order to guarantee extremely different cases and thus to enhance the generalizability of the proposed theory, according to what stated by Eisenhardt and Graebner
(2007). Yet, some problems can arise from the specificity of the empirical setting, which is common to all case studies. Bangalore IT cluster holds some unique features, which sharply differentiate it from other traditional industrial clusters. Far below the overembeddedness threshold, Bangalore IT cluster is strongly export-oriented, which entails a limited local networking activity and a strong local focus on external linkages. Moreover, the service-based nature of the products engenders knowledge flows which are purely intangible. Fast-paced dynamics of change can be observed in this relatively young cluster. On the one side, this has given us the opportunity to gain a close insight into the key turning point of the evolution of the cluster and of the strategy of the companies under observation. On the other side, limited longitudinal evidence could be gathered, covering only four years of the companies’ history with a retrospective bias. Further research is needed, to gather extensive longitudinal evidence on the evolution of internal and external networks and to test the shift from an exploitation-based to an exploration-based leveraging of the local domain.
Considering the networks, the present work has focused on the relational dimension only of the social capital, namely considering the quality and strength of the linkages involved. The cognitive as well as the structural perspective of the social capital, as theorized by Nahapiet and Goshal (1998) have been neglected. A much more exhaustive analysis can be undergone through large sample data, which could specifically allow appreciating the structural dimension of the network. In particular, the exploitative/explorative strategic intention could be operationalized through the company’s position in the network, as suggested by Rowley et al. (2000). By thus tracing the evolution over time of the firms’
structural behaviour, one can observe and give strong empirical test to the evolution over time of the firm’s strategic leveraging of the local domain.
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Exhibits (Chapter 3)
Table 3.1 – Comparative table across cases
Company S7 Software
Solutions BangaloreSoftSell Symphony IGate HP Yahoo!
Size (employees) 50 40 3400 6500 30.000 13.000
Year of
foundation 2004 1987 2002 1993 1989 2000
Ownership structure
Domestic firm Domestic listed firm Domestic listed firm
Domestic listed firm MNC Subsidiary MNC Subsidiary
Core business
Company S7 Software
Solutions BangaloreSoftSell Symphony IGate HP Yahoo!
Characterization
3IINFOTECH
Fig. 3.1 – Evolution of the six ego-networks over time (2005-2008). The circle portrays the boundary of the cluster.
Within the cluster, the square symbol indicates a MNC subsidiary while the round symbol represents a domestic firm.
3IINFOTECH
3IAPAC 3IEUROPE
Table 4.1 – Descriptive statistics and correlation matrixFig. 3.2 - The six ego-networks represented simultaneously to highlight the role of some partners in generating new alliances. The dotted arrows highlight the causal linkages between the inter-firm relationships
Fig. 3.3 – Relationship between firm age and average exploration degree of the local network.
Note: The size of each mark is proportional to the size of internal network.
Fig. 3.4 – Relationship between the long-term orientation of external network and average exploration degree of the local network.
Note: The size of each mark is proportional to the size of external network. The red dotted lines highlight the influence of firm age on the relationship.
Fig. 3.5 – Relationship between the capability dispersion of external network and average exploration degree of the local network.
External capability dispersion and internal exploration
S7
BangaloreSoftSell Symphony
IGate HP Yahoo!
0 2 4 6 8 10 12
0 2 4 6 8 10
Exploration
Capability dispersion
Note: The size of each mark is proportional to the size of external network. The red dotted lines highlight the influence of firm age on the relationship.