IDEAS home Printed from
   My bibliography  Save this paper

Regional Skill Supplies and Location of Firms: The Case of Information Technology Industry in India


  • Abraham, Vinoj


The “new economic geography” of the IT industry is shaped by two characteristic features of the industry, smaller size of the firms and zero transportation costs of its products that provide its ability of being a ‘footloose’ industry. The IT industry could locate itself in a region on the basis of two factors, namely, the nearness to large markets that ensures steady demand for its products, and the nearness to its factors of production. The importance of proximity to large markets in the case of Indian IT industry is only marginal as the IT industry, mainly dominated by the computer software segment, is a highly export oriented industry. There are reasons, however to believe that the location of firms in the ICT industry would be based on the supply of its crucial factor of production, namely, skilled labour. The IT industry being a skilled-labour-intensive, export-oriented industry it is by reducing the cost of labour, relative to capital, that it can reap comparative advantage benefits. Moreover, the skill requirement of this industry being very flexible and is subjected to fast rate of obsolescence it remains important for the firm, in order to have uninterrupted production, to locate itself in large pools of skilled labour. Correlations drawn between the location of firms and regional supply of skills tend to support the hypothesis that the quantity and quality of skills supplied in a region could determine the location of firms in a region and clustering of firms to a city.

Suggested Citation

  • Abraham, Vinoj, 2010. "Regional Skill Supplies and Location of Firms: The Case of Information Technology Industry in India," MPRA Paper 28424, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:28424

    Download full text from publisher

    File URL:
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    1. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-656, September.
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    3. Carlton, Dennis W, 1983. "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 440-449, August.
    4. Nakamura, Ryohei, 1985. "Agglomeration economies in urban manufacturing industries: A case of Japanese cities," Journal of Urban Economics, Elsevier, vol. 17(1), pages 108-124, January.
    5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Skill Supply; Information Technology Industry; Location; Region; India; Economic Geography; Agglomeration Economies.;

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:28424. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.