Upgrading within Global Value Chains and Innovation Capabilities: Lessons from Indian Information Technology Sector

Abstract

This study examines the process, nature, and drivers of upgrading among Indian information technology (IT) services firms in the global value chain (GVC) by analysing the sector as a whole and examining three cases – Tata Consultancy Services (TCS), Infosys and Wipro. It uses a qualitative research approach and data obtained from secondary sources such as the Organization for Economic Co-operation and Development (OECD) Trade in Value Added (TiVA) online database, company websites and annual reports. The study found that the contribution of India’s IT sector to GVC is relatively high among service sectors. It is increasingly delivering high-value products, reflecting its upgrading within the GVC. Indian IT firms have gradually transformed from being subcontractors providing low-value-added products and services to providing complete projects and solutions. The three cases show that upgrading of India’s IT firms was mainly due to continuous efforts to build innovation capacity by forging partnerships with other technology leaders, start-ups, and academic institutions, and through acquisitions. India needs to design specific industrial policy with enabling institutions to increase domestic value-added (DVA) and develop a foreign direct investment (FDI) policy that focuses on attracting multinational corporations (MNCs) with GVC linkages.