SOCIAL CAPITAL, DIVERSITY AND (ECONOMIC) DEVELOPMENT: EVIDENCE FROM THE INDIAN IT INDUSTRY, BANGALORE σ Florian A. TÄUBE, Johann Wolfgang Goethe-University φ This version: 22 April, 2005 Preliminary Version: Please do NOT quote without permission from the author! Paper presented to ISEC/ Cornell Conference on Social Science and Development in Karnataka: A Vision for Public Action, Bangalore, June 10-12 2005 Abstract Bangalore is known worldwide for its achievements in the high technology domain. Almost every multinational company has located some of its global activities in one of the technology parks around the city thereby integrating Bangalore in their global value chains. Moreover, many indigenous software firms sprouted during this process over the last decade or so have themselves reached reputation on a level not common to Indian companies before. This paper addresses two sets of questions related to this development and lessons to be drawn for other regions both in and outside India. It is based on previous work rooted in but not confined to economic geography and international business. In order to develop the research hypotheses, literature on the history and anthropology of India has also been consulted. Firstly, based on original fieldwork an additional argument to traditional location literature is deployed. Secondly, related research on the financial services industry conjectures an intersectoral upgrading of the software industry clustered in Bangalore. Hence, the question is whether other regions can duplicate the success factors of Bangalore for both innovative technological development and an eventual industrial diversification. The major empirical finding is that the open and cosmopolitan nature of Bangalore has contributed a large share to the existing diversity of the city which, ultimately, has led to an innovative and thriving (economic) development. Keywords: Economic Development; Diversity; Social Capital; Regional Culture; Value-Chain Upgrading JEL-code: O30, R12, Z13, L86 σ This paper builds on fieldwork conducted in Bangalore between November and December 2003. I wish to thank all my interview partners for sharing their insight, and especially Vijay Chandru and M.H. Bala Subrahmanyam of the Indian Institute of Science for making this stay possible and instructive interactions. A grant from the Verein der Freunde und Förderer der Johann Wolfgang Goethe-Universität is gratefully acknowledged. Earlier versions of this paper have been presented at conferences at the London School of Economics, the Center for International Development (CID) at Harvard University, Cambridge (MA) among others. Thanks are due to all the participants in these events, and in particular Stefano Breschi, Paul David, Dominique Foray and Jan Vang-Lauridsen for helpful comments and suggestions. Of course, all remaining errors are mine. φ Doctoral Candidate, Department of Economic Development and International Economics; Schumannstr: 60, 60325 Frankfurt/ Main, Germany, Tel.: +49 69 798 23 411, Fax.: +49 69 798 28 121, taeube@wiwi.uni-frankfurt.de