Product and labor market globalization & convergence of corporate governance: Evidence from Infosys and the Indian software industry

In contrast to the focus of much of the literature on the role of capital markets in hastening convergence in corporate governance practices worldwide, we document the role played by the globalization of product and talent markets in affecting corporate governance of firms in the Indian software industry. We discuss several possible reasons why a particular firm, Infosys, has emerged as the exemplar of good corporate governance in India, traditionally a backwater of corporate governance practices. We further analyze the manner in which Infosys has attempted to shape corporate governance practices in India more generally. Finally, we discuss why these efforts in particular, and globalization more generally, has not had much of an effect on corporate governance convergence in the aggregate in India, thus far. We would like to thank the management of Infosys for providing access and relevant information, Kat Pick for assistance with several interviews in India, Joe Kogan for help with econometric work that is closely related to this paper, and Chris Allen, Sarah Eriksen and Kathleen Ryan for assistance with collecting relevant public-sources data. Omkar Goswami (Chief Economist, Confederation of Indian Industry and Board Member, Infosys), S. Ramadorai (CEO, Tata Consultancy Services), Fred Hu (Managing Director, Goldman Sachs, Asia), Fritz Foley, Simon Johnson, Bjorn Jorgensen, Joe Kogan, Greg Miller, Ravi Ramamurti, Jasjit Singh, Yishay Yafeh, Bernard Yeung, Sri Zaheer, and the Global Corporate Governance group at the Harvard Business School provided helpful comments. We also benefited from discussions with seminar audiences at the HBS/Tsinghua University Conference on Global Corporate Governance in Shanghai (July 2001), at the Academy of Management Meetings in Washington, D.C. (August 2001), and at the William Davidson Institute and Aspen ISIB-sponsored conference on “Impact of Cross-border Interactions on Social Institutions” in Aspen (September 2001).