| Chapter 1: | Introduction |
and Andhra Pradesh ensured the successful implementation of policies to attract the industry, the relatively autonomous nature of the state in Kerala, its distrust of large private enterprises, its failure to carry out genuine labor and other policy reforms, and its focus on redistribution rather than growth prevented it from achieving similar success during the 1990s. However, Kerala also adopted similar policies after 2000 and, as a result, achieved considerable success in attracting software firms and increasing their exports during this period.
The strategies adopted by these states are also in sharp contrast to the prevailing thinking in the regional-development literature, which places emphasis on four related factors as the sources of national or regional industrial competitiveness. These factors are the following: supply of specialized factors of production, influencing demand conditions in the domestic market, presence of related and supporting industries, and firm structure and rivalry (Porter, 1990, 1998). The states in India heavily influenced the factor conditions by providing industry-specific infrastructure and increasing the availability of skilled labor. However, they did not try to influence the demand conditions at home except in a very limited way.1 Also, the competition among local firms was mainly for specialized labor (Dossani, 2005) and not for the local market as the main markets for these firms were foreign, not domestic.
As the discussion in the preceding paragraphs indicates, the existing analytical frameworks are unable to fully account for the success of these states in developing this industry. The success of these industrially backward regions in a technologically sophisticated industry calls for new thinking on the role of the state in industrial development. In this book, I seek to explain how these states succeeded in developing an innovation-based industry in a relatively short span of time.