The role of the multinational companies

This paper analyzes the role of multinational corporations (MNCs) in the growth of the software industry in three emerging economies - India, Ireland and Israel. The paper examines the evolution of MNCs’ activities over time and their linkages with domestic software firms, by drawing on different sources of data, including D&B’s Who Owns Whom, corporate websites and national industrial association datasets. An important source of information is the Gale Group’s InfotrackWeb database which report press articles on events such as inter-firm alliances and new subsidiaries. Another critical source of information is represented by interviews conducted with domestic firms and MNCs in the period between 1999 and 2003. The empirical analysis leads to two final conclusions. First, it shows that the role of MNCs varies considerably across these three countries. The main differences concern the time of entry of MNCs relative to domestic firms and the activities conducted by MNCs, which appear to reflect different regional comparative advantages. The second final conclusion is that the overall impact of MNCs on the development to the domestic software industry in the three examples analysed appears to be quite controversial. Ireland is the only case where many MNCs entered before the domestic industry started to grow and contributed on various grounds to its emergence (e.g., reputation effects and access to foreign markets). In Israel and India, most MNCs have remained quite isolated from the rest of the host economy for some time. Only recently they have directly contributed to the domestic industry by providing spillovers such as reputation, access to capital and managerial capabilities.