Size, Age & Firm Growth: The Computer Industry in India

This paper analyses the growth trends in the Indian Computer Industry for the period 1991-2002. We focus on the significance of size and age on growth of firms and whether or not the law of diminishing returns to learning holds for a high tech industry like computers. An important difference between the computer software and hardware industry is also taken into account: The software industry is more service oriented, mainly targeting exports whereas hardware is a goods oriented industry, targeting the home market. Hence we analyse the hardware and software industry separately. It is found that the law of diminishing returns to learning does not hold for the software industry, but does hold for the hardware industry. Current size also negatively affects firm growth and more diversified hardware firms are more successful in the Indian context. JEL Codes: L11, L86, C33