The Role of Technological Innovation in Managing Through Business Cycles: A Study on Indian ICT Firms

Abstract

The global economic downturn of 2008 has impacted almost all industry segments in all geographies, and even after 5 years, many of them are in different stages of recovery. Emerging economies and technology firms in these economies have braved this headwind relatively better, and they have witnessed a significant growth in the recent years. In this study, we conduct an empirical research on Indian ICT firms and analyse how factors related to innovation and inorganic growth contribute to their sustenance and growth during boom and bust cycles. A set of 442 Indian firms in the ICT sector have been studied for the period 1999–2012, a period when this sector has witnessed all the four phases of business cycle. The results show that acquisitions vary significantly across phases of business cycle, whereas R&D investments do not vary over the cycle. Contrary to established findings in developed economies on technology firms’ focus on R&D, we find that Indian ICT firms’ R&D investments are significantly lower and may not play any significant role in the long-term growth of the firms.