The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries

The spectacular growth of the software industry in some non-G7 economies has aroused both interest and concern. This paper addresses two sets of interrelated issues. First, we explore the determinants of success in software in emerging economies. We then touch on the broader issue of the lessons, if any, that can be applied to economic development more generally.
From the US perspective, we think that the interesting debate is not the current one about the impact of outsourcing on jobs, but instead the one about whether offshoring of software is a long-term threat to American technological leadership. We conclude that policymakers in the United States should not fear the growth of new software-producing regions. Instead, the US economy will broadly benefit from their growth. US technological leadership rests in part on the continued position of the United States as the primary destination for highly trained and skilled scientists and engineers from the world over. Though this leadership position is likely to persist for some time, the increasing attractiveness of foreign emerging-economy destinations is a long-term concem for continued US technological leadership.