PROCESS AND INTENSITY OF INTERNATIONALIZATION _ STUDY OF IT Firms- Evidence from India Dr. Justin Paul

BORN GLOBAL ORIENTATION ‘‘This behavior is particularly prevalent among firms operating in small open economies and in emerging nations, where domestic demand may be limited.’’- Bell et al. (2003: 341), Lopez, Kundu and Ciravegna (2009) found that most Costarican software companies followed a gradual approach to internationalisation and there are few born global - firms among Costa Rican software firms.

MEASURES 1. International orientation of companies Total income from foreign market as a percentage of total income Total investment in subsidiaries as a percentage of total investment Investment for foreign market development _ as per cent of Reserve and surplus invested outside the domestic country foreign/international subsidiaries as a percentage of total subsidiaries 2. Firm level characteristics Firm size, Firm age International experience

CLUSTER ANALYSIS Hierarchical Clustering method followed by K Means Clustering to analyse the characteristics of variables Two clusters were extracted

FINAL CLUSTER CENTRES Cluster Variables 1 2 Time elapsed to set up first international subsidiary 11 25 Income from foreign mkt 65.64 85.64 Investment in subsidiaries 43.29 33.61 Investment for foreign mkt development 24.24 12.87 International expansion through international subsidiaries 67.40 81.69 Firm size 15272 123006 Firm age 21 45 Cluster 1 16.000 2 3.000 Valid 19.000 Missing .000

CLUSTER ONE 84% of the companies listed on CNX IT sector index were found to be a part of this cluster _ 16 firms Relatively young smaller companies (21 years on average). Total income from foreign markets was, on average, a little less than 66% On average 11 years to expand their business through subsidiaries outside domestic market Relatively Smaller companies having, on average 15272 employees , compared to cluster 2 keenly interested in foreign market and invested, on average 43.29% in international subsidiaries 24.24% on average investment for foreign market development. (as % of total reserves and surplus)

CLUSTER TWO 3 companies representing 16% of CNX IT Sector index . Firm size helps them to build brand in foreign market. More than 85% of their income from outside markets Set up their first international subsidiaries after a long period from their foundation (25 years on average) Big companies having, on average 123006 employees Little slower in international market expansion and invested, on average 33.61% in subsidiaries outside domestic market Strategy of investing relatively less amount for foreign market development by investing, on an average 12.87% of reserve & surplus , but still generating 85% of income from foreign markets

CONCLUSION RO1: To test the existence of born global firms in a fast developing country with open economy ie, India. The results of cluster analysis confirm the gradual internationalization of CNX IT companies. However, firm age and % of income from foreign market are not correlated.

CONCLUSION RO2: To identify the process of internationalization adopted by Indian IT companies. Indian IT companies took average 12 years in establishing their first international subsidiary after gaining enough knowledge and expertise in the domestic market.

Descriptive Statistics CONCLUSION Descriptive Statistics Mean Std. Deviation N Income from foreign mkt 68.8005 31.87590 19 Investment in foreign subsidiaries 41.7616 27.19145 Investment for foreign mkt development 22.4432 26.00879 Business expansion outside domestic country 69.6600 27.78169 Firm size 48244 44454.234 Firm age 25.16 13.078 Time elapsed to set up first international subsidiary 11.95 7.299 RO3: To measure the intensity of internationalization of Indian IT companies. Indian IT companies of both the clusters were found to possess high level of intensity for internationalization