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Quality Certification and the Economics of Contract Software Development A Study of the Indian Software Industry

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  • Ashish Arora
  • Jai Asundi

Abstract

A significant amount of software development is being outsourced to countries such as India. Many Indian software firms have applied for and received quality certifications like the ISO9001, and the number of quality certified software firms has steadily increased. Despite its growing popularity among Indian software developers, there is very little systematic evidence on the relationship of ISO certification to organizational performance. Using data on 95 Indian software firms and their US clients, we develop a stylized model of a firm that develops software for others to articulate the different ways in which ISO certification can affect firm profits. We conclude that ISO certification enhances firm growth. The results provide partial support for the proposition that ISO certification also enhances revenue for a given size, suggesting that firms are receiving a higher price per unit of output. In turn, this is consistent with the notion that ISO certification also enhances the quality of output. Our field studies confirm that although most firms see ISO certification as a marketing ploy, some of them do proceed to institute more systematic and better-defined processes for software development.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7260.

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Date of creation: Jul 1999
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Handle: RePEc:nbr:nberwo:7260

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Cited by:
  1. Lamin, Anna & Dunlap, Denise, 2011. "Complex technological capabilities in emerging economy firms: The role of organizational relationships," Journal of International Management, Elsevier, Elsevier, vol. 17(3), pages 211-228, September.
  2. Ghosh, Saibal, 2009. "Productivity and Financial Structure: Evidence from Indian High-Tech Firms," MPRA Paper 19467, University Library of Munich, Germany.
  3. Alfonso Gambardella & Myriam Mariani & Salvatore Torrisi, 2001. "How Provincial is your Region? Effects on Labour Productivity and Employment in Europe," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2001/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  4. Qiu, Larry D., 2006. "A general equilibrium analysis of software development: Implications of copyright protection and contract enforcement," European Economic Review, Elsevier, Elsevier, vol. 50(7), pages 1661-1682, October.
  5. K.J. Joseph & K.N. Harilal, 2001. "India's IT export boom: Challenges ahead," Centre for Development Studies, Trivendrum Working Papers, Centre for Development Studies, Trivendrum, India 317, Centre for Development Studies, Trivendrum, India.
  6. Francis Xavier Rathinam, 2008. "Determinants of Inter-Firm Contractual Relations: A Case of Indian Software Industry," The IUP Journal of Financial Economics, IUP Publications, IUP Publications, vol. 0(4), pages 73-85, December.
  7. Patibandla, Murali & Petersen, Bent, 2001. "Role of Transnational Corporations in the Evolution of a high-tech Industry: The Case of India’s Software Industry," Working Papers, Copenhagen Business School, Department of International Economics and Management 5-2001, Copenhagen Business School, Department of International Economics and Management.
  8. Arti Grover, 2007. "International Outsourcing and the Supply Side Productivity Determinants," CESifo Working Paper Series 2088, CESifo Group Munich.
  9. Paulo G. Correa & Ana M. Fernandes & Chris J. Uregian, 2010. "Technology Adoption and the Investment Climate: Firm-Level Evidence for Eastern Europe and Central Asia," World Bank Economic Review, World Bank Group, World Bank Group, vol. 24(1), pages 121-147, January.
  10. Manning, Stephan, 2013. "New Silicon Valleys or a new species? Commoditization of knowledge work and the rise of knowledge services clusters," Research Policy, Elsevier, Elsevier, vol. 42(2), pages 379-390.
  11. Joseph, K.J., 2002. "Growth of ICT and ICT for Development: Realities of the Myths of the Indian Experience," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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