The Globally Competitive Indian Firm

Benchmark Candidates The characteristics of the globally competitive Indian firm are best discerned against some benchmark. There are several candidate counterfactuals that could sensibly constitute such a benchmark--Indian firms that are not global, for one, or globalizing firms from other emerging markets. The bulk of the research of which I am aware implicitly or explicitly compares to the first of these sets. To balance the comparisons, I will offer my sense of some of the distinguishing attributes of the global Indian firm, comparing to firms from other emerging markets and from China in particular. Why China? As my earlier work has argued (Khanna 2008, Chapter 1), India's choices can be seen more starkly when juxtaposed against China's, and vice versa. These differences are even more striking when one realizes that, despite many similarities in size, proximity and antiquity, they chose so differently at their near-contemporaneous births (1949 for the People's Republic of China and 1947 for India). This is even more so when one also realizes that there are historical similarities---they underwent their first significant unifications in approximately 200 BC, under the Mauryas in India and the Han dynasty in China. And if India was humiliated for two centuries by the British presence, China underwent its own 'century of humiliation.' Both countries were scarred deeply. These surface similarities, yet starkly different paths, make the past six decades as close to a 'petri dish' of sorts for a social scientist, where something profound can be learned for anyone interested in how societies develop. Let me define 'global' also since it is a term interpreted in many ways. Most common, and sensible, is the idea that the firm sells outside India. This would easily encompass the storied Indian software services firms that have been largely responsible for bringing corporate India to the business world's attention. But this should not be the only criterion. Consider Bharti Teleservices, India's leading mobile telephony firm with a purely domestic footprint. In a sense it is very global on the factor inputs side, with technology in the early years coming from Singapore Telecom, and capital entirely raised substantially from global providers--the private equity firm Warburg Pincus and from Singapore Telecom. I suggest that the criterion for 'global' is that the firm be globally competitive, that is, be able to withstand global competition wherever it operates, including potentially only in India, a criterion that my colleague Krishna Palepu and I have elaborated on elsewhere (Khanna & Palepu 2006, for example). To my mind, Bharti Teleservices qualifies. Hence, also, the title of this essay as opposed to, say, The Global Indian Firm. Strengths Here is my candidate list of strengths of globally competitive Indian firms, then. First, many of the leading Indian firms today are the result of ground-up, private-sector entrepreneurship. That is, unlike the leading firms in China, they are not affiliated with the state in the sense of explicitly being state-owned enterprises, nor are they quasi-state-affiliated, in the sense of being collective enterprises or entities with partial government ownership. This characterization holds regardless of which of several plausible metrics one uses to generate a list of 'leading' firms, whether it be market capitalization or profitability or some notion of economic value added (that takes into account value creation over some cost of capital). The one exception might be a measure of sheer size, through sales or employees, where the state enterprises in India would rule the roost. There are many ways to further subdivide globally competitive firms. Some, like the globally resurgent enterprises that are part of the House of Tata, are the current manifestations of longstanding business groups (Khanna & Palepu 1997, Khanna & Yafeh 2007). …