U.S. immigration regulations and India’s information technology industry

The export-led growth of India’s information technology (IT) industry has been nothing short of phenomenal over the past half-dozen years. Other studies have provided a number of explanations for the growth. This paper proposes that a significant factor has been overlooked or understated in prior explanations. Specifically, the Indian IT industry has utilized U.S. immigration regulations for competitive advantage to accelerate its growth. The importance of this factor is estimated through quantitative data analysis at the macro and firm levels. The analysis helps to explain why India’s IT industry grew while that of other developing countries, with similar human capital resources and wage rates, did not. The U.S. Congress is currently debating U.S. immigration policies and may change them in the near future. Any changes will have significant effects on the future growth pattern of the Indian IT industry. Many developing countries have recognized India’s success, and policymakers in those countries are implementing strategies to replicate it. The results from this study may help those policymakers better understand a key factor of India’s success in exporting IT. D 2004 Published by Elsevier Inc.