Tim Chong / Reuters

India is becoming an important global player in entertainment.

India's economic growth and development over the past decade or so has been nothing short of remarkable. The success of the country's high-tech software industry around Bangalore (capitol of the Karnataka state) has been recounted many places, but India’s Bollywood has emerged as the world’s largest producer of films, larger even than Hollywood.

Published in the Journal of Economic Geography, a recent study by Mark Lorenzen (Copenhagen Business School) and Ram Mudambi (Temple University's business school) details the very different ways these two creative clusters have developed and emerged on the world scene. (An earlier ungated version of their research is here.)

Bangalore’s high-tech software industry has been historically "outward-looking" (to borrow a phrase from Terutomo Ozawa). It began as a way to provide low-cost software workers and services to large multinational companies like Texas Instruments, Microsoft, Hewlett Packard, Motorola, Oracle, Philips, and Cisco, who established facilities in the region between 1985 and 1996. The authors point out that these facilities were not just low-end body shops. They undertook “cutting edge R&D [research and development]” and generated a large number of U.S. patents for their parent companies. These early investments later led to the development of Bangalore-based, Indian-owned software companies — Infosys, Wipro, and Tata Consultancy Services (TCS), which have become global players in the industry, performing software development services for companies and organizations all over the world.

The development trajectory for Bollywood, the film industry centered in India's Mumbai, was different. It has a much longer history, dating back to 1912, around the same time as the birth of Hollywood. For a long time, it evolved in an “inward-looking” way (again, phrase courtesy of Ozawa), producing and marketing its feature films for the large Indian market. But over the past two decades, its exports have skyrocketed and its product base has widened as it exploits its synergies with TV, music, games, and advertising. Mumbai’s studios might produce only 15 percent of India’s films, the study's authors point out, but they account for 40 percent of the country’s film revenues. "It is largely due to Bollywood that entertainment now is India’s second biggest growth sector and that India is becoming an important global player in the booming global entertainment sector," the study states.

Bangalore's tech and Mumbai's film industries have evolved very different ways of connection to the global economy, which has affected their creativity and innovativeness.

Bangalore’s global connectivity has traditionally been one-way — with foreign capital and knowledge pipelined in. Even though the subsidiaries of global companies were producing new knowledge and patents, the locally-generated firms were not nearly so innovative. As of 2008, according to the study, two of India's largest and most important tech companies — TCS and Infosys — had accumulated a grand total of just seven and four U.S. patents respectively.

While it took much longer to develop, the study says, Bollywood benefits from its “two-way connectivity” to the global market, with knowledge coming in and investments going out. They note "the 10 million strong Indian diaspora in the U.S., the U.K., Canada, the Middle East, and Australasia” provides both a strong marketplace for movies and a source of intelligence from “lead users” on global trends and styles. Bollywood films now shoot in locations all over the world, and Bollywood-based companies “own more than 250 cinemas across North America and large shares of several Hollywood production companies.” This is all the more impressive, they write, because “Hollywood has had little luck with its attempts at investing in the Indian entertainment market.”

Of course, India’s high-tech sector has also developed more two-way connections over time. Indian techies and entrepreneurs — like Sun Microsystems co-founder and leading venture capitalist Vinod Khosla; Suhas Patil, founder of Cirrus Logic; Pradeep Sindhu, co-founder of Juniper Networks; Preetish Nijhawan, co-founder of Akamai Technologies; Amar Bose of the audio company that bears his name, and many others — have played a vital role in American high-tech. In her book, The New Argonauts, AnnaLee Saxenian points to the role played by such immigrant entrepreneurs and of organizations like TiE (The Indus Entrepreneurs) in shaping the flow of people and technology back and forth between high-tech clusters like Bangalore and Silicon Valley — a phenomenon she aptly dubs “brain circulation” (as opposed to “brain drain”). Established in 1992 in Silicon Valley by local entrepreneurs, venture capitalists and executives, TiE now counts more than 13,000 members, including over 2,500 across the U.S., India, and a dozen other countries.

While their development trajectories have been very different, the Bangalore high-tech and Bollywood film clusters in turn reflect the underlying creativity of India’s economy — something that is also reflected in the country’s cutting-edge music, fashion, and food sectors as well. 

Top image: Tim Chong / Reuters

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