Between Dependency and Autonomy [Reprint 2020 ed.] 9780520323919

Citation preview

Between Dependency and Autonomy

Science, Technology

and the Changing

World

Order

edited by Ernst B. Haas and J o h n Gerard Ruggie Scientists and World Order: The Uses of Technical Knowledge in International Organizations,

by Ernst B. Haas, Mary Pat Williams and Don Babai Pollution, Politics, and International Law: Tankers at Sea,

by R. Michael M'Gonigle and Mark W. Zacher Plutonium, Power, and Politics: International Arrangements for the Disposition of Spent Nuclear Fuel,

by Gene I. Rochlin Between Dependency and Autonomy: India's Experience with the International Computer Industry,

by Joseph M. Grieco

Between Dependency and Autonomy India's Experience with the International Computer Industry Joseph M. Grieco

University of California Press

Berkeley • Los Angeles • London

University of California Press Berkeley and Los Angeles, California University of California Press, Ltd. London, England © 1984 by The Regents of the University of California Printed in the United States of America 1 2 3 4 5 6 7 8 9 Library of Congress Cataloging in Publication Data Grieco, Joseph M. Between dependency and autonomy. (Science, technology, and the changing world order) Bibliography: p. Includes index. 1. Computer industry—India. 2. International business enterprises— India. I. Tide. II. Series. HD9696.C63I44 1983 338.8'87 83-4866 ISBN 0-520-04819-9

To my parente, Mauro and Mary Grieco

Contents

List of Tables, viii Acknowledgments, ix List of Abbreviations, x Chapter I Chapter II Chapter III Chapter IV Chapter V Chapter VI

Introduction, 1 India's Changing Fortunes in Computing, 1960-1980, 16 The International Creation of Computer Opportunities, 53 India's Exploitation of International Opportunities, 70 Policies, Politics, and Computers in India, 103 Conclusion, 150

Notes, 171 Bibliography, 193 Multinational Enterprises, the "Assertive" Upper-Tier Developing Countries, and International Relations, 193 International Computer Technology and Industrial Structure, 200 The Indian Experience with the International Computer Industry, 207 The Experiences of Other Countries with High-Technology Multinational Enterprises, 215 Index, 219

Tables 1. Percentage of U.S. Affiliates Encountering Performance Requirements and Incentives in Selected Developing Countries, Through 1977 and 1970-1977, 18 2. Computer Market Structure of India, 1960-1972, 26 3. Lag of Foreign Computers in India, 1960-1972, 28 4. Computer Market Structure of India, 1960-1977, 34 5. Lag of Foreign Computers in India, 1960-1977, 36 6. Per-Bit Costs of ECIL and Selected IBM Main Memories, 37 7. Computer Market Structure of India, 1960-1980, 41 8. Partial Value of Indian Computer-Base at the End of the 1970s, 43 9. Lag of Foreign Computers in India, 1960-1980, 45 10. Processing Times and Costs of Computer Systems, 1955-1976, 54 11. Per Bit Main Memory Costs, 1955-1978, 55 12. Minisystems, 1955-1975, 57 13. Operations of U.S. Computer Enterprises in Developing Countries, Late 1960s to Late 1970s, 61 14. Operations of U.S. Computer Enterprises in Upper-Tier Developing Countries, Late 1970s, 65 15. Electronics Research and Development Funding Support by the Indian Government, 1970s, 76 16. Indian Government Support for Computer Research and Development, 1971-1978, 77 17. Indian Electronics, Mid-1960s to Mid-1970s, 123 18. Research and Development Funding of Electronics Commission and Department, by Recipient, 1971-1979, 124 19. ECIL System Recipients, 1971-1978, 127 20. Janata National Leadership: Ideology, Former Party Affiliation, and Position as of Early 1977, 143

Acknowledgments First and foremost I wish to thank Richard N. Rosecrance and Peter J. Katzenstein for their guidance during my graduate training in general and the development of this study in particular. For their suggestions and criticisms I would also like to thank Duncan L. Clarke, Jack Donnelly, Howard Erdman, Glenn Fong, Frank Golay, Ernst B. Haas, Stanley A. Kochanek, Frederick V. Kratochwil, Michael Mastanduno, John J. Mearsheimer, George H. Quester, Myron Rush, and Louis T. Wells. I am grateful to many institutions for their generous support of the research reported here: at Cornell University, the Center for International Studies, the Peace Studies Program, and the South Asia Program; at Princeton University, the Center of International Studies; at Harvard University, the Division of Research in the Graduate School of Business Administration; the Institute for the Study of World Politics; and the American Institute for Indian Studies. In preparing the study, I have relied upon information provided by individuals with firsthand knowledge of India's experience with the international computer industry. These individuals have requested that their identities not be reported, but they are aware that their names and notes taken by me of conversations with them are available to my special committee at Cornell. I shall not soon forget the assistance and, in many instances, the hospitality of these persons. To all persons I interviewed I offered an opportunity to review my "write-up" of conversations with them and to review chapters (and in the case of IBM executives, the entire manuscript) relating to their knowledge of computers in India. Many errors of fact were corrected as a result of these review procedures, and I thank these individuals for the time they devoted to the study. Of course, I alone am responsible for any error of fact or of interpretation.

Abbreviations AEC BARC BEL CAPRE CDC CU CMC DAE DCM ECIL FERA HCL IBM ICIM ICL I CT IDM IPAG MRTP ORG SEEPZ TIFR UNDP

Atomic Energy Commission Bhabha Atomic Research Center Bharat Electronics Limited Commission for Coordination of Electronic Data Processing Activities Control Data Corporation Compagnie Internationale pour Informatique Computer Maintenance Corporation Department of Atomic Energy DCM Dataproducts Division, Delhi Cloth Mills Electronics Corporation of India Limited Foreign Exchange Regulation Act Hindustan Computers Limited International Business Machines Corporation International Computers Indian Manufacture Limited International Computers Limited International Computers and Tabulators Limited International Data Management Limited Information, Planning, and Analysis Group, Electronics Commission of India Monopoly and Restrictive Trade Practices Act Operations Research Group, Sarabhai Enterprises Santa Cruz Electronics Export Processing Zone Tata Institute for Fundamental Research United Nations Development Program

Chapter I

Introduction

This study is concerned with an important dimension of change in the contemporary international system: the increase in power of certain developing countries in their political-economic interactions with the advanced capitalist societies. The study seeks to document a recent shifting in power away from high-technology multinational enterprises (originating from the advanced capitalist societies) and toward certain developing countries in which the firms operate. T o explore this shifting in power, the study describes and explains India's experience with the international computer industry between 1960 and 1980. T h e major empirical finding of the study is that India did increase its capacity to manage its ties with the international industry: there was in fact a shift in the balance of power away from individual international computer firms and in favor of India. As a result of this shift in the power relationship, there was also a change in the behavioral relationship between India and the international industry. India transformed its linkages with international firms in the industry and thereby enlarged its share of the benefits resulting from interactions between the country and the industry. One major objective of this study is to document and to explain how this power shift took place between India and the international computer industry. A second objective is to use this particular case as a way of evaluating two competing schools of thought on whether power balances between developing countries and agents of advanced capitalism can indeed change very significantly. One school of thought contends that longterm power balances typically favor developing countries at the expense of multinationals. This argument is in accord with the

2

Introduction

more general perspective which emphasizes the variety of ways developing countries increase their power in interactions with the advanced capitalist societies.1 Another school of thought contends that developing countries are unable to enhance their power significantly over multinationals. This argument is a part of the more general perspective which emphasizes the .basic powerlessness of developing countries in what is considered an unchanging and unjust capitalist international order. 2 India's experience with computers, it is suggested in this study, points to the overall analytical superiority of the first over the second school of thought. As with relations between the superpowers or among the advanced capitalist societies, changes in power are a fundamental characteristic of relations between developing countries and advanced capitalist societies. We will first discuss more fully the two schools of thought on relations between developing countries and multinational enterprises and then evaluate the usefulness of India's computer experience as a test case for the two schools. A brief discussion follows on the range of other developing countries to which India's experience with high-technology multinationals may be relevant. A chapter-by-chapter guide to this study's empirical findings and theoretical arguments is then presented, along with a few concluding thoughts on the limits or qualifications of this study's arguments. THE BARGAINING SCHOOL, T H E MARXIST-DEPENDENCIA SCHOOL, AND INDIA'S COMPUTER EXPERIENCE

Three propositions constitute the bargaining school's understanding of relations between developing countries and multinationals. 3 First, the terms by which an enterprise operates in a country, and the distribution of benefits between them, are the result of negotiations and the balance of bargaining power between the country and the company. Second, in early interactions the balance of power and of benefits often favors the multinational. T h e developing country may control access to its markets and resources, but the enterprise has more important bargaining assets through its control of capital, access to foreign markets, technology, and managerial expertise. Third, and most crucial, over time the host country is likely to gain access

Introduction

3

in varying degrees to the sources of bargaining power which earlier had been controlled by the enterprise. As the country attains greater bargaining power, it forces the balance of benefits to shift in its favor. In sum, according to the bargaining school, prolonged contacts with foreign enterprises afford developing countries the experience needed to manage these relations more effectively and to the greater benefit of the countries. The Marxist-dependencia school agrees with the bargaining school in observing that multinationals translate their superior power resources into the establishment of ties with developing countries benefiting the former much more than the latter. However, the Marxist-dependendistas see very little chance for developing countries to learn to change their relations with foreign firms.4 Developing country elites may choose not to be aggressive with foreign firms because they are co-opted by the latter. Alternatively, the elites may wish to be aggressive toward multinationals but are deterred from doing so out of concern for losing vital resources provided by the enterprises or out of fear of retribution by the multinationals' home governments. In sum, the Marxist-dependencia school believes that developing countries cannot or will not try to change their relations with multinationals, and therefore these countries' long-term development is inhibited by contact with foreign firms. Recent commentary on the case study method points- to the utility of India's computer experiences as a test of the relative strength of the bargaining and the Marxist-dependencia schools.5 If the most extreme phenomena predicted by a theory (i.e., "hard cases") actually are observed, then strong support is given to the theory. Involving a developing country and a technologically dynamic industry, the present case is just such a "hard case" for the bargaining school.6 According to the school developing countries can, in general, cause the balance of bargaining power to shift over time in their favor. However, causing this shift in power is most difficult for developing countries to effect, according to the school, in bargaining instances involving high-technology multinationals. For example, Raymond Vernon, a leading influence within the bargaining school, has chronicled the increasing power of developing host countries over multinationals first in natural

4

Introduction

resource industries and later in a variety of manufacturing industries. At the end of the 1970s Vernon believed, however, that not all multinationals were equally vulnerable to developing country pressures. Vernon argued that developing countries increasingly were gaining control over subsidiaries of some manufacturing multinationals, and in particular he believed that the diffusion of technology among such enterprises weakened individual firms as they bargained with developing countries.7 Yet Vernon observed: As long as a foreign-owned goose can still lay golden eggs . . . the policy of most developing countries has been to squeeze the goose, not destroy it or have it fly away. Accordingly, multinational enterprises that provide a unique function, such as to provide access to some difficult technology or some otherwise inaccessible foreign market, have generally been less vulnerable to government pressures while subsidiaries where withdrawal is thought to entail very little national loss have been more vulnerable. 8 Other representatives of the bargaining school have also argued that developing country control over high-technology multinationals is possible but difficult to achieve. As C. Fred Bergsten, Theodore Moran, and Thomas Horst noted in their discussion of the problem: Some investors will doubtless be relatively immune from this process [of increasing host-country control]. Where technology is complex, rapidly changing, and tightly held—such as computers—the shift in bargaining power toward developing (and other) host countries will proceed least rapidly. 9 Hence developing countries can exert some control over manufacturing enterprises, but this becomes progressively more difficult (but still possible) as the enterprises are involved in increasingly sophisticated industries. Instances of success by developing countries with high-technology multinationals are at the outer edge of the predictive power of the bargaining school. Therefore, if a developing country like India is successful with high-technology enterprises in an industry like data processing, then even the most extreme observation predicted by the bargaining school can be made, and this would give strong support to the school.

Introduction

5

On the other hand, the Indian case constitutes an "easy case" for the Marxist-dependencia school. According to this school, developing countries generally are unable or unwilling to change their relations with multinationals, but this is especially true in cases involving high-technology multinationals. As Peter Evans recently argued, when a developing country and a multinational bargain: "The position of the multinational is never stronger than when it is based on monopolistic control over new knowledge." 10 Evans suggested that in such bargaining encounters: "To put the argument in its most simplistic form, the best cards on the side of the locals are political. T h e multinationals' best cards are technological." 11 Evans also argued that hightechnology multinationals have succeeded in retaining control over corporate research and development programs while at the same time they have succeeded in making the consumption patterns in developing countries increasingly similar. According to Evans, these two factors give multinationals great power over developing countries: "Since consumption patterns (especially among consumers with enough income to make a difference) are becoming more homogeneous at a rapid rate while the multinationals' control over new knowledge is eroding only slowly, technology continues to be a strong card in most industries."12 Another recent Marxist-dependencia study of relations between multinationals and developing countries also concludes that high-technology multinationals are especially likely to prevail in bargaining encounters with developing countries. Douglas Bennett and Kenneth Sharpe argue that technological dependency combined with other political-economic weaknesses to cause the Mexican government to be unsuccessful in the early-1960s in negotiations with multinational automobile firms on their establishment of manufacturing operations in the country. 13 Most significantly, Bennett and Sharpe posit that this initial failure by the Mexican government led to the creation of tight limits on the government's bargaining power in subsequent negotiations with the foreign auto firms, for the latter became able to form ties with local Mexican political-economic actors (Bennett and Sharpe identify "suppliers, distributors, labor, and consumers") that could be used against the government. Bennett and Sharpe conclude that while developing

6

Introduction

countries may experience an increase over time in their bargaining power with respect to foreign enterprises in natural resource industries, the evolution of bargaining relations between developing countries and foreign firms in hightechnology consumer-goods manufacturing industries is likely to be very different. As they suggest: "Other things being equal, then, the balance of bargaining power in such a manufacturing industry may with time shift toward the transnational rather than toward the LDC." 14 It should be noted that the Bennett and Sharpe proposition concerning the possible diminution of developing-country bargaining power over time is precisely opposite that presented by the bargaining school, for the latter emphasizes the probable increase in bargaining power enjoyed by developing countries over time. Through its analysis of a fairly long time period (1966—1980) of actual bargaining between the Indian government and multinational computer firms, the present study may shed significant light on this key question of how power relations between developing countries and multinationals may change over time. Developing countries, according to the Marxist-dependencia school, are supposed to be at their very weakest when they bargain with high-technology multinationals. 15 They should attain very little if they try to change their ties with this set of enterprises. Hence a country like India should clearly fail, according to the Marxist-dependencia school, in bargaining with computer multinationals. If India is successful with such firms, then even a most obvious set of phenomena predicted by the Marxist-dependentistas is shown not to be observed in exactly the circumstances in which it should be observed. Success by India in computers would therefore cast severe doubt on the validity and strength of the Marxist-dependencia school. RELEVANCE OF THE INDIAN EXPERIENCE WITH COMPUTERS

Involving, as it does, a major developing country and a key high-technology industry, India's experience with the international computer industry is interesting in its own right. Also, a focus on this case permits a key test and comparative assessment of two major schools of thought on the power capabilities of developing countries as they interact with multinational en-

Introduction

7

terprises. Moreover, the case itself and the assessment it permits of the two schools may reflect on the more general problem of how much room for policy maneuver developing countries already enjoy or may come to attain in the contemporary capitalist international economy. However, most other developing countries have not attained the level of national power reached by India, and therefore India's experience with computer multinationals may not be indicative of the levels of success to which most developing countries can aspire as they negotiate with high-technology enterprises. On the other hand, India's industrial structure is similar to those of Brazil and Mexico. In terms of scientific manpower productively employed Brazil is close to India, and Brazil and Mexico match or exceed India in terms of financial resources available per science and technology worker. Hence, India's bargaining success with multinationals might be achieved as well by Brazil and Mexico at present. In addition, countries such as Colombia, Nigeria, and Venezuela have objectives with regard to national control over multinationals that are very similar to those of India, and over differing time horizons they might approach India in terms of potential bargaining power. As they attain the bargaining capabilities currently enjoyed by India, they increasingly will be able to view India's bargaining successes as a realistic standard to which they can aspire. 16 India, Brazil, and Mexico at present, together with countries such as Colombia, Indonesia, Nigeria, and Venezuela over the longer term, constitute most of what might be termed the emerging "assertive" upper-tier of the developing world. These important and increasingly advanced countries have contacts with a wide variety of multinational enterprises in contrast to upper-tier countries such as Saudi Arabia which thus far have interacted mostly with oil multinationals. At the same time, these more or less "assertive" upper-tier countries are extremely sensitive about possible threats by multinationals to their national autonomy, and they seek to control and to compel an improvement in the terms of their relations with foreign enterprises through the employment of stringent legal/administrative regimes on foreign capital. (This "assertive" strategy on foreign firms contrasts with that followed by newly industri-

8

Introduction

alizing developing countries such as Hong Kong, Malaysia, the Philippines, Singapore, Taiwan, South Korea, and Thailand, which seek foreign-enterprise-assisted growth through relatively accommodating regimes.) 17 India's experience may be illustrative of what can be achieved by only a narrow band of other developing countries as they bargain with multinationals in high-technology enterprises. However, while few in number, the "assertive" upper-tier developing countries are especially important hosts of foreign direct investments from the advanced capitalist societies. According to an estimate of the Organization for Economic Cooperation and Development, the total book value of foreign direct investments from the advanced countries in 101 developing countries reached $88 billion in 1978; of this total about 40 percent was accounted for by investments in the "assertive" upper-tier countries. In contrast, only about 14 percent of all such investments were in the "accommodating" members of the upper tier, and only around 6 percent of all investments from the capitalist countries were in the oil-exporting countries (excluding Indonesia, Nigeria, and Venezuela). 18 A discussion of India's computer experience may yield important insights about possible power shifts between developing countries and a very large percentage of foreign investors from the advanced capitalist societies. In addition, many studies have already been conducted on power shifts in favor of a wide range of developing countries as they negotiated with foreign firms in several natural resource, and a few manufacturing, industries. 19 Together with the Indian case the studies span almost the entire range of possible bargaining encounters between developing countries and multinational enterprises. Hence, together with these examples of successful bargaining encounters the Indian case reveals the growing power of many developing countries over almost all types of multinational enterprises. 20 AN OVERVIEW OF THE STUDY

This study seeks to describe and to explain India's increasing capacity over a period of fifteen years to transform its ties with the international computer industry in such a way as to increase its share of the benefits resulting from interactions between the

Introduction

9

country and the industry. Chapter 2 begins this effort by reviewing the factual record of India's experience with computers and the international computer industry. T h e chapter analyzes the objectives of the Indian government with regard to the country's computer industry and to foreign computer firms operating in India. These objectives were publicly specified in the mid-1960s, and their analysis permits the establishment of a standard or measuring rod against which progress can be observed and assessed in India's performance in the computer field. An examination of key governmental policy statements indicates that the overall goal set by the government for itself and the country was to become autonomous and technically sophisticated in the shortest time possible. This general goal was operationalized by the government through the enunciation of three specific objectives: Indians should participate in the ownership and control of any units established in the country by foreign computer firms; wholly Indian firms should emerge quickly and satisfy the bulk of the nation's computer requirements; and Indians should have access to the most advanced computers and computer fabrication technologies available internationally. This specification of performance standards is then followed by a report on data reflecting upon changes in India's success in meeting its computer goals. On the basis of government documents and relying especially on interviews conducted by the author with governmental officials and corporate executives, a measurement is taken of the government's changing ability to offer incentives and to bear costs sufficient to reformulate the country's ties with the international computer industry in terms of corporate control and the activities of the foreign computer firms in India. Chapter 2 also presents data (collected through interviews and analysis of governmental and private reports) on the structure of the Indian computer market during the 1960-1980 period and on the levels of technological sophistication of the foreign-origin systems installed in the country during these twenty-one years. Evaluation of these data allows for an assessment of changes in success of indigenous systems suppliers and of changes in the ability of the country to gain access to increasingly sophisticated foreign-origin systems. Finally, a comparison is made of the types of manufacturing activ-

10

Introduction

ities undertaken in the country over time in the computer field as another indicator of changes in the country's ability to gain access to advanced computer technologies. On the basis of these data the principal empirical finding of Chapter 2 is that after a period of regression in the late 1960s India did achieve progress in the mid- to late 1970s along each of the major dimensions of the computer policy established by the Indian government in the mid-1960s. For example, while in the late 1960s the Indian government decided that it could not insist that IBM share equity with Indians for fear that the company might exit from the country, by the late 1970s the government was in a position to decide that it could sustain the loss of IBM in pursuit of a new effort to force equity sharing by foreign firms in India. (As is explained in the text, however, it is doubtful that the government really needed to force the exit of IBM.) Moreover, while in the 1960s a second foreign computer firm, International Computers Limited (ICL), was able to organize its Indian operations to exclude effective Indian participation in the direction of the firm's Indian activities in spite of permitting some Indian shareholding, in the late 1970s ICL was compelled to change its corporate structure to allow meaningful participation by Indians in the control of ICL's operations in the country. Finally, as a result of government pressures and policies Burroughs in the mid-1970s decided not to try to establish a wholly owned subsidiary in India and chose instead to form a joint venture with an Indian enterprise, Tata Consultancy Services, in which each had an equal equity holding. In addition to acting more effectively in the areas of corporate organization, the Indian government in the mid-1970s set into motion policies that fostered indigenous supplies of computers and which led to greater access to more advanced international technologies. However, in contrast to the preeminent role of the government in the corporate organization issue area, we find in Chapter 2 that at the end of the 1970s success by the country in terms of market shares and advanced foreign-system imports was less the result of government policies and more the outcome of efforts undertaken by elements of the Indian computer industry outside the central government. Equally striking about the late 1970s is the reluctance of the central government to allow these new entrants into the Indian

Introduction

11

computer industry even though they were indigenous in character. The eventual lack of success on the part of the government in keeping new indigenous enterprises from entering the industry and its inability to limit imports of modern systems to the level it preferred suggest that while the Indian government was more powerful in directing the course of computing in the country during the 1970s than it had been in the 1960s, nevertheless forces emerged from within the Indian computer community to limit the government's ability to dictate how the industry would evolve. Yet the key finding remains that Indian actors—the central government and enterprises not under its direct control—were able to undertake actions which led to an improvement in India's computer industry according to the objectives established in the mid-1960s. The major challenge of the study, of course, is to explain why India was able to formulate a more favorable relationship for itself with international computing, and it is also necessary to explain the limits of the Indian government's ability to lead this reformulation of relations between the country and the international industry. Clearly a wide variety of factors interacted and contributed to the sequence of events described in Chapter 2. For example, India possessed in the mid-1970s highly skilled but inexpensive software personnel, and this high-value labor was an important factor in increasing the willingness of Burroughs to comply with Indian governmental requirements on equity sharing. Moreover, it was the increase in international suppliers of systems and technology, which in turn was a reflection of a lowering of barriers to some extent in at least certain segments of the international industry, which allowed India to choose from a wider array of international enterprises. Finally, there was the factor of the potential fast growth of the Indian computer marketplace (as the country continues to industrialize) which served to increase the willingness at least of Burroughs and ICL to comply with India's demands. These and other factors played a role in leading India to be more effective in the computer field during the 1970s. For the sake of clarity two basic sets of forces can be identified. The first set of factors—the topic of Chapter 3—involved changes in the international computer industry. Here we explain how the emergence of increasingly less expensive computer components

12

Introduction

and peripherals (resulting from technological innovations originating in the advanced countries), whose availability to India was accelerated by the increasing déconcentration of the international industry, gave India the opportunity to develop a strategy in the mid- to late 1970s of systems engineering of minicomputers and microcomputers (whose architectures also were the product of technological advances in the advanced countries). While not a costless approach, the new strategy nevertheless allowed India potentially to have indigenous suppliers of relatively efficient systems and to become less dependent on the decision of any single foreign enterprise for the evolution of the Indian computer industry. Note, however, the emphasis on potential opportunities. International technological innovations, the presence of which was facilitated by change in the international structure of the data processing industry, constituted one necessary condition for improvement in India's position in international computing. Chapters 4 and 5 seek to show that operating in India was a separate set of factors which constituted a second necessary condition for India's changes in fortunes in computing. Chapter 4 shows that improvement in the country's computer situation in the mid-1970s was a result of a new Indian approach to data processing and that this new approach—developed and executed by the government—made use of the international opportunities described in Chapter 3. It also argues that a shift in the policies of the Indian government at the end of the 1970s can be observed and indicates that the government experienced a diminution of its ability to lead the country's computer community. Chapter 5 then takes this argument concerning Indian domestic institutions a step further. First, the chapter shows that international opportunities described in Chapter 3 were available to a small degree in the late 1960s, that is, the period during which India was least successful in its relations with the international industry and in its effort to foster an indigenous industry. This suggests that the presence of international opportunities by itself cannot explain India's improvement during the 1970s. Chapter 5 explores more fully the argument that the second necessary condition for the country's improvement in computing was domestic in origin. T h e chapter shows how the

Introduction

13

new and successful Indian approach to computers (discussed in Chapter 4) was made possible by the emergence within the Indian government of effective policy institutions in the field of data processing, for these new institutions (explained in Chapter 5) gave India the capability to exploit the international developments reviewed in Chapter 3. Chapter 5 accounts for the emergence of these new institutions by reference not to conflicts with international computer firms but rather to more fundamental political struggles within the Indian government for control over the entire Indian electronics industry. The chapter also explains how political dynamics between the Indian computer community and the government, and within the latter itself, served to limit the ability of the government to pursue its preferred strategy for computers. The Indian computer industry did evolve in the mid-1970s in a way more closely in line with the objectives of the government (and for it to do so the government had to forge new ties with the international industry), but Chapter 5 shows how Indian domestic political-economic developments placed a limitation on the government's autonomy in setting the course for Indian computers. Serving as the conclusion of the study, Chapter 6 contains two major arguments. First, India's experience with computers strongly suggests the overall analytical superiority of the bargaining school over the Marxist-dependencia school. However, the second major argument is that the bargaining school may not fully appreciate the power of its central insight concerning changes over time in relations between developing countries and multinational enterprises. Not only is it true that developing host countries can attain increasing levels of control over multinationals in natural resource and low-technology manufacturing industries, but this may also become increasing typical of bargaining relations involving "assertive" upper-tier developing countries and high-technology manufacturing enterprises. The chapter suggests that the bargaining school underestimates the potential of "assertive" upper-tier countries to adapt to opportunity-producing international technological innovations. What emerges from the study is the point that there are important similarities between bargaining instances involving low-technology enterprises and "assertive" developing countries on the one hand, and, on the other hand, high-

14

Introduction

technology enterprises and these countries. Indeed, Chapter 6 shows that even the limits on the Indian government's autonomy at the end of the 1970s (as described and explained in Chapters 4 and 5) are similar in cause to the limits observed in a key case study undertaken from the viewpoint of the bargaining school of the experience of a developing country with natural resource foreign enterprises. Moreover, the chapter suggests that India's experience may not be unique, for other "assertive" upper-tier developing countries also are restructuring their ties (with varying degrees of success) with the international computer industry and at least one other hightechnology industry, pharmaceuticals. Finally, the chapter presents a few concluding thoughts on what India's experience with the international computer industry may suggest about the power capabilities of developing countries in the contemporary international economy. CONCLUSION

This chapter has sought to outline the main empirical findings and theoretical arguments of the study. It must be stressed that the study does not argue that all technological innovations have the effect of increasing the potential bargaining capabilities of "assertive" developing countries. Instead, the more modest goal of the study is to show that technological innovations may have different implications for the level of the barriers to entry of different segments of a manufacturing industry. T h e argument is that while technological innovations may make some segments of an industry more difficult for a developing country to master (and thereby to be in a better potential position when negotiating with multinationals in the industry), the same innovations may render other segments of the industry more accessible to entry by the developing country (which could make the country less dependent upon, and therefore more powerful in negotiations with, multinationals in the industry). It must also be emphasized that the study does not seek to argue that India was able to become wholly independent of the international computer industry, nor to argue that any developing country can expect to become wholly autonomous in

Introduction

15

high-technology industries in the foreseeable future. Rather, our claim is that over time India developed the capacity to improve its position within international computing and that certain specific developments within the latter actually facilitated the progress achieved by India. The advances made by India, however, were the result of a decision by it to remain associated with the international industry, albeit on new terms. Also, India in the late 1970s was certainly more autonomous in computing than it had been in the late 1960s, but it was equally clear that it could not forego its ties to international computing. In sum, in the field of data processing India in the 1970s reached a position somewhere between dependency and autonomy.

Chapter II

India's Changing Fortunes in Computing, 1960—1980

This chapter describes India's experience in data processing and with international computer enterprises. Two sections review the background to and major objectives of the Indian government's policies as of the mid-1960s in the areas of foreign capital in general and in electronics and data processing in particular. This discussion provides a yardstick to measure India's changing ability in the 1960s and 1970s to meet the objectives set for it by the government. In the third section, data are reported which reflect quite clearly on the degree to which the objectives were met as a result both of Indian governmental and nongovernmental actions. As noted in Chapter 1, the key empirical finding of the present chapter is that India in the late 1960s failed to meet its computer policy objectives but reversed this adverse trend and did achieve progress in the mid- to late 1970s. However, the evidence also suggests that over time different segments of the Indian indigenous computer community were more responsible than others for this progress. Specifically, at the end of the 1970s Indian actors outside the government grasped leadership from the latter in advancing toward the government's computer policy objectives. T o highlight all of these changes the fourth and final section of the chapter compares and evaluates the progress made by India in the fourteen-year period after the government had set explicit goals in the computer field. INDIA AND FOREIGN CAPITAL

India possesses one of the world's most restrictive, cumbersome, and "assertive" regimes regulating foreign direct in-

India's Changing Fortunes, 1960—1980

17

vestments. Recently, a comprehensive survey was taken by the U.S. government of the overseas operations of U.S. enterprises as of 1977.1 The enterprises were asked to report on the performance requirements and incentives they encountered abroad. The resulting rates at which U.S. firms encountered at least one requirement or incentive in the major developing host countries are reported in Table 1. For U.S. investments in the developing world throughout the postwar period, India imposed one or more requirements on U.S. firms more frequently than any other "assertive" country. Indeed, the rate of 60 percent at which U.S. firms encountered performance requirements in India was higher than any other country in the world.2 For U.S. enterprises expanding or establishing operations in more recent years (1970—1977), India no longer was the country with the greatest requirements; instead, its performance requirement rate declined to 46 percent and was surpassed by Peru, Venezuela, Mexico, and probably Nigeria. Nevertheless, in terms of the ratio of requirements to incentives India became even more "assertive" during 1970-1977, and this "assertiveness" by India was surpassed during this later period only by Peru, Venezuela, and perhaps Nigeria . India maintains this regime even though the evidence suggests strongly that it inhibits the receipt of new foreign investments. India is an important host to foreign capital: in 1978 its total stock (totaling $2.5 billion) placed it seventh among 101 developing countries. But during 1969—1976 at least sixteen developing countries had a larger inflow of foreign direct investments than India (whose total inflow was $345 million). All of the "assertive" countries except Colombia and all of the "accommodating" countries except Thailand received more foreign capital than India during 1969—1976.3 Moreover, this situation concerning total flows is not driven by any single source of foreign capital: whether one looks at investments from the United States (for 1966-1976), Great Britain (during 1962-1974), or West Germany (for 1965-1976), India's receipt of new foreign capital is less than all of the other "assertive" upper-tier developing countries.4 The country's attraction of new foreign capital has been relatively low even in the area in which it occupies a leading position within the developing world, that is, manufacturing, in

I-H

R O

0 0

CM

O

CM

O

O I~H

O

0 0

O

E Ò

O

Ö

L >

E C

I M CO

Ö

AN

LF>

O

D

8

« 5

C

H

« OÁ

S - A FC C . O CFL

8 C RT

T : L L I Q CL

O T-H 0 0 I N

S S

1-H

CM

O

I—.

LO

O

1 >

O I

D

I >

CM

CT) D

D

O I N

CD D

M

CM

TO

O

D

D

D

D

E

S-

T-, OJ

B O

3

S

O

• S

J3

h

CL,

,

C - ¡ I

(

O

O

-

^

C

M

C

T

I

O

O

O

I

O

^

H

T

O

C

O

«

J

C

O

«

3

U

U

V

D

E

U

S

;

O

U

5

Ï

O
—

e I« Ê i

Ti í C 60- . s « í fli S t« ® J3 oo • S ^ s « 01 . O —i S « . Sr u D D o J ' 5 i. ¡U 3 3 . S ^ Q¿ ° "03 w 0 "" "O W J3 • U S —• o i D W 1 — ' 3 Q-c » C « C -O O

olz

-ü-S Já S c l « m M 1 • CO

3

J J, -fi w ce

'3 Rf e

23

(A

M U w

S

03 S


3 3 a O Si ¡X 3 P3 U

i

c V 1. 2. w0 f

"O

c abp

cu J2 « CL, J,

-

V'

J¿

5

V C O

Q

X

DC

'C

—t u

«2

s

£

«

S •3

CQ

QJ > O

en

u

V OuJ JS js O

O

S

a i

^ O S ^ tM « A i •» «« 2 ° K h ¿ í CT) 3bD>

fe g

Ii a8 C!

u

u b « ^ 1 T3 —i S 4-j ra •a 2 (S M

India's Changing Fortunes, 1960-1980

35

and II for the 1973-1977 period, especially with regard to ECIL installations. T h e figure in Estimate II for ECIL installations is taken from a nongovernment study published in 1980. This data is presented on a fiscal year basis (i.e., April 1-March 31). Therefore, it was assumed that an equal number of systems was installed by ECIL during each quarter of its fiscal year, and it was assumed that one-fourth of the systems reportedly installed in 1972-1973 and three-fourths of the systems reportedly installed during 1977-1978 were delivered within calendar years 1973 and 1977, respectively. Figures in Estimate II for non-ECIL systems are from the 1978 government study on which Estimate I is based, but it has been adjusted with the addition of systems in cases such as IBM and ComputerAutomation, in which systems were reported by the study to have been installed but without specifying the year of installation. This procedure for Estimate II may overstate slightly the number of foreign systems in India during 1973-1977. Regardless of the figures which are used for comparison, ECIL clearly became a markedly more important factor in the Indian computer market during 1973-1977. ECIL was the source of no more than 8.5 percent of all computers during 1967-1972; during 1973-1977 this market share increased to between 40 percent and 50 percent of all new installations. Also, during 1973—1977 there was an increase from four major sources of systems in India to nine major sources. However, during 1973-1977 IBM's market share collapsed, and, as will be explained in Chapters 4 and 5, this was the direct result of Indian governmental efforts. Technology

of

Systems

India's improved performance in this area can be observed in Table 5, which reports the temporal-technological lags for the 1960-1966,1967-1972, and 1973-1977 periods. By cutting the refurbishment programs of ICL and especially of IBM and by returning to imports as the source of foreign-origin systems, India reduced the average difference between the time a computer model was introduced in the West and the time a unit of this model was installed in the country to 3.7 years, a marked improvement over the lag of 8.5 years during 1967-1972.

36

India's Changing Fortunes,

1960-1980

TABLE 5

Lag of Foreign Computers in India, 1960-1977 1960-1966

1967-1972

1973-1977

33

126

95

Total lag (years)

145

1069

351

Average lag (years)

4.4

8.5

3.7

82.5

90.0

N u m b e r o f systems

% o f f o r e i g n systems in survey

8 3 (Estimate I) o r 6 7 (Estimate II)

Note: As explained in.the sources for Table 4, Estimate II for the 1973—1977 period includes several foreign systems which were installed by 1977, but for which exact installation dates are unavailable. The exclusion of these systems thus lowers the percentage coverage of foreign systems in the survey for Estimate II, 1973-1977, compared with Estimate I. Sources: Data for this measure are the same used to construct Table 3.

Another way to observe technological improvements in India's computer situation during 1973-1977 is by focusing on its computer fabrication programs undertaken or in final planning stages during this period. The measure employed here is the cost per bit of main memory used by the central processor (the unit which performs computations and which controls the computer system as a whole) of only those systems fabricated in the country (or proposed for production). The data are presented in Table 6, and compared using this measure are the major systems fabricated in India during 1967-1972 (the IBM-1401), the systems that IBM hoped would succeed the 1401 in India beginning in the early 1970s (the 360/30 and 360/40), and two systems fabricated by ECIL during the mid- and late 1970s (the TDC-312 and 316). Both the TDC-312 and 316 have a better cost performance for main memory than the 1401 and the 360/30, and the 316 has a better cost performance than the 360/40. This suggests that the systems that were fabricated in India during 1973—1977 were technologically more advanced than those fabricated during 1967-1972 by the IBM unit in India and that they were also more advanced than the systems IBM proposed to have follow the 1401. It should be noted that in 1971 IBM proposed to follow its 360 refurbishment program with the assembly of new and pre-

India's Changing Fortunes, 1960-1980

37

TABLE 6

Per Bit Costs of ECIL and Selected IBM Main Memories Company System

Year introduced Cost per bit ($ current)

IBM 360130

360/40

1960

1965

1965

1974

1975

0.93

0.32

0.21

0.25

0.14

1401

ECIL TDC—312

TDC—316

Note: Indian Costs are translated from rupees at an exchange rate of 8 rupees per dollar. Sources: The data for IBM systems are Montgomery Phister, Data Processing Technology and Economics (Santa Monica, Ca.: Santa Monica Publishing Co., 1976), pp. 339, 342; data on the T D C - 3 1 2 and 316 are from O m Vikas and L. Ravichandran, "Computerization in India: A Statistical Review," Electronics: Information Planning 6 (December 1978):327; and Om Vikas, "Indigenous Development of Computer Systems, Peripherals, and Computer Communication Facilities," Electronics: Information and Planning 5 (August 1978):793, 807, 811.

viously utilized IBM-370's (probably the models 115, 125, or 135).41 Any of these systems would have been superior to the ECIL systems, thus raising the question of whether India suffered by its refusal to accept IBM's offer. However, ICL agreed in 1977 to assemble new ICL-2904's in India (the 2904 had been introduced into Britain in 1974 and 1975). 42 In terms of size, speed, and cost the 2904 compares well with the 370 models IBM considered fabricating in India. 4 3 In any event, in 1974 IBM, aware that the government was firmly opposed to the 370 proposal, withdrew it in favor of a proposal to manufacture line printers at the company's Indian facility. 44 THE 1978-1980 PERIOD

Corporate Organization and Control During this period foreign firms in compliance with India's ownership requirements consolidated their computer operations in the country. First, ICL merged its two units within what previously had been the company's manufacturing arm in India, International Computers Indian Manufacture Limited (ICIM), and 60 percent of the ownership of this new enterprise was controlled by Indian individuals and institutions. T h e size

38

India's Changing Fortunes, 1960—1980

of the operation remained at about 400 employees, and after substantial delays ICIM began in 1980 to assemble and market ICL-2904's in India.45 However, ICIM failed in meeting a commitment to the government to produce peripherals. Second, Tata-Burroughs was created in December 1977. By the end of 1980 it had over 200 employees involved in overseas software projects, the marketing and servicing (for one year) of systems in India, and the manufacturing (for export) of dot-matrix printers.46 Third, between January and June 1978-IBM withdrew from India. The exiting process involved the settlement of tax and other financial matters with the government, the sale of systems to customers previously renting the units, and the placement of many of the 800 former IBM employees into new jobs in India (about 300 had left IBM/India in 1976-1977 and had been given support by the company). IBM/India also trained personnel from the government's new Computer Maintenance Corporation to service IBM systems remaining in the country. Finally, IBM established in New Delhi a "liaison office," which served as the only ongoing presence of the firm in India after June 1978.47 The major development in India's computer industry during this period was the emergence of several indigenous systemsengineering firms not under the control of the central government. The first of three wholly private Indian computer firms was DCM Dataproducts (DCM), a division of the very large Delhi Cloth and General Mills Company Limited. DCM Dataproducts began with hand calculators in 1974 and sought from 1975 to move up to minicomputers. Blocked by the government in minicomputers (described in Chapter 5), DCM developed and began in 1978 to deliver two microcomputers, the Galaxy 11 and Spectrum 7. By 1980 DCM had offices in thirteen Indian cities and a total of 800 employees. 48 Another new entrant was Hindustan Computers Limited (HCL), a joint venture formed in August 1976 by a private firm (Microcomp Limited), and an Uttar Pradesh state firm (U.P. Electronics Corporation Limited). Microcomp was formed in 1975 by ex-DCM employees frustrated by the latter's inability to obtain a computer fabrication license from the government. HCL's first product in 1976 was a desk-top microcomputer, the Micro 2200, and by 1980 it was delivering two quite large micros, the HCL

India's Changing Fortunes, 1960—1980

39

1600/1800 and the HCL-8C. HCL had 600 employees in six Indian cities by 1980, and in 1979 the firm announced the formation of a systems-engineering venture in Singapore with the Economic Development Board of the government of Sing49

apore. Two other wholly private firms which entered the microsystems-engineering industry in India at the close of the 1970s were the Operations Research Group (ORG), and International Data Management Limited (IDM). The former is a division of one of the largest family business houses in India, Sarabhai Enterprises, and was formed in 1960 as a management research and consulting firm. Working with computers and large data bases for its studies, ORG developed substantial expertise in software, and in the mid-1970s it exported software to the U.S.S.R. and served as the Indian sales and service group for the Univac Division of the Sperry Corporation. Research on possible ORG microcomputer architectures began in 1975, and in 1978 a separate division was established (it grew to 400 employees in six cities by 1980) to market its in-house microsystem, the O R G - 2 1 0 0 and to manage the firm's relations with Univac and with Soviet software customers. 50 Finally, IDM was created by former IBM employees. Most of IDM's 170 employees in 1980 were former IBMers, and indeed IDM began its operations as IBM terminated its activities in June 1978 (IDM had been incorporated the previous January). At first IDM concentrated its efforts on the former IBM data processing centers located in half a dozen cities around India. However, in late 1978 IDM became the sole sales and servicing agent for the Nelco 3000 microcomputer, designed and assembled by the National Radio and Electronics Company Limited, a subsidiary of Tata Enterprises (and one that is organizationally separate from Tata Consultancy Services Limited, Burroughs's partner). Moreover, at the end of the decade IDM became the representative (for sales and one year of service) of three foreign computer enterprises: Prime (for which IDM located several customers for systems to be delivered in 1981), National Advanced Systems, and Hitachi.51 In sum, by the end of the 1970s India had two foreign computer enterprises manufacturing in the country in accord with the ownership requirements of the Indian government, and the

40

India's Changing Fortunes, 1960—1980

country witnessed a rapid increase in the number of wholly indigenous systems-engineering enterprises. While in the early to mid-1970s only the government's enterprise, ECIL, designed and assembled (with imported components) computer systems, by 1980 three other firms had designed and were assembling their own systems, and a fourth marketed a microsystem produced by another wholly Indian enterprise. To give some sense of the overall evolution of the Indian computer sector, it may be noted that at the beginning of the 1970s the total employment in the country's computer industry—that is, employment at IBM and ICL—was probably around 1,500 persons (ECIL's Computer Division probably had not more than a few dozen employees). In contrast, by the end of the decade employment in the industry—that is, the two foreign firms, ECIL, and the four other wholly Indian companies—may have surpassed 3,500 individuals, and more than 80 percent of these were in wholly Indian enterprises. 52 What is equally striking, however, is that within the wholly Indian sector one observes the most rapid growth not in ECIL but in the private firms and in one involving a private and a state-owned enterprise. For example, while in 1980 ECIL Computer Division employed about 1,000 persons, the combined employment of non-ECIL wholly indigenous computer firms (firms which did not exist as systems suppliers until as late as 1975) may have exceeded over 1,900 individuals, or 65 percent of all wholly Indian computer sector employment and about 55 percent of all employment in the entire sector within India. India had a growing computer sector at the end of the 1970s, but a striking feature of its development was the sudden emergence at the very end of the decade of wholly Indian firms which were unconnected to the central government and the latter's own ECIL. Market Structure India's continuing progress in this area can be observed in Table 7. Data are unavailable for the actual installation of most foreign-origin systems during 1978-1980. For the most part Estimate III presents data on the number of systems approved for import by the government. Also, following the logic used in the construction of Estimate II in Table 2, it was assumed that

© H

© Tf

t^ N

t»

cn

m

o

-

S Z,

«

o ai

a « o

"Q -s ^

f a i ?

V

TS

«>

g - G

^ s g

11

XI o>

E U rH

til -Ü v

i

I

d

«T *

M 5

i

Ci 4 »> •s — C. • ©> a < CL

h i

S . «y i^ a o ^

*7

o l

fi O ì bo—
< Cb CK3 tu se S >-! M 3 o s a. 0 R" 1 X e 3 sr t u n v > 3 n 3 t u S c CL > §• 3 ^ g- £ "t m -n 3 tu tu » ¡u 3 > 3 a 3 3 » Q. 3. i Cd • i O f» tu 5T ao" n 3 3 5p" a3 3

tu

^

-

S ¡X) 2 S. H > - § w O' g r 3 Si. w m r no S ft o 5 O- w ? s O c/3 s. rt- *^ s tu tn VD

« G .o u (•w elis w 3 m w

V C

«

C/}

~0 s

aii u w c a a; «S •

S

o

e o Vi

•s

O (M M «-J < H

I

i> u « w C/3 V J3 • W TJ C «

Q * J E pq

a. w U

"S w t/3

o S o Q

-g c Oh

a m .C t- bo S « ' go

.3,

U

S

ii V n V a.

O C -3 rt •» i! LO u rt E rS o U Q-U h -o «j SL 60 g S O is S u y u-O * IH U w "c3 g.s« T3 C

o x> rt hJ IL) T3 11 3« • SJS•> c S o ^ OH C/3 Z en O

ä

s -o

3 rt 3

Q [in U

«î U u PS 3 11 TJ u M o fcT6V u Q T3 3 in 3 ,o JS U u IH U be 3 O U

Ë

"C 5H oo ea o

Z

a; S-S " C8 g « U e5 « •S Oy (333 Q a 3 5 c a 3 S bo £ w c 3 X ^ c« r " S rt m c PQ bcgU n >i 3 bc « ^.. sb O ^ £ CO S 3Oh < 3

X

Policies, Politics, and Computers

145

peared to be emerging in the first half of 1977. If true, then Fernandes would need to be concerned about criticisms from Shekhar and other leaders of the Left. Given this dilemma, perhaps Fernandes pushed for harsh treatment of highly visible multinationals like IBM and Coca-Cola in order to strengthen his left flank. Fernandes could then act more confidently, but with great discretion, to attract multinationals in select industries. This of course would not be the first time that political leaders would "talk left and act right." 101 T h e third and final cluster of actions relating to India's computer experience involved the entry by several noncentral government firms into data processing over the opposition of the Electronics Commission and Department. At least four such firms began operations during 1978—1980, and a total of fortythree received licenses during 1979—1980. T o explain these developments it is possible to refer to the Janata government's stated economic strategy of focusing state activity in agriculture (thus creating more opportunities for the private sector in industry) and its interest in fostering small companies. 102 This latter point may have helped HCL and perhaps IDM, but certainly not DCM or ORG, which were components of large business houses (Delhi Cloth Mills and Sarabhai Enterprises, respectively), and IDM wanted to market a system produced by a subsidiary of Tata Enterprises. Public statements of national economic strategy by the Janata government do not shed much light on the computer situation during 1978—1979. Execution of such a "strategy" would require, first, a consensus within the Janata coalition about strategy, and, second, an agreement on instruments for its execution. Both of these conditions were not met during the Janata period. By 1978 the Janata government was engulfed in an "internal war" involving, most especially, Prime Minister Desai and, until his forced resignation in July, Home Minister Charan Singh. (After July Charan Singh was still a formidable factor in Indian politics, and in recognition of his strategic value, he was able to reenter the government as finance minister in February 1979. In July he became prime minister but lost his governing majority in the Parliament in August. From then until the victory by Indira Gandhi in January 1980, Charan Singh headed a caretaker government.) As strife within the Janata govern-

146

Policies, Politics, and Computers

ment escalated during 1978, the machinery of government, according to observers in and outside of India, began to appear almost paralyzed, unable to initiate policies or even to control rising levels of social disorder within the country. Equally significant during this period was one particular line of attack used by Charan Singh and—from her seeming political isolation in 1978—Indira Gandhi against Prime Minister Desai. In essence, the charge was that Desai's economic policies amounted to government capitulation to "multinationals" and "monopolistic" domestic enterprises. 103 One might have expected that the weakness of the government at its apex would have allowed greater leeway to bodies like the Electronics Commission and Department to act on their own: However, the policy preference of the latter two units, to have only ECIL as the leading indigenous computer enterprise, required interministerial cooperation (to control the issuance of import licenses and to monitor actual imports of items listed in industrial licenses) that was virtually impossible during the turbulence of 1978-1979. Hence HCL and DCM, and perhaps ORG, were able to evade efforts by the commission and department to keep them out of microcomputers. (It is also likely that the criticisms in the press lessened the zeal of the two policy units to try to stop the firms by late 1978.) Also, while Prime Minister Desai probably did not direct the day-to-day operations of the commission and department, his sensitivity to attacks made in the Parliament about computers in particular and to charges made by Charan Singh and Indira Gandhi in general about Desai's alleged favoratism toward foreign and large domestic enterprises probably led him to conclude in late 1978 that he needed to shift Professor Menon out of electronics. Perhaps it was a fear of such criticisms, together with concerns about charges relating to multinationals, which explains why Fernandes's Ministry of Industry pressured the commission and department to allow the entry of several firms into the computer industry in 1978. In any event, Professor Menon's replacement, Professor Nag, moved to limit complaints about Tata-Burroughs and ICL by granting formal licenses to DCM, HCL, ORG, and IDM. Granting licenses to these four enterprises was insufficient, however, for the DCM and ORG cases could be related to favor-

Policies, Politics,

and Computers

147

atism toward big business. Once the first set was issued, new pressures arose to grant additional licenses. During 1978—1979 it was therefore the profound internal weakness of the Janata ruling coalition which probably aided the noncentral government computer firms in their struggle with the Electronics Commission and Department. Finally, both Charan Singh, during his brief period of leadership in late 1979, and Indira Gandhi, after she returned to power in January 1980, probably believed that not granting the licenses to additional enterprises could expose them to the same criticisms that had been made against Desai in 1978. CONCLUSION

From the above discussion at least four conclusions emerge. First, the particular evolution of computers in India until the late 1970s was very much a reflection of changes in the balance of power between two major bureaucratic factions or networks within the Indian government. In the 1960s the close balance between the Ministry of Defense and the Atomic Energy Commission led to a stalemate within the Electronics Committee, and it was this paralysis which made effective action by the government difficult both in terms of fostering an indigenous industry and in terms of forging satisfactory relations with the international computer industry. Later the balance shifted in favor of the atomic energy network, and with this resolution of the struggle the government finally was able to pursue in the early to mid-1970s what at least was a clear path in electronics and computers. T h e path charted by the commission and department allowed for the reformation of the country's ties with the international computer industry, and it led to the emergence of an indigenous enterprise able to use international technological innovations to supply systems within India. However, the second conclusion to emerge is that these actions of the commission and department led to an expansion of the arena of potential political struggle concerning computer strategy and policy outside of the government and into the broader Indian computer community. First, by permitting imports of minisystems so that the country would familiarize itself with this new technology and thereby be more receptive to

148

Policies, Politics, and Computers

ECIL small systems, the commission and department created high expectations among Indian users. When ECIL, perhaps because of all the protection the commission and department sought to provide it, could not meet these expectations, the user community had an incentive to try to defeat the policies of the commission and department to channel users toward ECIL. Second, by announcing that India should turn to indigenous small systems, by succeeding in fostering ECIL as a supplier (albeit with a low-quality product), and by redirecting foreign firms into larger systems or, in the case of IBM, causing a vacuum to be created with its withdrawal, the commission signaled to potential indigenous suppliers that a new set of commercial opportunities might be open to them (this was certainly the message of the Minicomputer Panel in 1972-1973). When the commission and department sought to protect ECIL by preventing the entry of these new firms into the industry, the latter had cause to seek the weakening of the authority of the commission and department in the computer field. Third, as the conflicts involving Indian computers broadened to include these new contestants, the commission and department found that their powers were inadequate to pursue their preferred vision of the future of Indian computers. First, Indian computer users—in and out of the government (with the exception of the police and the universities)—were able to devise effective counterstrategies to the effort of the commission and department to channel them toward ECIL. Second, and more significantly, enterprises seeking entry into the smallsystems industry devised and executed a series of actions which resulted not only in their commencement of operations but in the near destruction of the commission and department. These actions by the firms seeking entry probably were supported by governmental factions opposed to the commission and department, and the combination of the two forces led to the defeat of the strategy devised by the two electronics policy units in the early to mid-1970s. T h e commission and department had not been wholly unsuccessful; indeed, the lasting change they brought about probably is in the area of linkages between the country and the international computer industry. Yet one clear lesson of computers in India is that it is often much easier to reform economic ties with external agents than it is to sustain an economic policy in the face of domestic resistance.

Policies, Politics, and Computers

149

To a great extent the evolution of computers in India can be explained by reference to international technological and industrial changes and to the "micro" political dynamics summarized in the three points made above. However, the fourth and final conclusion is that "macro" political forces within India also affected the way in which the country's computer industry evolved. National political dynamics probably did not affect the day-to-day operations of policy institutions and private actors involved in Indian computing, but in a variety of ways these units sought to exploit these dynamics to their advantage (usually at the expense of other actors in the industry). Thus, at both the "micro" and "macro" level of analysis, the development of computers in India was a profoundly political phenomenon.

Chapter VI

Conclusion

In this final chapter we begin with some theoretical insights generated by the study for our understanding of relations between "assertive" upper-tier developing countries and multinational high-technology enterprises. Next, we examine these insights in the light of the experiences of other developing countries with multinational firms in the computer industry and in one other high-technology industry, pharmaceuticals. Finally, we present the implications of the Indian case study for our understanding of the prospects for future international order.

THEORETICAL IMPLICATIONS

T h e case of India and the international computer industry allows for several insights into the general problem of power relations between developing countries and multinational enterprises. First, India's relationship with the international computer industry evolved in a manner that fits closely within the basic predictions made at almost the outermost edge of the analytical power of the bargaining school. Hence, these "hard case" findings lend strong support to the bargaining school's basic contention that, over time, developing countries can increase their power over multinational enterprises. From the perspective of the Marxist-dependencia school, on the other hand, India almost certainly should have failed in its negotiations with the international computer industry. Yet this relatively "easy case" did not evolve as expected, and therefore the case offers strong grounds to question the validity of Marxistdependencia arguments concerning relations between multi-

Conclusion

151

nationals and at least the "assertive" upper-tier developing countries. While the Indian case suggests the overall theoretical superiority of the bargaining school over the Marxist-dependencia school, it also suggests a possible reformulation of elements of the first school's analysis. According to the bargaining school, international technological change tends to constrain the range of choice of developing countries in their relations with international firms even after taking into account increasing levels of international competition among these firms. T h e case of computers in India suggests, in contrast, that international technological innovations, whose availability was facilitated by changes in the international structure of the industry, actually expanded the range of possible computer choices for India and thereby directly improved the potential capabilities of the Indian government as it bargained with IBM and ICL. After the Indian government had established its small-systems strategy based on the international technological developments of minisystem architectures and increasingly less expensive components and peripherals, attracted foreign firms to Santa Cruz to help meet the foreign exchange costs of the new strategy, and fostered at least one domestic supplier by 1973-1974 (ECIL), the government lowered the costs to the country of losing the presence of any particular enterprise, that is, IBM. As it became clear that IBM might be unable to meet the demands of the government, the incentives increased for ICL and Burroughs to comply and thereby to replace IBM to some degree in the country. As Burroughs and ICL became more likely to comply, the costs to India of losing IBM declined even further, and the government was able therefore to persist in its demands even if it meant, and it ultimately did, that IBM would be compelled to withdraw from the country. Hence the first possible revision of the bargaining school is that instead of arguing that technological change consistently constrains the opportunities of developing countries as they interact with high-technology multinationals, technological innovations may be thought of as a force which may inhibit entry by such countries into certain segments of an industry, but may also lower the barriers to entry to other segments of the same industry. Such a lowering of barriers to entry, combined with a

152

Conclusion

déconcentration of the international structure of the industry (which itself reflects a lowering of barriers to entry in the latter), could allow a developing country to become less dependent upon any single foreign firm and thereby be able to move more aggressively toward foreign enterprises in or seeking entry into the country. Of course, the Indian experience also suggests that the government should not use this new-found power too aggressively. In sum, the case of computers in India suggests that a more complete understanding of the impact of technology on interactions between multinationals and at least the "assertive" upper-tier developing countries may need to be more complex than the analysis offered by the bargaining school. At the same time it should be noted that increasing international competition within a high-technology industry may be a prerequisite for technological change to work in favor of hostdeveloping countries. It is an open question as to whether technology-intensive industries other than data processing are displaying the two key characteristics of lower input prices (driven by technological improvements) and increasing international competition. Additional studies should be executed to determine if other high-technology industries are in fact evolving along these two dimensions in a manner similar to that in data processing. If they are, then the bargaining school's basic thesis can be expected to capture events with increasing ease and frequency in what has been to date its most difficult cases. Second, and of equal importance, the Indian experience with computers draws into question the bargaining school's understanding of the domestic capability of developing countries to exploit international technological innovations. According to the school, the adaptive capabilities of developing countries in high-technology areas are severely limited. Yet in India domestic institutions did evolve quite rapidly and in such a manner that the country became capable of exploiting international computer developments to its advantage. At first the domestic change came about within the Indian government. In part as a result of the bureaucratic political struggles and in part as a result of disenchantment with the activities of IBM and ICL in India at the end of the 1960s, new policy units emerged at the beginning of the 1970s to take

Conclusion

153

charge of the development of Indian computers. T h e new governmental structures—motivated by a variety of institutional interests—did devise and execute a strategy which wrestled control over computers in the country from IBM and ICL. Subsequent innovations took place within the Indian private sector (in one case a private firm was supported by a state government) in the form of new systems-engineering firms. These new enterprises pressured the central government into allowing them to enter the industry and to make available products based on their own exploitation of international computing innovations, including the introduction into India of microcomputers. Hence the bargaining school tends to underestimate what is in fact a formidable ability on the part of at least the more powerful developing countries to adapt to international industrial and technological changes in such a way as to improve their relations with international enterprises. In sum, the basic thrust of the argument of the bargaining school can be extended beyond natural resource and lowtechnology manufacturing multinational enterprises to include at least certain high-technology multinationals when they interact with the more powerful developing countries. Of course, the Indian experience with computers indicates that limits do come into operation to the degree to which even a relatively powerful developing country government can dictate how a national industry will emerge and the degree to which it can control all linkages of the country to an international high technology industry. One could even argue that it was because the Indian government was seeking to control a high-technology industry that limits came into operation and that these limits would not have constrained the maneuverability of developing country governments seeking to control the evolution of natural resource or low-technology manufacturing industries. To this line of argument there are at least three responses. First, within India itself the pattern of significant but incomplete control by the government over the national economy manifests itself in industries quite removed from hightechnology industries such as computers. At the microanalytical level, for example, there is the case reported by Stanley Kochanek of the successful lobbying effort of the Indian Tea Association and the Indian Associated Chambers of Commerce and

154

Conclusion

Industry to reverse the 1966—1967 attempt by the Indian government to increase excise duties on tea.1 Indeed, one can also point to more basic failures on the part of the Indian government to overcome domestic resistance to policy initiatives in agricultural areas such as the inability of the government to accelerate the formation of agrarian cooperatives as had been called for by the Indian government and Congress party in 1958 to early 1959 and the inability of the government in 1959 to initiate extensive state trading in food grains.2 At the same time one could argue that the continuing growth of the private industrial sector in India in the face of the government's alleged commitment to a "socialistic pattern of society" also indicates that limits operate on the government in areas other than those involving high-technology manufacturing. Finally, and as Francine Frankel teaches us, there operates in India a very general reluctance on the part of the government to press national elites too greatly (especially in the agrarian sector but in industry as well), for to do so might trigger social and political conflicts that would be uncontrollable. 3 Hence the first response to the argument about technology and limits on governmental power is that in the Indian context such limitations can in fact be observed across the entire spectrum of national economic and social policies. The second response is that one needs to distinguish between domestic political limits on governmental authority which weaken the overall strength of the country in relation to international firms and those limits on governmental power which do not have this effect. The Indian government was not as successful in the late 1970s in controlling computer imports as it had been in the mid-1970s. This does suggest that a portion of the market that may have gone to ECIL in fact was occupied by foreign suppliers, and in this sense the limits on the ability of the government to control the Indian computer import market detracted from the country's movement toward greater autonomy. However, the increase in computer imports was far less significant a feature of Indian computing in 1978-1980 than the emergence of wholly Indian systems-engineering firms other than ECIL. This development, while it was also the result of limitations on the policy autonomy of the Indian government, does not illustrate

Conclusion

155

the weakness of Indian domestic structures in computing as a whole; on the contrary, it shows the dynamism of the latter. T h e first two responses to the argument about technology and governmental autonomy rely on an analysis of Indian politics and policies. T h e third response is that the limitations on Indian policies regarding a high-technology industry such as computers can also be observed in a key study undertaken from the bargaining perspective of a natural resource industry in another developing country, that is, Theodore Moran's study of international copper companies in Chile. Moran found that while the long-term shift in the balance of power between the Chilean government and the international copper companies favored the former, temporary and small shifts in power back in favor of the foreign firms occurred from time to time, and Moran attributes these shifts not to dynamics between the Chilean government and the international firms but rather to political struggles within Chile itself.4 Just as domestic political dynamics in Chile led to limitations on the government's autonomy with regard to copper in the mid-1950s, so too did domestic political limitations on the power of the Indian government (in terms of policing computer imports and preventing new wholly Indian entrants into the industry) constrain the latter's ability to dictate the exact course of Indian computing. In sum, India's experiences with computers suggest that "assertive" upper-tier developing countries can have levels of success in negotiating with high-technology multinationals, and in setting their own courses in these high-technology industries, that are similar to the levels of success enjoyed by many developing countries in their interactions with natural resource and low-technology manufacturing enterprises. This is not to say that governments of "assertive" upper-tier developing countries can expect to have absolute autonomy either with regard to foreign high-technology firms or to their indigenous industries and customers for the goods produced in the industries (although the Indian case does suggest that such governments can expect to be more successful with international than with domestic actors). Limits on governmental action will come into operation, but the nature and intensity of these limits probably will not differ dramatically from those observed in industries

156

Conclusion

that do not involve high technology. Domestic institutional dynamics and political struggles, rather than international technological change, are likely to be the most important determinants of the interactions involving "assertive" upper-tier developing countries and high-technology multinationals. A REVIEW OF OTHER NATIONAL EXPERIENCES

This phenomenon of substantial but incomplete success on the part of national governments in trying to change their relations with international high-technology industries is not restricted to "assertive" developing countries. Among the advanced capitalist countries only the United States and Japan have wholly autonomous computer industries. Both France and Britain have sought to lessen their dependence on American computer enterprises, and both have had some—but not complete—success in their endeavors. In 1964 the U.S. government prevailed upon Control Data Corporation not to sell a very large CDC—6600 computer system to the French government for likely use in the latter's nuclear weapons program. 5 This was the most dramatic illustration of France's dependence on American computer firms in ways which could lead the country to have its freedom of action constrained. More generally, the entire computer community of France relied upon American suppliers, and private French efforts to develop an indigenous computer industry ended with the acquisition in 1964 of Machines Bull by General Electric (which in turn sold Machines Bull to Honeywell when General Electric left the computer business in 1970).6 In response to these developments the French government in 1966 announced the "Plan Calcul": the objective of the plan was to direct government resources toward the encouragement of a wholly indigenous computer enterprise, Compagnie Internationale pour l'lnformatique (CII). Between 1966 and 1971 the French government allocated about $200 million to CII to develop products that could compete with American systems, and the French government also instituted a purchasing system that greatly favored CII. 7 However, while the French government wanted to foster an indigenous supplier, it did not want to cut France off from the advanced technology embodied in American systems. Hence

Conclusion

157

the French computer community under Plan Calcul still could obtain access to American computer products, and as a result CII by the mid-1970s was unable to compete effectively with American computer enterprises. In the summer of 1975 the French government permitted Honeywell-Bull to purchase CII (according to John Zysman the government actually assisted in arranging the sale).8 This could appear to be a case, therefore, in which a government's efforts to foster an indigenous supplier were thwarted by the technological superiority of American computer firms. However, Zysman found that the HoneywellBull acquisition of CII has created a more complex relationship in which the French government, through CII, is able to affect Honeywell's computer activities at the same time Honeywell affects French computing. As Zysman notes with regard to Honeywell: "The French have not captured a multinational, but they hardly stand helpless before this one."9 In the case of Britain, as in the case of France, a conscious decision was made within the government that Britain could not afford to be dependent on American computer enterprises, and the U.S. government veto of the CDC sale to France appears to have been important in setting the collective mind of the Labour government on the need for an autonomous computer firm for Britain.10 The result of British governmental efforts was the formation in 1968 of International Computers Limited—ICL. The British government, as the French government had done with CII, made available to ICL very large grants and loans to develop systems that could compete with American products (and, as in France, especially products sold by IBM), and the British government pursued a very clear policy in its computer purchases of discriminating in favor of ICL.11 The firm did develop a significant market share in Britain, but the financial strain of competing with American firms and of developing new products has been almost too much for ICL to bear. Hence in 1975, ICL joined two American firms, Control Data Corporation (CDC) and National Cash Register (NCR), to form a venture to produce peripherals.12 Also, ICL does not have the capability to produce components for its computer systems. Finally, ICL continues to suffer high annual losses in spite of government support and its ties with NCR and CDC, and there are reports that ICL might soon follow the

158

Conclusion

example of CII and merge with an American computer enterprise such as CDC or Burroughs. This might suggest that Britain has gone through a cycle of initial success and, later, severe constraints on its progress. However, even if ICL does become a part of an American firm, it and the British government, as in the case of CII and the French government with regard to Honeywell, may be able to hold their own in interacting with their new partner. In any event the basic point concerning the experiences of France and Britain with the international computer industry is clear: even highly developed countries have been concerned about and have sought to alter their relations with international high-technology industries, and countries such as France and Britain have been able to do so with significant, but not complete, success. Another way to appreciate the significance of India's experiences with the international computer industry is to compare and contrast them with the experiences of other developing countries—including other "assertive" upper-tier developing countries—with multinationals in the data processing and one other high-technology manufacturing industry, pharmaceuticals. One of the most interesting of these cases is that of computers in Brazil. In the early 1970s Brazil's computer market placed it among the world's twelve largest, and the market was growing from the late 1960s through the mid-1970s at a rate of at least 30 to 40 percent per year. 13 In addition, the dynamism of the market had attracted to Brazil a wide range of systems suppliers. While IBM dominated the Brazilian market, Burroughs was an important contender, and firms such as NCR, SperryUnivac, Honeywell-Bull, Data General, Digital Equipment, Ferranti, Olivetti, and Philips were all active in Brazil by the early to mid-1970s. 14 Finally, by the early 1970s both IBM and Burroughs had substantial manufacturing programs in Brazil, and by the mid-1970s Honeywell-Bull, Digital Equipment, and Nixdorf were seriously considering computer manufacturing possibilities in the country. 15 Hence the Brazilian computer community was growing rapidly in the early 1970s, diversity of international supply had been achieved, and foreign computer enterprises had established or were interested in establishing manufacturing activities in the country. However, from the viewpoint of the Brazil-

Conclusion

159

ian Secretariat of Planning (which operates directly under the president of Brazil) and at least one other bureaucratic actor, the navy, a major problem with the evolution of computers in Brazil was that the import policies of the Foreign Trade Office in the Bank of Brazil and the licensing activities of the National Institute of Industrial Property were such that wholly Brazilian enterprises could not break into this rapidly growing industry. The Planning Secretariat and the navy began to cooperate on a "task force" on data processing policy in the late 1960s, and in 1972 the secretariat was able to form a Commission for Coordination of Electronic Data Processing Activities (CAPRE). CAPRE was given the task of managing data processing within the federal government, maintaining statistics on the national market, and developing a strategy to encourage a local industry. However, at its inception CAPRE did not have the power to regulate computer imports or to control the Brazilian manufacturing activities of foreign computer firms.16 CAPRE's original authority (and perhaps its preference) was such that its first effort was to encourage the emergence of an indigenous Brazilian supplier without trying to affect very seriously the local operations of the foreign computer firms active in the country. In 1973 the commission established an enterprise, Digibras, which was authorized to serve as a holding company for the government in computers. Digibras in July 1974 formed a three-way joint venture involving itself, a private Brazilian firm (E. E. Equipamentos Electrónicos), and a British firm (Ferranti); the new venture, Computadores e Sistemas Brasileiros (Cobra), planned to assemble and market in Brazil a Ferranti sixteen-bit minicomputer to be designated the Argus 700.17 In addition Digibras sought to locate another private Brazilian firm with which it could form a second joint venture (which also would have involved a foreign computer enterprise) to fabricate a smaller system aimed at business data processing requirements. Both elements of the initial government strategy failed by 1976. First, Digibras experienced severe marketing problems with the Ferranti system; by mid-1976 all of the firm's sales negotiations were with Brazilian governmental units, and it had achieved only one firm sale. Also, as Cobra's financial problems mounted, the private Brazilian firm lost interest in the venture and soon sold all but 5 percent of its equity to Digibras.

160

Conclusion

Second, Digibras was unable to persuade any private Brazilian firm to establish the second proposed venture for small business systems. This was not surprising, for in addition to an extremely high rate of minisystem imports by several foreign suppliers, IBM announced in 1976 that it planned to produce IBM System/32 minicomputers in the country, and by the end of the year, even though it had not yet begun actual production, IBM had over 100 orders for this new system. 18 CAPRE responded in three ways to these challenges to its original strategy. First, to limit minicomputer imports, CAPRE was able to raise import duties on computers and to require that foreign computer firms deposit the value of imported systems with the Bank of Brazil for one year without interest; these two actions raised Brazilian prices for U.S. computers from about 140 percent of U.S. prices to about 190 percent of U.S. prices. 19 Moreover, in early 1976 CAPRE was granted authority to review import applications for computers. 20 T h e first response was therefore to create a potential market for Brazilian enterprises by making imports more expensive and difficult to acquire. Second, CAPRE began in late 1976 to strengthen Cobra. First, the firm was granted a $3.3 million loan from the government's National Economic Development Bank. Second, CAPRE persuaded the country's largest private bank, Bradesco, to invest $20 million in Cobra and thereby to become the largest stockholder in the enterprise (Ferranti, Digibras, and E. E. Equipamentos remained in Cobra as minority participants). 21 This action apparently was aimed at bringing Cobra into contact with a small-systems user, Bradesco itself, as well as an institution with wide contacts throughout the Brazilian business community. Finally, in late 1976 and early 1977 Cobra was authorized to seek out a new foreign connection. In March 1977 it signed an Original Equipment Manufacturer (OEM) and technology transfer agreement with a small U.S. firm, Sycor, Incorporated (which itself was acquired by Canada's Northern Telecom), and the agreement allowed Cobra to assemble and market in Brazil a small business system, the Sycor 400 (in Brazil it is designated the Argus 400). 22 In addition to limiting imports and directly fostering one indigenous supplier, the third new effort by CAPRE was to prevent foreign computer firms, and especially IBM, from fab-

Conclusion

161

ricating small systems in Brazil. In June 1977 CAPRE announced that in addition to Cobra only two other enterprises would be permitted to fabricate small business systems in Brazil, and both would need to include Brazilian equity participation.23 A total of seventeen proposals were submitted to CAPRE, of which thirteen were from American and other foreign computer enterprises. Of the thirteen proposals, seven—including those by IBM, Burroughs, and NCR—did not involve equity participation by Brazilian nationals. In early 1978 CAPRE announced that three proposals (of the original seventeen) were acceptable to the Brazilian government. Each involved a consortium of Brazilian private firms, and each of the Brazilian groupings had established licensing relationships with non-U.S. computer firms (the three foreign computer firms were Logabax of France, Nixdorf of West Germany, and Japan's Fujitsu).24 By the end of 1979 Cobra, the three firms organized in early 1978, and a fifth firm subsequently granted approval by CAPRE to enter the industry (Sisco S.A., which apparently "back-engineered" a Data General system and thereby operated without a foreign license) supplied about 20 percent of the approximately 6,000 systems installed in Brazil, with Cobra the source of about one-half of the locally fabricated systems.25 Finally, after the foreign suppliers accommodated themselves to their treatment on minicomputers, they soon responded favorably to an invitation by CAPRE to fabricate computer products in Brazil that would not compete with the new indigenous enterprises. In late 1980 IBM was granted permission to fabricate about 600 IBM-4331's over four years (of which the company is required to export about 360 systems), and Burroughs was granted permission to fabricate about fifty B—6900's per year for the Brazilian domestic market. At the end of the decade Honeywell-Bull had a proposal before CAPRE to begin a joint venture with a Brazilian private firm and an investment bank to produce forty large systems per year; Control Data had submitted proposals to begin two joint ventures for large systems, and tape and disk drives, respectively; and Sperry-Univac was also seeking to begin a manufacturing program. Also, Hewlett-Packard was seeking permission to fabricate its HP—95A minisystem at the end of 1980, arguing that it would restrict its sales to scientific and technical markets which

162

Conclusion

were not the targets of the small business systems fabricated by the Brazilian enterprises. 26 In addition, a small American firm, Ampex Incorporated, also was seeking permission at the end of the decade to license Brazilian production of tape and disk drives, and another small American firm, E.G.&G. Incorporated, was granted permission to establish a joint venture with a Brazilian firm to make electric fans for use in the cooling systems of computers. Finally, a Brazilian private firm, Scopus S.A., had designed at the end of a decade a visual display unit and data entry keyboard for the Brazilian market. 27 Brazil, beginning with a much more favorable situation than India, nevertheless perceived that its relations with the international computer industry were unfavorable in the early 1970s in terms of fostering indigenous computer suppliers to participate in what was an extremely dynamic small-systems market. It was a government institution, CAPRE, which through a holding company formed Cobra as a government-private sector-foreign enterprise. When this effort languished at first and as additional private firms declined to enter the industry for fear of foreign competition, CAPRE devised and executed a new series of increasingly stringent policies designed to make the small-systems market inaccessible to foreign suppliers and open only to Brazilian-dominated local enterprises. At the same time the dynamism of the Brazilian market allowed CAPRE to maintain—on a reformulated basis—the presence of the world's major computer enterprises. Hence, just as in the Indian case, for Brazil the international developments of small-system architectures, inexpensive components and peripherals, and the emergence of several new foreign computer enterprises created new potential opportunities for the fostering of a more self-directed indigenous computer industry. Moreover, it was the emergence of relatively strong governmental institutions in the specific field of computing which in Brazil, as in India, made possible the initial domestic exploitation of these international opportunities. Third, as in the Indian case, successful transformation of Brazil's relations with foreign computer firms was achieved by the new policy institutions. Finally, the Brazilian government, as in the case of the Indian government, had substantial but incomplete control over do-

Conclusion

163

mestic enterprises seeking entry into the systems-engineering industry after the actions of the government made it clear that such enterprises could become economically viable in a context of government protection. While in 1974-1976 Digibras could not find a private firm willing to join it in a small business systems enterprise and the private firm operating with it actually lessened its participation, after the tough new minicomputer policies were in place, at least four Brazilian firms or groups of firms submitted proposals to enter the industry. T h e government in January 1978 granted permission for production to three of these firms, which was one more than what CAPRE stated it would permit in June 1977, and the entry of Sisco indicated that a total of two firms had entered the industry beyond what CAPRE thought would be optimal. Perhaps these two additional grants of approval marked a change in the assessment of CAPRE of the Brazilian small-systems market, but it is also possible that the two firms gained entry through protests and lobbying within CAPRE and the government at large. As in the case of India, it was the interaction of international technological and industrial change and domestic institutional innovations which permitted Brazil to become more selfdirected in computing, and governmental institutional and policy changes in particular were crucial at least to the initiation of the efforts by the country to take charge of its computer industry. T h e significance of both of these forces can be further appreciated by considering two cases which involved the international computer industry (thus controlling to some extent for the presence of the international factor) and two emerging "assertive" upper-tier developing countries, Nigeria and Indonesia, in which domestic institutional reforms in the data processing field had not taken place in the 1970s to the extent they had in India and Brazil. In each of the two cases foreign computer firms, and most importantly IBM, had wholly owned marketing subsidiaries, and in each case a national decree was put into effect which required local participation in the ownership of such a subsidiary. Also, in each case the administrative unit which negotiated with IBM and other foreign computer firms was the same unit that negotiated with foreign firms affected by the decree in other industries. In sum, neither Indonesia nor Nigeria developed policy institutions in the specific

164

Conclusion

area of data processing when an effort was made to reform national linkages with the international computer industry. In each case the outcome of bargaining was basically the same: the key foreign computer firm in each country, IBM, located a foreign representative to be in charge of sales to local customers, and the firm maintained in each country a wholly owned unit that would service systems and advise their foreign representatives. In Indonesia IBM apparently did not have its market share substantially changed by these new arrangements.28 In Nigeria IBM did reduce its sales staff, and it is likely that its market share in the country has declined, but for the most part it has probably been taken up by other foreign firms which established middlemen relations or permitted small local levels of equity sharing. In Indonesia there was no sign at the end of the 1970s that an indigenous systems-engineering industry would soon emerge, and in Nigeria only one five-person firm (headed by a Nigerian computer scientist trained in Canada) had emerged to fabricate a few small ($1,000) microsystems based on imported processors and peripherals.29 Perhaps Indonesian and Nigerian businessmen were able, as a result of the actions of their respective governments, to obtain a portion of the local earnings of the foreign computer enterprises. However, these policies were not at all tailored to the specific problem of national dependence on foreign suppliers, and therefore these two countries have been unable to take advantage of international computer developments to the extent that can be observed in the cases of India and Brazil. It is also possible to appreciate the importance of the presence of both international and domestic innovations by considering the experiences of developing countries with multinationals in another high-technology industry, pharmaceuticals. For example, Sanjaya Lall and Senaka Bibile found that Sri Lanka in 1972—1976 was able to lower the costs of imported, finished pharmaceutical products through bulk purchasing of generic as opposed to brand-name products.30 This was accomplished because rapid diffusion of technology characterized the international drug preparation industry and because the quality of generic drugs could be verified by requiring that a supplier provide a "certificate of quality" from independent testing units in Switzerland, Canada, and India. Sri Lanka in particular was

Conclusion

165

able to exploit these international developments because the government in the early 1970s authorized the creation of a special study team at the University of Sri Lanka to determine methods by which the foreign exchange expenditures of the country could be reduced, and on the basis of the study team's recommendations the government created the necessary formulatory and marketing institutions to increase Sri Lanka's usage of generic as opposed to brand-name drugs. T h e government was less successful in a second effort relating to pharmaceuticals, that is, to purchase in bulk the raw materials used by the local manufacturing subsidiaries of multinational drug companies. At least in part this can be attributed to the fact that Sri Lanka's new institutions in the field of pharmaceuticals in the 1970s (the study team at the University of Sri Lanka and the State Trading Corporation for pharmaceuticals) had expertise in the composition and distribution but not the actual fabrication of pharmaceutical products—for that Sri Lanka still needed foreign drug firms which preferred to obtain their raw materials from their international affiliates. Hence while the domestic institutional reforms allowed Sri Lanka to exploit certain trends in the international pharmaceutical industry (the proliferation of generic drugs), the reforms were not suited and therefore did not permit the exploitation by Sri Lanka of other international trends (the availability of raw materials from several companies at prices much below those charged by international drug firms in their intracompany transactions). Similar phenomena were observed by Gary Gereffi in his study of the Mexican steroid hormone industry and Mexico's relations with multinational firms interested in these compounds. 31 Gereffi found that to a great degree the takeover in the 1950s and 1960s by several foreign firms of what might have been an autonomous and fast-growing Mexican steroid hormone industry was the result of the lack of policy efforts by the Mexican government to protect the national industry. Moreover, the limited success in 1975—1976 of the Mexican governmental enterprise, Proquivemex, at least to increase the payments by foreign drug firms to Mexico for an indigenously grown plant (barbasco) for steroid drug manufacturing was due to the fact that the state trading enterprise lacked the support

166

Conclusion

of the top Mexican political leadership and because the state firm was unable to address the key problem that Mexico was dependent on foreign drug firms for export earnings and for the importation of pharmaceutical products and technology. In both cases new state institutions were able to make some progress (although more was achieved in the case of Sri Lanka than in Mexico), and in both cases the degree of success was limited by the initial scope and support of the new policy institutions. Of course, it need not be the government which always must develop the strategy for greater self-direction and which also must execute the actual manufacturing program which leads to less reliance on, or achieves better relations with, an international high-technology industry. Daniel Chudnovsky found in the case of Argentina that wholly indigenous pharmaceutical companies were able to challenge multinational drug firms in the local supply of a fairly wide range of products.32 These national companies have been able to develop the technology to fabricate drugs on the basis of raw materials from countries— especially Italy—which do not recognize international patents on the production of these raw materials. Hence national companies, without the direct financial or administrative assistance of the Argentine government, have been able to be viable competitors with the local subsidiaries of foreign drug firms as a result of the exploitation by the former of divisions within the international pharmaceutical industry. However, even in this case one needs to look at a governmental institutional factor, that is, the position of the Argentine Supreme Court that the country's patent laws do not extend protection to patents held by international pharmaceutical companies on raw materials and components production, and, for this reason, in the face of court challenges to the wholly indigenous firms by the multinational drug firms operating in Argentina, the indigenous firms could continue to fabricate drugs based on imports of materials from international patent-violating companies in Italy and elsewhere. Hence a permissive legal environment has been necessary for Argentine private actors to emerge and to flourish in the face of stiff competition from their multinational pharmaceutical colleagues.

Conclusion

167

Moreover, successful reformulation of ties with multinationals need not always involve the establishment of*new policy institutions specifically tasked with responsibility in the issue area in which the government is exerting pressure. For example, Peter Evans's basic theme in his recent study of multinationals in Brazil is that such firms work in "alliances" with the governmental elite and local capitalists to the detriment of the Brazilian public. However, he also shows that often the government must bargain on particular matters with multinational firms. One such bargaining instance concerned the government's belief in the late 1960s and early 1970s that multinational drug firms conducted too little of their corporate research and development activities in Brazil. 33 While he is unimpressed with the response of the foreign enterprises, Evans does report that Johnson & Johnson, American Cyanamid, and Beecham all took on new research and development activities in Brazil during the early 1970s as a result of governmental pressures. He reports that one method of exerting this pressure was a series of statements by Brazilian governmental officials that they were interested in turning a state drug distribution agency for the poor into a "Medibras" similar to Petrobras, that is, to nationalize the Brazilian pharmaceutical industry. In this case the mere mention of such an action, adding credibility to it by referring to a policy body that might be used to execute such an effort, was sufficient to alter the behavior of several foreign drug firms in Brazil. Yet even in the two cases of Argentina and Brazil the interaction between international technological and industrial developments and domestic policy institutional dynamics combined to facilitate their respective new levels of success with international high-technology enterprises. In the case of Brazil it was probably the knowledge on the part of the foreign firms that the government could devote resources to a nationalized d r u g industry that made the reference to what was otherwise a fairly minor policy unit so effective. Moreover, it was the legal framework of Argentina which gave the indigenous enterprises an opportunity to enter the pharmaceuticals industry. Hence, the levels of success and failure (and combinations of both) of several developing countries with multinational firms in the

168

Conclusion

computer and pharmaceuticals industry are closely correlated to the presence or not of policy units that have the expertise and authority to reestablish ties with foreign firms and to encourage the emergence of indigenous participants in the two industries. Just as in the case of India's experience with the international computer industry, it is the combination of change in international technology and industrial structure and the evolution of domestic policy institutions which provides the most powerful explanation of increasing self-direction of developing countries with regard to computers and to pharmaceuticals.

CONCLUSION

"Assertive" upper-tier developing countries have much to gain by studying the Indian experience with computers and the basic argument of the bargaining school. These countries cannot expect to enjoy both complete national autonomy and extensive, productive economic ties with advanced capitalist societies. At the same time, however, the Indian experience suggests that "assertive" developing countries do not face a stark choice between autonomy and dependency. "Assertive" developing countries may become "dependent" as a result of contacts with advanced capitalist societies for the acquisition of particular goods, services, technology, or flows of capital. However, these countries can also expect to learn, over time, how to manage (and to increase their benefits resulting from) these "dependent" relationships. Hence, these countries do not need to equate being "dependent" on specific ties with advanced capitalist countries with being in a general situation of "dependency" on advanced capitalism.34 Instead, they can be increasingly confident of their ability to achieve national selfdirection and economic development within the context of active participation in the international economy. Finally, the study's understanding of the Indian experience with computers may generate useful insights about the prospects for international order. After a period of realignment, India's linkages with the international computer industry are more extensive and stable at present than during previous periods and certainly more so than during the period of India's

Conclusion

169

greatest policy weakness in computers, that is, 1967—1972. During that period the government viewed IBM and ICL with a mixture of awe and suspicion, and, uncertain about the motives and plans of these firms, the government placed very tight limits on the ability of the firms to expand their operations in the country. (This of course was much easier than changing the activities that they had already undertaken.) At the end of the 1970s India's relations with the international industry were operating in a context in which the government had substantially more confidence that it understood the industry and that the foreign firms in India were contributing to the country's efforts to establish a stronger, more self-directed computer industry. Hence at the end of the 1970s both Burroughs and ICL were actively planning to expand their Indian operations, approval for these plans by the government appeared to be promising, and Indian systems-engineering firms had a wide variety of contacts with international suppliers of components and peripherals. Moreover, at the end of the decade India had attracted to its Santa Cruz Export Processing Zone two American firms, Intersil and Computer-Automation, whose export activities based in India made available to the country technology that may be helpful to the future expansion of the scope of the indigenous industry. (Of course, an even better outcome would have been one in which India had retained the presence, modified to some extent, of IBM.) More generally, at the end of the 1970s the Indian policy units responsible for computers had come to understand that linkages with international computer firms did not necessarily involve the surrender by the country of its control over the development of the Indian computer industry. It was the establishment of ties with foreign suppliers of components and peripherals, the policy units understood, which made possible the fostering of an indigenous systems-engineering industry. Moreover, through the creation of a new set of policy incentives and constraints, the government could ensure that the manufacturing activities of foreign computer firms in India were in accord with the general preferences of the government in terms of corporate organization, technological sophistication, and nondomination of the domestic systems market. Indeed, the government had come to realize that the local activities of

170

Conclusion

foreign computer firms could supplement the activities of the indigenous producers, and in the cases of Burroughs, Computer-Automation, Intersil, and a number of other foreign electronics enterprises, their export activities at Santa Cruz facilitated importation of components and peripherals used by the indigenous systems-engineering industry. In sum, it is likely that "assertive" upper-tier developing countries increasingly will apply pressures with varying degrees of success on high-technology enterprises operating within their economies. These new confrontations could for a time be acrimonious while new relations are being forged, but the case of India and computers suggests that "assertive" countries can expect to be successful over time in achieving relations with high-technology multinationals that are acceptable both to the country and to (at least some) members of the industry in which the multinationals are active. These new relations may in fact be more diverse and stable than in the earlier periods of seemingly great invulnerability of the international industry. Hence turbulence can be expected in the near term as new ties between "assertive" developing countries and multinational hightechnology enterprises are formulated. Yet it is likely that from this turbulence will emerge a new set of even closer (albeit different) ties between these vitally important "assertive" countries and international firms in high-technology industries. Having achieved these more favorable ties with international firms, it is reasonable to speculate that "assertive" upper-tier developing countries will assign greater legitimacy to the broader international economic system of which these multinationals are a prominent component. If this is true, then shortterm turbulence in relations between "assertive" developing countries and high-technology multinationals may lead to circumstances more conducive to a new and perhaps higher level of international order.

Notes Chapter I 1. For an overview of the objectives and new power opportunities of developing countries, see Stephen D. Krasner, "Transforming International Regimes: What the Third World Wants and Why," International Studies Quarterly 25 (March 1981): 119—148. Several analyses of developing country opportunities focus on their use of international organizations, and for a discussion of the dynamics within international institutions that may be favorable for developing country efforts, see Robert O. Keohane and Joseph S. Nye, Jr., "Transgovernmental Relations and International Organizations," World. Politics 27 (October 1974):39-62; and Robert O. Keohane and Joseph S. Nye, J r . , Power and Interdependence: World Politics in Transition (Boston: Little, Brown, 1977). One strategy on the part of developing countries that has been examined is to negotiate as a very large group with the developed countries. See Branislav Gosovic and John Gerard Ruggie, "On the Creation of a New International Economic Order: Issue Linkage and the Seventh Special Session of the U.N. General Assembly," International Organization 30 (Spring 1976):309-346; Joseph S. Nye, Jr., "UNCTAD: Poor Nations' Pressure Group," in Robert W. Cox and Harold K. Jacobson, eds., The Anatomy of Influence: Decision Making in International Organizations (New Haven: Yale University Press, 1974), pp. 334—370; and Keohane and Nye, Power and Independence, pp. 29—36, 54—58. For a discussion of how success was limited for developing countries as they followed this strategy in the negotiations for an Integrated Program for Commodities (IPC), see Robert L. Rothstein, Global Bargaining: UNCTAD and the Quest for a New International Economic Order (Princeton: Princeton University Press, 1979). Another strategy which has been examined is the use of producer associations such as OPEC; see C. Fred Bergsten, "The Threat Is Real," Foreign Policy 14 (Spring 1974):84-90; and C. Fred Bergsten, "The New Era in Commodity Markets," Challenge 17 (September-October 1974):32-39. Krasner is pessimistic that this approach is promising; see Stephen D. Krasner, "Oil Is the Exception," Foreign Policy, no. 14, Spring 1974, pp. 6 8 - 8 3 . A third strategy is to form developing country regional organizations, and, depending upon the regional power situations, these efforts have had success. See Stephen D. Krasner, "Power Structures and Regional Development Banks," International Organization 35 (Spring 1981):303-328. A fourth strategy is for developing countries to act on their own. Most studies of this strategy have focused on the effectiveness of individual developing countries as they have negotiated with multinational enterprises; for citations, see n. 3. For a study of how individual developing countries bargain with advanced country governments in trade matters, see David B. Yoffie, "The Newly Industrializing Countries and the Political Economy of Protectionism," International Studies Quarterly 25 (December 1981):569—600. 2. Important early statements of this general perspective include Paul A. Baran, "On the Political Economy of Backwardness," and Andre Gunder Frank, "The Development of Underdevelopment," both in Charles K. Wilbur,

172

Notes for Page 2

ed., The Political Economy of Development and Underdevelopment (New York: Random House, 1973), pp. 82-93, 9 4 - 1 0 4 ; and Harry Magdoff, The Age of Imperialism: The Economics of U.S. Foreign Policy (New York: Monthly Review Press, 1969). Important recent discussions include: Samir Amin, "Self-Reliance and the New International Economic Order," Monthly Review 29 (July-August 1977): 1—21; Fernando Henrique Cardoso, "AssociatedDependent Development: Theoretical and Practical Implications," in Alfred Stepan, ed., Authorization Brazil: Origins, Policies, and Futures (New Haven: Yale University Press, 1973), pp. 142-176; Fernando Henrique Cardoso and Enzo Faletto, Dependency and Development in Latin America, 2nd ed. (Berkeley and Los Angeles: University of California Press, 1979). For excellent (but differing) reviews of this literature, see T o n y Smith, " T h e Underdevelopment of Development Literature: T h e Case of Dependency Theory," World Politics 31 (July 1979):247-288; and J a m e s A. Caporaso, "Dependence, Dependency, and Power in the Global System: A Structural and Behavioral Analysis," in James A. Caporaso, ed., Dependence and Dependency in the Global System, special issue of International Organization 32 (Winter 1978): 13-44. 3. Of central importance within the school are the following works by Raymond Vernon: "Foreign-Owned Enterprises in the Developing Countries," Public Policy (Cambridge, Mass.: Harvard University Press, 1966), 15:361—380; "Long-Run T r e n d s in Concession Agreements," Proceedings of the American Society of International Law (April 1967):85—89; " T h e Power of Multinational Enterprises in Developing Countries," in Carl H. Madden, ed., The Case for the Multinational Corporation (New York: Praeger, 1975), pp. 151—183; Sovereignty at Bay: The Multinational Spread of U.S. Enterprises (New York: Basic Books, 1971), pp. 46—59, 105—106, 256—257; Storm over the Multinationals: The Real Issues (Cambridge, Mass.: Harvard University Press, 1977), pp. 139-179, 194—199. Also of great significance within the school is T h e o d o r e H. Moran, Multinational Corporations and the Politics of Dependence: Copper in Chile (Princeton: Princeton University Press, 1974). For very early statements of the school's basic hypothesis, see the following works by Charles P. Kindleberger: International Economics (Homewood, 111.: Irwin Series, 1953), p. 356, in which Kindleberger notes the possibility of change of concession agreements; Economic Development (New York: McGrawHill, 1958), p. 271, in which he refers to relations between firms and countries as being one of bilateral monopoly; and International Economics, 3rd ed. (Homewood, 111.: Irwin Series, 1963), p. 418, in which he explicitly states that concession agreements are bilateral monopoly situations in which the "balance of bargaining strength" shifts over time in favor of the host country. However, in these early years the concepts were not expanded very far. Of course, Kindleberger eventually did set down his comprehensive views on the problem; see his American Business Abroad: Six Lectures on Direct Investment (New Haven: Yale University Press, 1969), pp. 147—159. Other important works by representatives of the school include Raymond F. Mikesell, "Conflict in Foreign Investor-Host Country Relations: A Preliminary Analysis," in Raymond F. Mikesell, ed., Foreign Investments in the Petroleum and Mining Industries (Baltimore: J o h n s Hopkins Press for Resources for the Future, Inc., 1971), pp. 29—55; Frederick T . Knickerbocker, Oligopolistic Reaction and Multinational Enterprise (Boston: Graduate School of Business Administration, Harvard University, 1973); C. Fred Bergsten, "Coming Investment Wars?" Foreign Affairs 53 (October 1974): 135-152; and C. Fred Bergsten, T h e o d o r e H.

Notes for Pages 3—5

173

M o r a n , a n d T h o m a s H o r s t , American Multinationals

and American

Interests

(Washington, D.C.: Brookings Institution, 1978), pp. 369-381. 4. Important Marxist-dependencia analyses of the multinational corporation include Cardoso and Faletto, Dependency and Development (n. 2), pp. 159-164; Arghiri Emmanuel, "The Multinational Corporations and the Inequality of D e v e l o p m e n t , " International Social Science Journal 28 ( 1 9 7 6 ) : 7 6 0 - 7 6 4 ; P e t e r Evans, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil ( P r i n c e t o n : P r i n c e t o n University

Press, 1979); and Stephen Hymer, "The Multinational Corporation and the Law of Uneven Development," in Jagdish N. Bhagwati, ed., Economics and World Order: From the 1970s to the 1990s (New Y o r k : F r e e Press, 1972), p p .

113-140. Useful analyses of this literature include Theodore H. Moran, "Multinational Corporations and Dependency: A Dialogue for Dependentistas and Non-Dependentistas," in Caporaso, ed., Dependence and Dependency (n.2), pp.79-100; and Thomas J. Biersteker, Distortion or DevelopmentContending Perspectives on the Multinational

Corporation ( C a m b r i d g e , Mass.: M I T

Press, 1978), pp. 1-27. 5. See Harry Eckstein, "Case Study and Theory in Political Science," in Fred I. Greenstein and Nelson W. Polsby, eds., Strategies of Inquiry, vol. 7 of Handbook of Political Science, ed. Fred I. Greenstein and Nelson W. Polsby (Reading, Mass.: Addison-Wesley, 1975), pp. 79—137. India's experience with computers does not constitute an Ecksteinian "critical case" for either the bargaining or the Marxist-dependencia school. Such a case would involve the most powerful multinational enterprises (which could be those firms in the computer industry, according to both schools) and the weakest developing country (which is certainly not India). Yet within the developing world "strong" multinationals (i.e., those in high-technology manufacturing industries) have extensive operations only in relatively advanced developing countries. Hence for the foreseeable future most instances of significant bargaining between "strong" multinationals and developing countries are likely to involve the more advanced countries. 6. According to an important standard for comparing technological intensiveness of manufacturing industries—annual research and development expenditures as a percentage of total yearly revenue—data processing is technologically the most dynamic industry at present. For a discussion of the measure, see Raymond Vernon, William Gruber, and Dileep Mehta, "The R&D Factor of International Trade and in International Investment of the United States," in Louis T. Wells, Jr., ed., The Product Life-Cycle and International Trade (Boston: Graduate School of Business Administration, Harvard University, 1972), pp. 114—115. For a comparison of thirty-one manufacturing industries, see the annual survey of research and development in American industry, Business Week, J u n e 27, 1977, pp. 62-84; July 3, 1978, pp. 48-77; and July 2, 1979, pp. 52-72. Also, see U.S. National Science Foundation, Research and Development in Industry: Technical Notes and Statistical

Tables

(Washington, D.C.: NSF, 1978), p. 34. 7. V e r n o n , Storm over the Multinationals

(n. 3), p. 151.

8. Ibid., pp. 70-71. 9. Bergsten, Moran, and Horst, American Multinationals (n. 3), p. 380. 10. Evans, Dependent Development (n. 4), p. 200.

11. Ibid., p. 203. 12. Ibid.

174

Notes for Pages 5—8

13. Douglas C. Bennett and Kenneth E. Sharpe, "Agenda Setting and Bargaining Power: T h e Mexican State Versus Transnational Automobile Corporations," World Politics 32 (October 1979):57-89. 14. Ibid., p. 87. 15. According to Cardoso and Faletto, Dependency and Development (n. 2), pp. 161—162, the technology problem exists not only between a specific enterprise and the government but between the advanced capitalist society f r o m which the firm originates and the developing country represented by the government. For a discussion of this basic asymmetry between developed and developing countries, see J o h a n Galtung, "A Structural Theory of Imperialism,^"Journal of Peace Research 8 (1971):81—117.

16. For comparisons of general economic conditions, see International Bank for Reconstruction and Development, World Development Report 1979 (New York: Oxford University Press for the World Bank, 1979), pp. 126-127, 1 3 6 - 1 3 7 ; a n d J . W. Wilke, Statistical Abstract of Latin America (Los Angeles:

UCLA Press, 1980), vol. 20; and International Bank for Reconstruction and Development, World Tables 1976 (Washington, D.C.: IBRD, 1976), pp. 61, 79, 121, 169, 179, 243. For comparisons of national scientific capabilities, see United Nations Educational, Scientific, and Cultural Organization, Statistical Yearbook (Paris: UNESCO, 1980), pp. 755-861. 17. These upper-tier countries were classified as being more or less "assertive" or "accommodating" after an analysis of how their foreign investment regimes treat multinationals on matters such as requirements for equity sharing, controls on technology and external payment, and whether or not they are parties to the International Convention for the Settlement of Investment Disputes. Sources used for this analysis are listed in the first part of the Bibliography. 18. Organization for Economic Cooperation and Development, Development Cooperation 1980 Review (Paris: OECD, 1980), p. 165. 19. See Edith Penrose, The Large International Firm in Developing

Countries:

The International Petroleum Industry (London: Allen & Unwin, 1968); the case studies in Mikesell, ed., Foreign Investments (n. 2); Moran, Multinational Corporations (n. 3); Francis Tugwell, The Politics of Oil in Venezuela (Stanford: Stanford University Press, 1975); and for discussions which refer to several instances of bargaining, see Louis T . Wells, Jr., and David N. Smith, Negotiating Third World Mineral Agreements: Promises as Prologue ( C a m b r i d g e , Mass.:

Ballinger, 1975); and Bergsten, Moran, and Horst, American Multinationals (n. 3), pp. 130-140. For case studies of bargaining involving foreign manufacturing companies and developing countries, see the following: on I T T in Peru, Charles Goodsell, American Corporations and Peruvian Politics (Cambridge, Mass.: Harvard University Press, 1974), pp. 146-152; on pharmaceuticals in Sri Lanka, Sanjaya Lall and Senaka Bibile, "The Political Economy of Controlling Transnationals: T h e Pharmaceutical Industry in Sri Lanka, 1972—76," World Development 5 (August 1977):677—697. 20. Studies within the Marxist-dependencia tradition have attempted to show how tight limits operate on developing countries as they negotiate with multinationals in manufacturing (and especially high-technology manufacturing) industries. In addition to the studies by Evans (n. 4) and Bennett and Sharpe (n. 13), see Gary Gereffi, "Drug Firms and Dependency in Mexico: T h e Case of the Steroid H o r m o n e Industry," in Caporaso, ed., De-

Notes for Pages 16-19

175

pendence and Dependency (n. 2), pp. 237-286; and Rys Owen Jenkins, Dependent Industrialization: The Automobile Industry in Argentina, Chile, and Mexico (New York: Praeger, 1977).

Chapter II 1. U.S. Department of Commerce, Bureau of Economic Analysis, U.S. Direct Investment Abroad, 1977 (Washington, D.C.: U.S. Department of Commerce, 1981). 2. U.S. Department of Commerce, International Trade Administration, "The Use of Investment Incentives and Performance Requirements by Foreign Governments" (Washington, D.C.: Department of Commerce, October 1981), p. 9. For detailed descriptions of India's regime concerning foreign direct investments, see India, Indian Investment Center, Industrial Licensing and Foreign Collaboration (New Delhi: Indian Investment Center, 1976); H. P. Agrawal, Business Collaborations in India (New Delhi: Aruna Publications, 1979); and Price, Waterhouse, Inc., Doing Business in India (New York: Price, Waterhouse Center for Transnational Taxation, 1980). 3. K. Billerbeck and Y. Yasugi, Private Direct Foreign Investments in Developing Countries, World Bank Staff Working Paper No. 348 (Washington, D.C.: World Bank, July 1979), p. 70. This study lists fifteen developing countries with greater direct investment flows. In order of total flow, they are Brazil, Indonesia, Mexico, Panama, Peru, Argentina, Nigeria, Hong Kong, Republic of Korea, the Philippines, Papua New Guinea, Malaysia, Liberia, Singapore, and Zaire. Taiwan also had a greater inflow of direct investments during this period; see Central Bank of China, Annual Report (Taipei), for the following years: 1970, p. 16; 1971, p. 17; 1973, p. 20; 1974, p. 21; 1976, pp. 15-16. 4. Billerbeck and Yasugi, Private Direct Foreign Investments (n. 3), pp. 76, 86, for U.S. and West German investment flows. For U.K. flows, see Great Britain, Department of Industry, Trade and Industry 26 (February 25, 1977):528. 5. International Bank for Reconstruction and Development, World Development Report 1981 (New York: Oxford University Press for the World Bank, 1981), pp. 144-145. 6. U.S. Department of Commerce, Survey of Current Business 55 (October 1975):52; and 61 (August 1981):32. Developing countries listed in the August 1981 Survey with greater stocks of manufacturing investments are, in order, Brazil, Mexico, Argentina, Venezuela, Colombia, the Philippines, Singapore, Taiwan, and Hong Kong. 7. Data on direct investment flows are from Billerbeck and Yasugi, Private Direct Foreign Investments (n. 3), and Central Bank of China, Annual Report (n. 3). Data on total resource flows are from the following issues of the Organization for Economic Corporation, Development Cooperation Review (Paris, annual): 1973 (November 1973), pp. 2 0 8 - 2 0 9 ; 1974 (1974), pp. 2 7 0 - 2 7 1 ; and 1977 (November 1977), pp. 202-203. 8. On the relationship between Indian foreign investment policy problem of foreign exchange, see John P. Lewis, Quiet Crisis in India: Economic Development and American Policy (Washington, D.C.: Brookings Institution, 1962), pp. 38, 210—217; and Jagdish N. Bhagwati and Padma Desai, India: Planning for Industrialization: Industrialization and Trade Policies Since 1951 (London: Oxford University Press, 1970), p. 218. On the technology issue, see India,

176

Notes for Pages

19-25

Indian Investment Center, India Invites Foreign Capital (New Delhi: Caxton Press, 1965), pp. 7-8. 9. V. N . B a l a s u b r a m a n y a m , International

Transfer of Technology to India

(New York: Praeger, 1973), p. 32. 10. On the legal bases for intervention by minority owners of enterprises in India and on the ability of the government to have greater control over foreign subsidiaries which involve some Indian equity participation, see India, Indian Investment Center, Indian Company Law (New Delhi: Indian Investment Center, 1967). India's basic policy on equity sharing was stated in 1949 by Prime Minister Jawaharlal Nehru in the Constituent Assembly on April 6, 1949; see Great Britain, Board of Trade, Overseas Economic Surveys: India (London: Her Majesty's Stationery Office, 1950), p. 225. Hanson argues that the 1948 Industrial Policy Resolution, which set India's basic strategy for industry and which had been fairly harsh on foreign capital, was followed in actual Indian policy except in the area of foreign capital, for in this field the government was more liberal than could have been anticipated on the basis of t h e Resolution. See A. H . H a n s o n , The Process of Planning:

A Study of India's

Five-Year Plans, 1950—1964 (London: Oxford University Press for the Royal Institute of International Affairs, 1966), pp. 456-457. 11. N e h r u , in Overseas Economic Surveys (n. 10). 12. India Invites Foreign Capital (n. 8), p. 9.

13. Ibid. 14. Michael Kidron, Foriegn Investment in India (London: Oxford University Press, 1965), p. 287; and U.S. Direct Investment Abroad (n. 1), pp. 170-171. 15. India, Electronics Committee of India, Electronics in India (New Delhi, 1966), p. 23. 16. On the conduct of the war, see Neville Maxwell, India's China War (London: Jonathan Cape, 1970). On its aftermath, see Henry C. Hart, "India A f t e r t h e C h i n e s e Attack," Annals of the American Academy of Political and Social

Sciences 351 (January 1964):50-57. Also see Francine R. Frankel, India's Political Economy, 1947-1977:

The Gradual Revolution ( P r i n c e t o n : P r i n c e t o n U n i v e r -

sity Press, 1978), pp. 215—223. Perhaps one of the most debilitating effects of the conflict was the postwar near doubling of India's defense expenditures; f o r d a t a , see L a w r e n c e A. Veit, India's Second Revolution:

Dimensions of Devel-

opment (New York: McGraw-Hill for the Council in Foreign Relations, 1976), p. 112. 17. Electronics in India (n. 15), p. 5.

18. Ibid., p. 17. 19. Ibid., p. 66. 20. Ibid., pp. 66-76. 21. Ibid., p. 3. 22. Ibid., p. 76. 23. Ibid., p. 235. 24. Ibid., pp. 236-237. 25. Ibid., p. 237. 26. Ibid., p. 112. 27. Ibid., p. 241. 28. Statement of Minister of Industry D. Sanjivayya, in India, Lok Sabha, Lok Sabha Debates, 3rd ser., 51 (March 3, 1966): 3885-3886. 29. IBM interview materials, New Delhi, February 1979. 30. See John M. Stopford and Louis T. Wells, Jr., Managing the Multinational Enterprise: Organization of the Firm and Oumership of the Subsidiaries (New

Notes for Pages 25-38

177

York: Basic Books, 1972), pp. 122-123, which relied upon a report by Jack Baranson, "Technology Transfer Through the International Firm," American Economic Review 60 (May 1970):439. 31. International Computers and Tabulators Manufacturing Company, Prospectus (Bombay), January 24, 1964, pp. 1, 6; and First Annual Report and Accounts (Bombay), May 8, 1964, p. 6. 32. The entitlement program for IBM is noted in India, Lok Sabha, Public Accounts Committee (1975—1976), Two Hundred and Twenty-First Report: Computerization in Government Departments (New Delhi: Lok Sabha Secretariat, April 1976), pp. 196—198. For a general discussion of India's strategy with regard to "entitlements" of foreign exchange, see Bhagwati and Desai, India: Planning for Industrialization (n. 8), pp. 406, 434—447; and Anne O. Kruger, The Benefits and Costs of Import Substitution in India: A Micro-Economic Study (Minneapolis: University of Minnesota Press, 1975), pp. 29—30. 33. IBM interview materials, North Tarrytown, J u n e 1978; and Paris, July 1978. 34. Ibid.; and IBM interview materials, New Delhi (n. 29). 35. ICL interview materials, London, August 1978; ICL/India interview materials, New Delhi and Bombay, February 1979; ICL/India interview materials, New Delhi, January 1981; interview, former official in Department of Electronics, January 1981. 36. Burroughs interview materials, Detroit, October 1978; TataBurroughs interview materials, Bombay, February 1979. 37. Telephone interview, former Burroughs executive, Detroit, October 1978. 38. IBM interview materials, North Tarrytown, J u n e and September 1978; and Paris, July 1978 and January 1979. See Trevor Drieberg, "IBM Proposes to Set Up Scientific Research Post," Journal of Commerce, April 21, 1977, p. 10. 39. Public Accounts Committee, Computerization (n. 32), pp. 183—193. 40. IBM interview materials (nn. 29 and 38). 41. Telephone interview, IBM/North Tarrytown, April 1980. 42. ICL/ICIM interview materials, New Delhi and Bombay, February 1979; and New Delhi, January 1981. See also "ICL Asked to Make 100 Medium-Range Computers," Economic Times (Bombay), November 19, 1977, p. 6. 43. Data on this range of the IBM-370's are in Montgomery Phister, Jr., Data Processing Technology and Economics (Santa Monica, Ca.: Santa Monica Publishing Co., 1976), pp. 346-347. On the 2904, see Om Vikas, "Indigenous Development of Computer Systems, Peripherals and Computer Communication Facilities," Electronics: Information and Planning (Bombay) 5 (August 1978):836; and the annual survey on minicomputers in Datamation 22 (October 1976):91—105. 44. IBM interview materials (nn. 33 and 41). 45. International Computers Indian Manufacture Limited, Eighteenth Annual Report and Accounts, 1979-1980 (Bombay), December 10, 1980, pp. 12, 15, 17-32, 50. 46. Tata-Burroughs interview materials, New Delhi, January 1981. 47. IBM interview materials, North Tarrytown, J u n e 1978; and IBM interview materials, North Tarrytown (n. 38). 48. DCM Dataproducts interview materials, New Delhi, January 1981; and DCM brochures.

178

Notes for Pages 39-55

49. HCL interview materials, New Delhi, January 1981; and HCL brochures. 50. ORG interview materials, New Delhi, January 1981; and ORG brochures. 51. IDM interview materials, New Delhi, January 1981; and Nelco 3000 fact sheet. 52. The figure for IBM employment in the early 1970s is from IBM interview materials (n. 47); for ICL, ICL/London interview materials, London, July 1978; and Public Accounts Committee, Computerization (n. 32), p. 181. T h e ECIL Computer Division employment figure is from "Growth of Indigenous Effort: Special Section on Computers in the 1980s," Commerce (Bombay), May 31, 1980, p. 925; for Tata-Burroughs, Tata-Burroughs interview materials (n. 46); for ICIM, Annual Report (n. 45), pp. 17—32. Figures for the non-ECIL Indian firms are from interviews conducted in January 1981 in New Delhi. 53. On ECIL, see "Growth" (n. 52). For complete import approvals see the following issues of the Annual Report of the Indian government's Department of Electronics (New Delhi: annual): 1977-1978 (1978), p. 97; 1978-1979 (1979), p. 41; and 1979-1980 (1980), p. 33. 54. "Statistics," Electronics: Information and Planning 2 (March 1975):493; and India, Review Committee on Electronics, "Report of the Review Committee on Electronics, Part II," Electronics: Information and Planning 7 (April 1980):470. 55. Data on the TDC-316 and Galaxy 11 are from Vikas, "Indigenous Development" (n. 43), pp. 793, 795; the cost per-bit for the Galaxy 11 was reported to the author by a DCM executive in an interview in New Delhi, January 1981.

Chapter III 1. T h e figures are from Montgomery Phister, Data Processing Technology andEconomics (Santa Monica, Ca.: Santa Monica Publishing Co., 1976), p. 483. The use of "flip-flops" in computer circuitry is explained in William C. Holton, "The Large-Scale Integration of Microelectronic Circuits," Scientific American 237 (September 1977):89. For an overview of the history of the transistor, see "The Solid State Era," Ch. 5 of Fifty Years of Achievement: A History, special issue of Electronics, April 17, 1980, pp. 216—273. For a history of solid state physics and the work at Bell Laboratories leading to the transistor, see Charles Weiner, "How the Transistor Emerged," IEEE Spectrum 10 (January 1973):24—33. Finally, see Ernest Braun and Stuart MacDonald, Revolution in Miniature: The History and Impact of Semiconductor Electronics (Cambridge: Cambridge University Press, 1978), esp. pp. 11-60 for the discovery of the transistor, and pp. 61—66 and 83-86 for the development of improved varieties of and production processes for transistors. 2. Phister, Data Processing (n. 1). T h e integrated circuit emerged almost simultaneously at Texas Instruments and Fairchild during 1958—1959; see Braun and MacDonald, Revolution in Miniature (n. 1), pp. 101—120; and Michael Wolff, "The Genesis of the Integrated Circuit," IEEE Spectrum 13 (August 1976):44—53. 3. T h e differences between bipolar and MOS integrated circuits are described in Braun and MacDonald, Revolution in Miniature (n. 1), pp. 118—119;

Notes for Pages

56-59

179

and James N. Meindl, "Microelectronic Circuit Elements," Scientific American 237 (September 1977):77. 4. For a discussion of process improvements, see Robert N. Noyce, "Microelectronics," Scientific American 273 (September 1977):67—68; Holton, "Large-Scale Integration" (n. 1), p. 94; and William G. Oldham, "The Fabrication of Microelectronic Circuits," Scientific American 237 (September 1977): 111—128. T h e ability to increase the densities of components on a single chip is explained in Richard N. Gossan, Jr., "100,000 Gates on a Chip: Mastering the Minutia," IEEE Spectrum 16 (March 1979):42-44; and Erich Bloch and Dom Galage, "Component Progress: Its Effect on High-Speed Computer Architecture and Machine Organization," Computer 11 (April 1978):64—69. 5. For the development (by IBM) of improved d r u m and disk storage systems, see R i c h a r d E. Matick, Computer Storage Systems and Technology (New

York: Wiley, 1977), pp. 21—25. While the storage of 1 million bits of information in auxiliary storage cost $153 in 1956, this same amount of auxiliary storage cost $2.25 in 1975; see A. S. Hoagland, "Storage Technology: Capabilities and Limitations," Computer 12 (May 1979): 16. For a discussion of how disk drives evolved during the 1960s and 1970s, see Rick Brechtlein, "Comparing Disk Technologies," Datamation 24 (January 1978): 139—150. 6. On the concept of computer "generations," see Peter J. Denning, "Third-Generation Computer Systems," Computer Surveys 3 (December 1971): 175; additional historical analysis is provided in Saul Rosen, "Electronic Computers: A Historical Survey" Computer Survey 1 (March 1969):7-10. For an introduction to minisystems, see Peter Masucci, "Micro, Mini, and Mainframe Basics," Instrument and. Control Systems 50 (June 1977):59—61. See also Stephen A. Kallis, Jr., "Mini or Micro—What's the Difference Anyway?" MiniMicro Systems 9 (June 1976):46—47; E. J. Kovalcik, "Understanding Small Computers," Instrument and Control Systems 49 (January 1976):57—62; Arthur Robinson, "Computers: First the Maxi, Then the Mini, Now It's the Micro," Science, December 20, 1974, pp. 1102—1104. For a good definition of the range of minisystems, see Ralph Spencer, Jr., "VLSI and Minicomputers," in I E E E ( C o m p u t e r Society), Digest of Papers: Computer Technology: Status, Limits,

and Alternatives (New York: IEEE Spring Computer Conference, 1978), pp. 13-15. For a historical overview, see John Koudela, Jr., "The Past, Present, and Future of Minicomputers: A Scenario," Proceedings of the IEEE 61 (November 1973): 1527-1528. 7. Digital Equipment, Annual Report 1975 (Maynard, Mass.: 1975), p. 6. On the PDP—8 line, see also Charles P. Lecht, The Waves of Change: A TechnoEconomic Analysis of the Data Processing Industry (New Y o r k : A d v a n c e d C o m -

puter Techniques Corporation, 1977), p. 125. 8. Malcolm L. Steifel, "Add-On Memories Are Made of This," Mini-Micro Systems 10 (June 1977):35—46; and Malcolm L. Steitel, "Add-On Memories," Mini-MicroSystems 11 (December 1978):71-83. 9. See Arthur L. Robinson, "Multiple Minicomputers: Inexpensive and Reliable Computing," Science, January 31, 1975, pp. 337-338. 10. For comparisons of minisystem and mainframe performance, see Barry J. Tannenbaum and Steven J. Wallach, "Trends in Supermini Architect u r e , " in I E E E ( C o m p u t e r Society), Digest of Papers: Micros, Minis, and Mainframes: Technology Thrust Versus User Requirements (New Y o r k : I E E E Fall C o m -

puter Conference, 1977), p. 215. 11. This discussion of Intel draws on Dwight H. Sawin, Microprocessors and

180

Notes for Pages 59—64

Microcomputer Systems (Lexington, Mass.: Lexington Books, 1977), p. 2; and Gene Bylinsky, "Here Comes the Second Computer Revolution," Fortune 92 (November 1975): 136. 12. Sawin, Microprocessors (n. 11), refers to the 8008 as the "first generation" and the 8080 as the "second generation" of microcomputers. On their comparative performance, see Kenneth Rose, "The Microcomputer Revolution," Modern Materials Handling 34 (August 1979): 181. 13. For the entry of these firms into the microcomputer field, see Bylinsky, "Second Computer Revolution" (n. 11), p. 137; and for the mid-1970s as a whole, see Charles J. Sippl, Microcomputer Handbook (New York: Petrocelli/ Charter, 1977), pp. 131, 380-415. 14. On these developments, see Rose, "Microcomputer Revolution," (n. 12), p. 182. 15. For attempts to draw distinctions between minicomputers and microcomputers, see Masucci, "Micro," Kallis, "Mini," and Robinson, "Computers" (n. 6); and Douglas A. Cassell, "Putting the Micro into Perspective," Datamation 24 (August 1978): 100-102. It should be noted that in some cases all of the functions of the microcomputer are performed by circuits embedded on only one integrated circuit; examples are the Intel 8748 and Motorola 6801; see Rose, "Microcomputer Revolution" (n. 12), p. 182. 16. For example, between 48 and 60 percent of the price for hardware of the Digital Equipment PDP—11 family may be attributed to peripherals; see Lecht, Waves of Change (n. 7), p. 128. 17. T h e different types of auxiliary storage for minisystems are discussed in A. Bruce Minildi, "A Guide to Data Storage for Micros and Minis," Instruments and Control Systems 50 (August 1977):41—43. 18. T h e double-sided floppy was introduced both by IBM and Shugart Associates in 1977; see George H. Sollman, "Double-Sided Recording: The Floppy Disk Reaches Maturity," IEEE (Computer Society), Digest of Papers (n. 10), p. 117. For figures on the increase of density of data storage on disks and floppies, see Len Yencharis, "Micro/Mini Storage Peripherals Driven by Disk, Tape Advances," Electronic Design, October 25, 1979, p. 62. T h e emergence of the floppy disk is explained in Dan M. Bowers, "Floppy Disk Drives and Systems, Part I: Historical Perspective," Mini-Micro Systems 10 (February 1977):36—44, which includes a list of fifty vendors of floppy systems. Finally, in late 1976 a newer, smaller, less expensive flexible disk was announced: the "mini-floppy"; see Donald J. Massaro, "Advent of the Minifloppy," IEEE (Computer Society), Digest of Papers: System Design: A Discipline in Transition (New York: IEEE Spring Computer Conference, 1977), pp. 91-94. 19. Figures on floppy disk costs are taken from a figure in J. Egil Juliessen, "Where Bubble Memories Will Find a Niche," Mini-Micro Systems 12 (July 1979):60. Prices for printers and cathode-ray tube visual displays also are improving; see A. Santoni, "Mini/Micro Peripherals Going Up in Ability, Down in Price," Electronic Design, October 21, 1978, pp. 46—48. For a discussion of the impact of lower peripheral prices on a specific minisystem, the PDP—8/E, see James Brinton, "Peripherals Flood Erodes Mini Prices," Electronics, July 3, 1972, pp. 111-112. 20. Usually a firm contracted with distributors directly; Datapoint, on the other hand, arranged in 1972 to have TRW Corporation distribute its products through TRW's network of distributors in developing countries; see Datapoint "10-K Form" for 1977, pp. 6 - 7 , 10-12.

181

Notes for Pages 65—66

21. On the Japanese computer industry, see Gene Gregory, "Japan Turns Its Ingenuity to the World Computer Market," IEEE Spectrum 16 (April 1979):69—71; Bro Uttal, "Japan's Big Push in Computers," Fortune 98 (September 25, 1978):64-72; and Bro Uttal, "Exports Won't Come Easy for Japan's Computer Industry," Fortune 98 (October 9, 1978): 138-146. On the Japanese and European industry, see U.S. Department of Commerce, The American Computer Industry in Its International Competitive Environment (Washington, D.C.: Department of Commerce, November 1976); and on European companies, see AlvinJ. Harman, The International Computer Industry: Innovation and Comparative Advantage (Cambridge, Mass.: Harvard University Press, 1971), pp. 18-38. Data on the revenues on major non-American computer firms (in the capitalist countries) are in Oscar Rothenbuecher, "The T o p 50 U.S. Corporations in the Data Processing Industry," Datamation 24 (June 1978):86; as Rothenbuecher notes, six of the seven largest non-American firms have revenues which would place them among the "top ten" American firms (although not the "top seven" American mainframe firms). 22. See U.S. Congress, Senate Committee on Commerce, Science, and Transportation, Industrial Technology (Washington, D.C.), October 30, 1978, p. 91. 23. Dick Hackmeister, "Focus on Semiconductor RAMs," Electronic Design, August 16, 1977, p. 62. 24. Bowers, "Floppy Disk Drives" (n. 18), pp. 42, 44; and Sam Davis, "Special Report: Hard Copy Computer Output—Recent Designs Feature Reliability, Intelligence, Lower Cost," EDN 19 (October 20, 1977):52-53. 25. These data are from the following sources (using the same code as in Table 13): Company

Source

Year

Page

Intersil Fairchild Mostek Motorola National Semiconductor

B B A B A

1977 1976 1977 1976 1976

10 3, 9 1, 17 12 24

26. Useful overviews of the integrated circuit industry can be found in Industrial Technology (n. 22); see also, "The Supergrowth in Memory Chips," Business Week, September 3, 1979, pp. 124-125, 128. Finally, a recent study has examined the present state and possible future evolution of integrated circuits competition internationally: I. M. Mackintosh, "Integrated Circuits: The Coming Battle," Long-Range Planning 12 (June 1979):28-37. 27. National Semiconductor Corporation, Annual Report 1977 (Santa Clara, Ca., 1977), p. 32. 28. Fairchild Camera and Instrument Corporation, Annual Report 1978 (Mountain View, Ca., 1978), pp. 5-15. 29. Data 100 Corporation, "10-K Form," (Washington, D.C.: Securities and Exchange Commission, 1977), p. 1. 30. Centronics Corporation, Annual Report 1978 (Hudson, N.H., 1978), p. 8. 31. See Gerald Brock, The U.S. Computer Industry: A Study of Market Power

182

Notes for Pages

71-78

(Cambridge, Mass.: Ballinger, 1975), pp. 20, 52, 65—66. It should be noted that even though Brock believes that barriers to entry are relatively low in minicomputers, he believes that the industry as a whole lacks adequate levels of competition and should therefore be restructured.

Chapter IV 1. R. Narasimhan, "Meaningful Goals in Computer Development, Production, and Use," in India, Electronics Committee of India, Electronics (Bombay: Electronics Commission, 1971), p. 374. 2. Ibid. 3. Ibid., p. 372. 4. India, Department of Electronics, Annual Report: 1977-1978 (New Delhi, 1978), p. 101 (hereafter all such Annual Reports are cited as DoE, AR). 5. India, Technical Panel on Minicomputers, "Report of the Panel on Minicomputers" (hereafter cited as India, "Minicomputers Panel Report"), Electronics: Information and Planning 1 (February 1974):478—479. 6. Ibid., p. 503. 7. N. Seshagiri, "Minicomputer Networks as Viable Alternatives to Imported Maxicomputers," Electronics: Information and Planning 1 (January 1974):446. 8. India, "Minicomputers Panel Report" (n. 5), pp. 490-491. 9. Ibid., p. 492. 10. Ibid., p. 503. 11. K. K. Kutty, "Low Cost Peripherals: Their Relevance to the Indian Computer Industry," Electronics: Information and Planning 2 (July 1975):341—343. 12. India, "Minicomputers Panel Report" (n. 5), p. 505. 13. Ibid., p. 507. 14. Seshagiri, "Minicomputer Networks" (n. 7), p. 445. 15. Ibid. 16. DoE, AR: 1973-1974, pp. 32-33. 17. India, Lok Sabha, Public Accounts Committee, Two Hundred and Twenty-First Report: Computerization in Government Departments (New Delhi: Lok Sabha Secretariat, April 1976) (hereafter cited as PAC, Computerization), p. 360. 18. DoE, AR: 1973-1974, p. 52. 19. M. G. K. Menon, "A Decade of Progress," Proceedings of the Convention of the Computer Society of India (Bombay, 1977), pp. 9—10. 20. PAC, Computerization (n. 17), p. 183. 21. ICL interview materials, Bombay, February 1979; and New Delhi, January 1981. 22. For sources see Ch. 2, Table 4. 23. DoE, AR: 1975-1976, p. 51. 24. O m Vikas, "Indigenous Development of C o m p u t e r Systems, Peripherals, and Computer Communications Facilities," Electronics: Information and Planning 5 (August 1978):781-783. 25. O n T I F R and ASCI, see ibid., p. 782; on IISc, see PAC, Computerization (n. 17), p. 258. 26. DoE, AR: 1973-1974, p. 33. 27. PAC, Computerization (n. 17), p. 258.

Notes for Pages

79-95

183

28. See DoE, AR: 1971-1972, p. 16, AR: 1973-1974, p. 35; AR: 1974-1975, p. 53; AR: 1975-1976, pp. 51-54; AR: 1976-1977, pp. 170, 175. See also U.N. Development Program, Compendium of Approved Projects, September 1979, p. 136; Trevor Drieberg, "India Seeks to Develop Computer Industry," Journal of Commerce, July 3, 1972, p. 9. 29. PAC, Computerization (n. 17), p. 197. 30. DoE, AR: 1975-1976, p. 46. 31. DoE, AR: 1971-1972, p. 200. 32. DoE, AR: 1976-1977, p. 94. 33. DoE, AR: 1975-1976, p. 91. 34. DoE, AR: 1977-1978, pp. 161-162; and "International Report: India," Solid State Technology 21 (May 1978): 11; and "International Report: India," Solid State Technology 23 (February 1980): 12. 35. DoE, AR: 1974-1975, p. 36. 36. Ibid. 37. India, Ministry of Commerce. Investment Opportunities in Electronics Exports (Bombay Development Commissioner, n.d.). For assessments, see "SEEPZ: Appraisal of Performance,"Journal of Industry and Trade 19 (January 1979):26—30; and K. K. Subrahmanian and P. M. Pillai, "Multinational Firms and Export Processing Zones," Economic and Political Weekly, August 26, 1978, pp. 1473-1477. 38. See H. P. Agrawal, Business Collaboration in India (New Delhi: A r u n a Publications, 1979), pp. 32-36, 236-252. 39. PAC, Computerization (n. 17), pp. 193-194. 40. Ibid., pp. 192-193. 41. This discussion is based on interviews conducted at Burroughs/Detroit, October 1978; and Burroughs/Bombay, February 1979. 42. This discussion is based on interviews conducted at ICL/London, August 1978; and ICL/New Delhi and ICL/Bombay, February 1979. 43. This discussion is based on interviews conducted at IBM/North Tarrytown, J u n e and September 1978; IBM/Paris, July 1978 and January 1979; and the IBM liaison office in New Delhi, January 1979. 44. See Trevor Drieberg, "IBM Proposes to Set U p a Scientific Research Post," Journal of Commerce, April 21, 1977, p. 10. 45. These issues are discussed in J o h n M. Stopford and Louis T . Wells, Managing the Multinational Enterprise: Organization of the Firm and Ownership of the Subsidiaries (New York: Basic Books, 1972), pp. 99-124; Michael Z. Brooke and H. Lee Remmers, The Strategy of Multinational Enterprise (London: Pitman, 1978), pp. 215—221; and J o h n Fayerweather, International Business Strategy and Administration (Cambridge, Mass.: Ballinger, 1978), pp. 428—443. 46. Burroughs Corporation, Annual Report 1977 (Detroit, Mich.: 1978), p. 4; International Business Machines Corporation, Annual Report 1977 (Armonk, N.Y., 1978), pp. 3 - 4 ; International Computers Limited, Annual Report and Accounts (London, 1977), p. 3. 47. This information is taken f r o m Annual Reports of the firms d u r i n g the mid-1970s and, in the cases of IBM and Burroughs, 10-K Forms submitted to the U.S. Securities and Exchange Commission. Data on IBM also can be f o u n d in Canada, Royal Commission on Corporate Concentration, Study No. 14 of the Royal Commission on Corporate Concentration, IBM Canada Ltd.: A Case Study (Ottawa, 1977). Additional material on Burroughs can be f o u n d in Burroughs Corporation, Burroughs Corporation Fact Book (Detroit, n.d.).

184

NoUs for Pages

96-109

48. Ibid. 49. India, "Minicomputers Panel Report" (n. 5), p. 479. 50. "ICL May Be Allowed to Make Computers," Economic Times (Bombay), January 28, 1978, p. 1. 51. Ibid. 52. Menon, "Decade of Progress," (n. 19), p. 12. 53. See response of Prime Minister Morarji Desai to parliamentary questions, in India, Lok Sabha Debates, 6th ser., 11 (March 15, 1978): 186-190; and 24 (March 28, 1979):233-236. 54. These conditions are noted in "Licensing and Development of Computer Industry—Government Policy," Electronics for You 12 (March 1980):61. 55. DoE, AR: 1977-1978, p. 102.

Chapter V 1. The study was conducted by the Information, Planning, and Analysis Group (IPAG) of the Electronics Commission and is referred to in India, Lok Sabha, Public Accounts Committee, Two Hundred and Twenty-First Report: Computerization in Government Departments (New Delhi: Lok Sabha Secretariat, April 1976) (hereafter cited as PAC, Computerization), pp. 41, 50. 2. T h e first mention of the possibility that Honeywell would begin manufacturing activities in India came in 1967; see "Computer Cor {»ration," Eastern Economist, November 18, 1967, pp. 909, 911; and "Foothold for Honeywell," Economic and Political Weekly, November 18, 1967, pp. 2005—2006. Apparently the possibility of a Honeywell entry continued until 1970; see "Slow Start with Outdated Systems" Commerce, January 10, 1970, p. 16. T h e Honeywell possibility was also noted to the author by a former official in the Electronics Commission and Department of Electronics and a former official in the Department of Electronics in interviews conducted in New Delhi in January 1981. T h e Control Data possibility was described to me by the former official in both the commission and the department. 3. See "Computers for India," Link, January 7, 1973, p. 34; and " Computer Industry in India," Fortnightly Journal of Industry and Trade, January 15, 1973, p. 15. 4. PAC, Computerization (n. 1), p. 3. 5. Ibid., p. 43. On the lack of basic statistics on electronics at the disposal of the government during this period, see India, Lok Sabha, Estimates Committee, Sixty-Sixth Report: Department of Electronics (New Delhi: Lok Sabha Secretariat, April 1974) (hereafter referred to as Estimates Committee, Electronics), pp. 32-33. 6. Ibid., pp. 6 7 - 6 8 . 7. In 1968 the government and public sector accounted for 40 percent of the book value and total number of systems used in India; see R. Narasimhan, "Meaningful National Goals in Computer Development and Use," in India, Electronics Committee of India, Electronics (Electronics Commission: Bombay, 1971) (hereafter cited as ECI, Electronics), p. 371. 8. PAC, Computerization (n. 1), pp. 37—38. 9. Ibid., p. 40. 10. Ibid., p. 38. 11. Ibid., pp. 5 4 - 5 5 . 12. Ibid., pp. 196—198. For a discussion of the government's entitlement program generally, see Anne O. Kruger, The Benefits and Costs of Import Substi-

Notes for Pages 111—117

185

tution in India: A Micro-Economic Study (Minneapolis: University of Minnesota Press, 1975), pp. 15-16; and Jagdish N. Bhagwati and Padma Desai, India: Planning for Industrialization: Industrialization and Trade Policies Since 1951 (Oxford: Oxford University Press, 1970), p. 218. On the problem of foreign exchange scarcities and Indian development policy, see J o h n Lewis, Quiet Crisis in India: Development and American Policy (Washington, D.C.: Brookings Institution, 1962), pp. 38, 210-217. 13. See Ministry of Defense, Annual Report, 1966-1967 (New Delhi, 1967), p. 69; "Planned Path for Electronics," Commerce, May 13, 1972, pp. 1236—1237; and B. K. Roy, "Electronics Industry in India and Its Prospects During the Fourth Five-Year Plan," in ECI, Electronics (n. 7), p. 551. 14. See S. Bhagavantam, "Developments in the Electronics Industry: A Review," in ECI, Electronics (n. 7), p. 17; and A. Parthasarathi, "Goals and Structure of An Apex Body for Electronics," ECI, Electronics (n. 7), p. 39. 15. B. D. Nag Chaudhuri, "Inaugural Address," in ECI, Electronics (n. 7), p. 12. 16. Ibid., p. 13. 17. On the advisory nature of the committee, see Parthasarathi, "Goals and Structure" (n. 14), p. 39. 18. See Ministry ofDefense, Annual Report, 1966-1967(n. 13),p. 69; G. L. Sheth, "Foreign Financial Participation and Technical Collaboration in Electronics," in ECI, Electronics (n. 7), p. 126; Parthasarathi, "Goals and Structure" (n. 14), p. 40; and A. Parthasarathi, "Ensuring the Success of Technological Innovation in the Development Strategy for Electronics," in ECI, Electronics (n. 7), pp. 178, 196. 19. Bhagavantam, "Developments" (n. 14), p. 18; Roy, "Electronics" (n. 13), pp. 556-561; and India, Review Committee on Electronics, "Report of the Review Committee on Electronics, Part II," in Electronics: Information and Planning 7 (April 1980) (hereafter cited as India, "Report"):414, 418. 20. For example, see statements of Sheth, "Foreign" (n. 18), p. 127; and the statement of V. Sarabhai, "Some Aspects of Policy for the Development of Electronics," in ECI, Electronics (n. 7), pp. 45—46. 21. On the differences of strategy between BEL and ECIL, see Estimates Committee, Electronics (n. 5), pp. 6—7. 22. See discussion of BEL General Manager C. R. Subramaniam, in ECI, Electronics (n. 7), p. 421. 23. See statement of the director of the Electronics Group at the Bhabha Atomic Research Center, A. S. Rao, "Research and Development in the Field of Electronics," in ECI, Electronics (n. 7), p. 175. 24. Roy, "Electronics" (n. 13), p. 553. 25. See statement of BEL Deputy Manager G. K. Rao, "Scope for Company—Financed R&D in the Field of EDP," in ECI, Electronics (n. 7), p. 407. 26. India, Lok Sabha, Estimates Committee, Nineteenth Report: Industrial Licensing (New Delhi: Lok Sabha Secretariat, 1972), pp. 130-131. 27. Interview, former official in department, and former official in commission and department (n. 2). 28. "Preface," ECI, Electronics (n. 7), p. v. 29. Parthasarathi, "Ensuring the Success" (n. 18), p. 178. 30. Chaudhuri, "Inaugural Address" (n. 15), p. 7. 31. See in particular the paper by Parthasarathi, "Goals and Structure" (n. 14), and the remarks of Sarabhai at the close of the conference, ECI, Electronics (n. 7), pp. 540-543.

186

Notes for Pages

117-129

32. T h e structure and functions of the two units were outlined in Parthasarathi's paper delivered at the March 1970 national conference; see Parthasarathi, "Goals and Structure" (n. 14). For reports on the establishment of the commission and department, see "Which Direction in Electronics," Commerce, February 6, 1971, p. 232; D. Chaudhuri, "Empire Building in Electronics," Economic and Political Weekly, May 8, 1971, p. 953; and "Planned Path for Electronics" (n. 13), pp. 1236-1237. 33. Cabinet Resolution 26/7/70-EC (February 1, 1971), reprinted in Estimates Committee, Electronics (n. 5), p. 216. 34. India, Department of Electronics, Annual Report: 1971—1972 (New Delhi: Government of India, 1972) (hereafter all such Annual Reports are cited as DoE, AR), pp. 5—6. See also "Responsibilities of the Electronics Commission and Department of Electronics," Electronics: Information and Planning 3 (March 1976):478-479; and Estimates Committee, Electronics (n. 5), pp. 206-207. 35. Estimates Committee, Electronics (n. 5), pp. 216—218. 36. Professor Menon discussed the problem of information in August 1971 at a seminar in New Delhi; see "Future of Electronics in India," Eastern Economist, September 10, 1971, pp. 4 6 9 - 4 7 0 . 37. O n the initial composition of the commission see DoE, AR: 1971—1972, pp. 1—2; and for the placement of Chaudhuri, see Estimates Committee, Electronics (n. 5), p. 202. 38. DoE, AR: 1973-1974, p. 4; DoE, AR: 1975-1976, p. 191. See also Estimates Committee, Electronics (n. 5), pp. 207—211. 39. Estimates Committee (n. 26). 40. DoE, AR: 1971-1972, pp. 33-34. 41. India, Electronics Commission, Perspective Report on Electronics (New Delhi: Information, Planning, and Analysis Group, 1975), pp. 667-670. 42. India, Technical Panel on Minicomputers, "Report of the Panel on Minicomputers," Electronics: Information and Planning 1 (February 1974):478. 43. IBM and ICL interview materials. 44. For the statements in 1972 and 1974, see India, Lok Sabha Debates, 5th ser., 16 (May 13, 1972): 162-163; and 33 (March 20, 1974):70-71. 45. See DoE, AR: 1971-1972, pp. 23-24. 46. Interview, f o r m e r official in d e p a r t m e n t (n. 2). 47. Burroughs interview materials. 48. Interview, f o r m e r official in department (n. 2). 49. Interview, f o r m e r official in d e p a r t m e n t (n. 27). 50. Interview, f o r m e r official in d e p a r t m e n t and commission (n. 2). 51. India, "Report" (n. 19), p. 471; and Estimates Committee, Electronics (n. 5), pp. 84-85. 52. India, "Report" (n. 19), pp. 470, 491. 53. Ibid., pp. 414, 428. 54. O m Vikas, "Indigenous Development of Computer Systems, Peripherals, and Computer Communications Facilities," Electronics: Information and Planning 5 (August 1978):793; and Datamation 24 (August 1978): 116. 55. Interview, f o r m e r official in d e p a r t m e n t (n. 2). 56. Interview, f o r m e r official in department, and f o r m e r official in commission and department (n. 2). 57. India, "Report" (n. 19), pp. 477-481. 58. Interview, manager, Data Processing Department, Indian Public Sector Enterprise, New Delhi, J a n u a r y 1981.

Notes for Pages 130-137

187

59. Interview, official, department, New Delhi, January 1981; and former official in department (n. 2). 60. Interview, former official in department (n. 2). 61. India, Lok SabhaDebates, 7th ser., 2 (March 8, 1980): 191. See also "New Import Policy for Software Exports," Times of India (New Delhi), January 3, 1981, p. 1, for discussion of the "abuses" of the export scheme. 62. "New Import Policy," (n. 61); and "Indian Firms Can Import Computers," Hindustan Times (New Delhi), January 3, 1981, p. 6. 63. Interview, Electronics Commission official, New Delhi, January 1981; and former department official (n. 2). 64. Ibid.; and interview with former official in commission and department (n. 2). 65. Prime Minister Desai noted in his March minicomputer/microcomputer policy statement that applications had been rejected; see India, Lok Sabha Debates, 6th ser., 11 (March 15, 1978): 190. On the delays concerning application in the mid-1970s, see "Computer Output Blocked," Financial Express (Bombay), February 20, 1978, p. 1. 66. During an interview an official in the commission (n. 63) indicated that newspaper articles and parliamentary questions were the major means by which ministries, such as Industrial Development and Commerce, and firms put pressure on Commissioners Menon and Nag. T h e official strongly urged the author to seek out newspaper articles and parliamentary questions, and the author thanks the official for his guidance. T h e official did not tell the author which exact articles and questions were most damaging to the position of the commission. 67. "Policy on Small Computers Soon," Economic Times (Bombay), January 12, 1978, p. 1. 68. "Computer Output" (n. 65), p. 1. 69. Ibid. 70. "ICIM Allowed to Make Big Computers," Economic Times, January 11, 1978, p. 1; "ICL May Be Allowed to Make Computers," Economic Times, January 28, 1978, p. 1; "ICL Asked to Cut Equity," Economic Times, March 3, 1978, p. 4. 71. "Policy" (n. 67). 72. "All Free to Make Minicomputers," Economic Times, February 18, 1978, p. 1. 73. "Minicomputer Policy Ready," Economic Times, March 6, 1978, p. 1. 74. "Decision Soon on Minicomputers," Economic Times, August 14, 1978, p. 1. 75. India, Lok Sabha Debates (n. 65), pp. 186-190. 76. India, Lok Sabha Debates, 6th ser., 17 (August 2, 1978):98. 77. India, Lok Sabha Debates, 6th ser., 20 (December 13, 1978):63-64. 78. "Electronics Department Being Reorganized," Economic Times, December 15, 1978, p. 3. 79. T h e approvals are announced in Electronics: Information and Planning 6 (January 1979):435-441. 80. Electronics: Information and Planning 5 (March 1978) :458, for the license which had been granted to HCL. 81. "18 Units Licensed to Make Minicomputers," Economic Times, November 3, 1979, p. 1. 82. See Electronics: Information and Planning 7 (June 1980):627—631.

188

Notes for Pages 138-142

83. "Electronics Policy to Be Reviewed," Economic Times, December 11, 1978, p. 1. 84. India, Lok Sabha Debates, 7th ser., 2 (March 12, 1980): 158. 85. "Licensing, Growth Policy Drawn Up," Economic Times, November 14, 1979, p. 1. This was made a part of the announcement of the "new strategy" for minicomputers and microcomputers. 86. Indian governmental units active in the public sector strive to avoid interactions within the broader Indian polity; see Susanne Hoeber Rudolph and Lloyd I. Rudolph, "The Centrist Future of Indian Politics," Asian Survey 20 (June 1980):578. 87. Francine R. Frankel, India's Political Economy, 1947—1977: The Gradual Revolution (Princeton: Princeton University Press, 1978), pp. 436—439. 88. In a January 1979 speech Fernandes said he "kicked out Coca Cola and IBM"; see "Black Money Paid to Indira, Says George," Indian Express (New Delhi), January 5, 1979, p. 1. 89. On reports that personnel changes were taking place as a result of the change in government, see A. Hariharan, "Challenges for Desai," Far Eastern Economic Review (hereafter cited as FEER), April 15, 1977, p. 9. 90. Interview, former IBM/India executive, New Delhi, February 1979. 91. Ibid.; and IBM interview materials, North Tarrytown, J u n e 1978. 92. IBM interview materials (n. 91). 93. Ibid. 94. Interview, former IBM/India executive (n. 90). 95. Ibid.; and IBM interview materials (n. 91); and IBM interview materials, North Tarrytown, September 1978. 96. IBM interview materials, North Tarrytown, J u n e 1978; "No Special Concessions: IBM Will Have to Dilute Equity," Economic Times, September 10, 1977, p. 1; Jayanta Sarkar, "IBM to Close Shop in India," FEER, December 9, 1977, p. 48. 97. N. R. Kleinfield, "I.B.M. to Leave India and Avoid Loss of Control," New York Times, November 16, 1977, p. 51. 98. See Richard Nations, "The Challenge for Janata," FEER, April 29, 1977, pp. 32—35; "Meaningful Change in Indian Import Policy," Business Asia (hereafter cited as BA), May 6, 1977, p. 138; "The Business Outlook: India," BA, May 27, 1977, p. 168, which discusses import liberalization moves of Commerce Minister Dharia; and "Indian Budget Details Provide Some Incentives for New Investment," BA, July 1, 1977, pp. 207-208. Finally, in mid-May Finance Minister Patel issued a report done by a private group suggesting that state enterprises should defer to private firms as key industrial producers; see Keesing's Contemporary Archives 23 (1977):28434. 99. On the MRTP classification controversy, see Keesing's Contemporary Archives 23 (1977):28605; BM (pseud.), "Industrial Policy Confusions," Economic and Political Weekly, July 16, 1977, pp. 1127-1128; "Indian Policy Debate Points to Dangers for Private Sector," BA, July 22, 1977, p. 227; and Jayanta Sarkar, "India: Key Industries Post Goes to Left," FEER, July 22, 1977, p. 34. 100. BM (pseud.), "Industrial Policy: Pragmatism Abounding," Economic and Political Weekly, September 3, 1977, pp. 1560-1561. Later reports also suggested that hard-line statements by Fernandes on FERA were not fully reflected in actual policy; see "More Flexibility Likely for Foreign Firms Investing in India," BA, J u n e 16, 1978, pp. 185-186; "Janata Infighting's Impact on Firms in India," BA, August 18, 1978, p. 259; "How Janata's Renovation

Notes for Pages

145-158

189

Affects Companies' Operations in India," BA, July 28, 1978, pp. 2 3 6 - 2 3 7 . 101. This is how Susanne Hoeber Rudolph and Lloyd I. Rudolph refer to Indira Gandhi with regard to economic policy during the emergency; see their essay, " T o the Brink and Back: Representation and the State in India," Asian Survey 18 (April 1978): 390. 102. For an analysis of the politics of the Janata economic policy, see Dennis J . Encarnation, "The Political Economy of Collaboration: Foreign Capital, Domestic Capital, and the State in India," Palo Alto, Ca., unpubl. ms., 1981, pp. 207-253. 103. On the collapse of the Janata coalition, see Iqbal Narain, "India 1978: Politics of Non-Issues," Asian Survey 19 (February 1979): 165-177; and A. G. Noorani, "The Crisis of India's Party System," Asian Affairs 7 (March-April 1980):239—249. See also A. Hariharan, "Coming Apart at the Seams," FEER, July 14, 1978, pp. 2 1 - 2 2 ; Denzil Peiris, "When T o o Many Chiefs Fall Out," FEER, August 4, 1978, pp. 16-17; Gail Omvedt, "Unrest Becomes a Way of Life," FEER, August 18, 1978, pp. 3 5 - 3 6 ; Romesh Thapar, "Desai: T h e Indispensable Target," FEER, October 13, 1978, pp. 3 2 - 3 3 ; and A. Hariharan, "Swings and Turnabouts," FEER, December 15, 1978, p. 28.

Chapter VI 1. Stanley A. Kochanek, Business and Politics in India (Berkeley and Los Angeles: University of California Press, 1974), pp. 2 8 5 - 2 8 7 . 2. Francine R. Frankel, India's Political Economy, 1947—1977: The Gradual Revolution (Princeton: Princeton University Press, 1978), pp. 162—169, 171-174. 3. Ibid., pp. 3—27; and Francine R. Frankel, "Compulsion and Social Change: Is Authoritarianism the Solution to India's Economic Development Problems," World Politics 30 (January 1978):215-240. 4. Theodore H. Moran, Multinational Corporations and the Politics of Dependence: Copper in Chile (Princeton: Princeton University Press, 1974), pp. 89-118, 192-197. 5. On the CDC—6600 controversy, see Michael Hodges, Multinational Corporations and National Government: A Case Study of the United Kingdom's Experience, 1964-1970 (Westmead: Saxon, 1974), p. 251. 6. See U.S. Department of Commerce, The American Computer Industry in Its International Competitive Environment (Washington, D.C., November 1976), pp. 4 3 - 4 5 ; and Wayne J . Lee, ed., The International Computer Industry (Washington, D.C.: Applied Library Resources, 1971), pp. 103-104. 7. Ibid. 8. Ibid.; and John Zysman, " T h e French State in the International Economy," in Peter J . Katzenstein, ed., Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States (Madison: University of Wisconsin Press, 1978), pp. 2 8 5 - 2 8 6 . 9. Zysman, "French State" (n. 8), p. 286. 10. Hodges, Multinational .Corporations (n. 5). 11. Ibid., pp. 242-250. 12. U.S. Department of Commerce (n. 6), p. 40. 13. "Brazil's Computer Market Growing Rapidly," Commerce Today, December 10, 1973, p. 27; and G. B. Levine, "Brazil 1976—Another Japan?" Datamation 21 (December 1975):65.

190

Notes for Pages 158-165

14. Levine, "Brazil 1976" (n. 13), p. 64; Steven Yolen, "Computer Production Prospects Brighten," Electronics News (hereafter cited as EN), J u n e 7, 1976, p. 32; Steven Yolen, "Brazil: Bars May Slow, Not Cut, Imports," EN, February 2, 1976, pp. 26, 28; and "No Change Due to Brazil Import Limits," EN, November 29, 1976, pp. 16, 18. 15. Steven Yolen, "Brazil OKs Three Small Computer Firms," EN, January 9, 1978, pp. 26, 30; Steven Yolen, "Brazil Move May Impact IBM/32 Plans," EN, December 13, 1976, pp. 30, 40; and Yolen, "Computer Production" (n. 14). 16. "Brazil's Computer Market" (n. 13), p. 28; Levine, "Brazil 1976" (n. 13), p. 66; and Yolen, "Computer Production" (n. 14). 17. Bohdan O. Szuprowicz, "Minicomputer Markets Around the World, Part I," Mini-Micro Systems 11 (May 1978):62. 18. Yolen, "Brazil Move" (n. 15), p. 30. 19. Levine, "Brazil 1976" (n. 13), p. 65; Yolen, "Brazil" (n. 14); and Yolen, "No Change" (n. 14). 20. Yolen, "Brazil" (n. 14). 21. Steven Yolen, "Cobra Regroups to Pace Brazil Market," EN, December 27, 1976, pp. 16, 18. 22. Steven Yolen, "Sycor, Cobra Sign OEM, Technology Transfer Accord," EN, March 21, 1977, pp. 48, 52. 23. Steven Yolen, "See Setback for IBM Plans to Make S/32's in Brazil," EN, J u n e 6, 1977, pp. 22, 34. 24. Yolen, "Brazil OK's" (n. 15). 25. Steven Yolen, "Brazil Lifts Origin Bar to CPU Manufacturers," EN, January 1, 1979, p. 26; Steven, Yolen, "Brazil Seen as Medium-Scale SystemsMaker in 3 Years," EN, December 3, 1979, p. 40; and "Brazil: A Bigger Slice for U.S. Computers," Business Week, November 3, 1980, pp. 55—56. 26. "Brazil," Business Week (n. 25). 27. Steven Yolen, "Small Computer Market in Brazil is Active for 4 Firms," EN, November 20, 1978, sec. 2, p. 43; and "E.G.&G. Subsidiary Forms Venture in Brazil," Wall Street Journal, September 2, 1980, p. 30. 28. "IBM Begins Indonesian Meetings," Financial Times, December 16, 1977, p. 33. IBM executives point to their new Indonesian operations as a successful instance of bargaining leading to the satisfaction both of national and corporate requirements; IBM interview materials, North Tarrytown, June 1978. 29. J. Morgan, "IBM to Pull Out of Nigeria," Financial Times, J u n e 21, 1977, p. 26; "IBM Elects to Pull Out of Nigeria "Journal of Commerce, J u n e 27, 1978, p. 11; "IBM Decides to Withdraw from Nigeria Because of a Foreign Investment Decree," Wallstreet Journal, J u n e 27, 1978, p. 4; "Nigeria Reflects Africa's Microcomputer Potential," Mini-Micro Systems 11 (May 1978):39—40; "Nigeria Denies Exemption to IBM," EN, July 3, 1978, p. 24; and S. Otitigbe, "IBM Pulls Marketing Unit Out of Nigeria," Advertising Age, October 9, 1978, p. 95. 30. Sanjaya Lall and Senaka Bibile, "The Political Economy of Controlling Transnationals: The Pharmaceutical Industry in Sri Lanka (1972-1976)," World Development 5 (July 1977):677-697. 31. Gary Gerefft, "Drug Firms and Dependency in Mexico: T h e Case of the Steroid Hormone Industry," in James A. Caporaso, ed., Dependence and Dependency in the Global System, special issue of International Organization 32 (Winter 1978):237-286.

Notes far Pages 166-168

191

32. Daniel Chudnovsky, "The Challenge by Domestic Enterprises to the Transnational Corporations' Domination: A Case Study of the Argentine Pharmaceutical Industry," World Development 7 (January 1979):44—58. 33. Peter Evans, Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil (Princeton: Princeton University Press, 1979), pp. 184-190. 34. For a "critical but sympathetic" discussion of the delinkage strategy, see Carlos F. Diaz-Alejandro, "Delinking North and South: Unshackled or Unhinged," in Albert Fishlow et al., Rich and Poor Nations in the World Economy (New York: McGraw-Hill for the Council on Foreign Relations 1980s Project, 1978), pp. 87—164. For a recent analysis of the strategy and it applications to Tanzanian trade policy, see Thomas J. Biersteker, "Self-Reliance in Theory and Practice in Tanzanian Trade Relations," International Organization 34 (Spring 1980):229-264. As Biersteker notes, most dependency writers, and other critics of international capitalism such as Johan Galtung, Immanuel Wallerstein, and Arghiri Emmanuel, advise developing countries that they should delink from and, perhaps later, "restructure" their relations with advanced capitalist societies.

Bibliography MULTINATIONAL ENTERPRISES, THE "ASSERTIVE" UPPER-TIER DEVELOPING COUNTRIES, AND INTERNATIONAL RELATIONS

Amin, Samir. "Self-Reliance and the New International Economic Order." Monthly Review 29 (July-August 1977): 1-21. "Annual Survey of Research and Development in American Industry." Business Week, June 27, 1977, pp. 6 2 - 8 4 ; July 3, 1978, pp. 5 8 - 7 7 ; and July 2, 1979, pp. 52-72. Baran, Paul A. "On the Political Economy of Backwardness." In The Political Economy of Development and Underdevelopment. Edited by Charles K. Wilbur. New York: Random House, 1973, pp. 82-93. Baranson, Jack. "Technology Transfer Through the International Firm." American Economic Review 60 (May 1970): 435-440. "Bargaining from Strength: The Right to Choose Investors." Asian Finance, July 15, 1980, pp. 47—51. Bergsten, C. Fred. "The Threat is Real." Foreign Policy, no. 14, Spring 1974, pp. 8 4 - 9 0 . . "The New Era in Commodity Markets." Challenge 17 (September-October 1974): 32-39. . "Coming Investment Wars?" Foreign Affairs 53 (October 1974): 135-152. Bergsten, C. Fred, Thomas Horst, and Theodore H. Moran. American Multinationals and American Interests. Washington, D.C.: Brookings Institution, 1978. Biersteker, Thomas J . Distortion or Development: Contending Perspectives on the Multinational Corporation. Cambridge, Mass.: MIT Press, 1978. . "Self-Reliance in Theory and Practice in Tanzanian Trade Relations." International Organization 34 (Spring 1980):229-264. Billerbeck, K., and Y. Yasugi. Private Foreign Direct Investment in Developing Countries. World Bank Staff Working Paper No. 348. Washington, D.C.: International Bank for Reconstruction and Development, July 1979.

194

Bibliography

Blankenheimer, Bernard. "The Foreign Investment Climate in Nigeria." Vanderbilt Journal of Transnational Law 10 (Fall 1977):589-600. Caporaso, James A. "Dependence, Dependency, and Power in the Global System: A Structural and Behavioral Analysis." In Dependence and Dependency in the Global System. Edited by James A. Caporaso. Special issue of International Organization 32 (Winter 1978): 1 3 - 4 4 . Cardoso, Fernando Henrique. "Associated-Dependent Development: Theoretical and Practical Implications." In Authoritarian Brazil: Origins, Policiesand Futures. Edited by Alfred Stepan. New Haven: Yale University Press, 1973, pp. 142-176. Cardoso, Fernando Henrique, and Enzo Faletto. Dependency and Development in Latin America. 2nd ed. Berkeley and Los Angeles: University of California Press, 1979. Carl, Beverly May, and Laurence Johnson. "Venezuela and the Andean Common Market." Denver Journal of International Law 7 (Spring 1978): 1 5 1 - 1 9 6 . Carr, David W. Foreign Investment and Development in the Southwest Pacific, with Specific Reference to Australia and Indonesia. New York: Praeger, 1978. Cox, Robert W. "Ideologies and the New International Economic Order." International Organization 33 (Spring 1979):257-302. Dempsey, Paul Stephen. "Foreign Investment Incentives in the Developing World: The Legislation of Greece, Egypt, Pakistan, Thailand, and the Republic Order of China." Case Western Reserve Journal of International Law 11 (Summer 1979):576-612. Diebold, John. "Multinational Corporations . . . Why Be Afraid of Them?" Foreign Policy, no. 12, Fall 1973, pp. 7 9 - 9 5 . Drucker, Peter F. "Multinationals and Developing Countries: Myths and Realities." Foreign Affairs 53 (October 1974):121-134. Dunning, John H. "The UK's International Direct Investment Position in the Mid-1970s." Lloyds Bank Review, no. 132, April 1979, pp. 1-21. Eckstein, Harry. "Case Study and Theory in Political Science."

Bibliography

195

In Strategies of Inquiry. Vol. 7 of Handbook of Political Science. Edited by Fred I. Greenstein and Nelson W. Polsby. Reading, Mass.: Addison-Wesley, 1975. Emmanuel, Arghiri. "The Multinational Corporations and Inequality of Development." International Social Science Journal 28 (1976):760-764. Evans, Peter. "National Autonomy and Economic Development: Critical Perspectives on Multinational Corporations in Poor Countries." In Transnational Relations and World Politics. Edited by Robert O. Keohane and Joseph S. Nye, Jr. Cambridge, Mass.: Harvard University Press, 1972, pp. 325-422. Federal Republic of Germany. Deutsche Bundesbank. "The Level of Direct Investment at the End of 1976." Monthly Report of the Deutsche Bundesbank 31 (April 1979):26-40. Fishlow, Albert, C. F. Diaz-Alejandro, R. R. Fagen, and R. D. Hansen. Rich and Poor Nations in the World Economy. New York: McGraw-Hill for the Council on Foreign Relations 1980s Project, 1978. "Foreign Investment in Asia." Economist, J u n e 23, 1979, pp. 8-9. Frank, Andre Gunder. "The Development of Underdevelopment." In The Political Economy of Development and Underdevelopment. Edited by Charles K. Wilbur. New York: Random House, 1973, pp. 94-104. Frank, Isaiah. Foreign Enterprises in Developing Countries. Baltimore: Johns Hopkins University Press, 1980. Galtung, Johan. "A Structural Theory of Imperialism." Journal of Peace Research 8 (1971):81-117. Gladwin, Thomas N., and Ingo Walter. Multinationals Under Fire: Lessons in the Management of Conflict. New York: Wiley, 1980. Gordon, Wallace. "Observations on the Nature of Joint Ventures in Mexico." Boston College International and Comparative Law Review 2 (1979):337-370. Gosovic, Branislav, and J o h n Gerard Ruggie. "On the Creation of a New International Economic Order: Issue Linkage and the Seventh Special Session of the U.N. General Assembly." International Organization 30 (Spring 1976):309—346.

196

Bibliography

Great Britain. Department of Industry. "Book Values of Overseas Direct Investment." Trade and Industry, February 25, 1977, pp. 528-534. "How Good a Tax Haven is Hong Kong?" Asian Finance, March 15, 1980, pp. 5 5 - 5 7 . Hsu, Paul. "Legal Considerations and Business Strategy for U.S. Firms to Do Business in Taiwan." Industry of Free China 49 (January 1978): 10-27. Hymer, Stephen. "The Multinational Corporation and the Law of Uneven Development." In Economics and World Order: From the 1970s to the 1990s. Edited by Jagdish N. Bhagwati. New York: Free Press, 1972, pp. 113-140. International Bank for Reconstruction and Development. World Tables 1976. Washington, D.C.: International Bank for Reconstruction and Development, 1976. . World Debt Tables: External Public Debt of 96 Developing Countries, Volume I. Washington, D.C.: International Bank for Reconstruction and Development, 1979. . World Development Report 1979. New York: Oxford University Press for the World Bank, 1979. . World Development Report 1981. New York: Oxford University Press for the World Bank, 1981. International Center for the Settlement of Investment Disputes. ICSID Fourteenth Annual Report: 1979-1980. Washington, D.C.: International Center for the Settlement of Investment Disputes, 1980. Keohane, Robert O., and Joseph S. Nye, J r . "Transgovernmental Relations and International Organizations." World Politics 27 (October 1974):39-62. . Power and Interdependence: World Politics in Transition. Boston: Little, Brown, 1977. Kim, Chin, and Roger H. Rogier. "International Trade and Investment Law in the Republic of Korea." Journal of World Trade Law 10 (September-October 1976):462-477. Kindleberger, Charles P. International Economics. Homewood, 111.: Irwin, 1953 and 1963. . Economic Development. New York: McGraw-Hill, 1958. . American Business Abroad: Six Lectures on Direct Investment. New Haven: Yale University Press, 1969.

Bibliography

197

Krasner, Stephen D. "Oil Is the Exception." Foreign Policy, no. 14, Spring 1974, pp. 6 8 - 8 3 . . "Power Structures and Regional Development Banks." International Organization 35 (Spring 1981):303-328. . "Transforming International Regimes: What the Third World Wants and Why." International Studies Quarterly 25 (March 1981): 119-148. Lake, Ralph B. "Foreign Investment in Thailand: The Effect of Recent Legislation." Denver Journal of International Law and Policy 3 (Fall 1973):293-304. Lu, Lawrence. "New Incentives and Current Guarantees for Foreign Investment in Taiwan." Industry of Free China 51 (June 1979):21—29. Magdoff, Harry. The Age of Imperialism: The Economics of U.S. Foreign Policy. New York: Monthly Review Press, 1969. Mikesell, Raymond F. "Conflict in Foreign Investor—Host Country Relations: A Preliminary Analysis." In Foreign Investments in the Petroleum and Mining Industries. Edited by Raymond F. Mikesell. Baltimore: Johns Hopkins University Press for Resources for the Future, Inc., 1971, pp. 2 9 - 5 5 . Moran, Theodore H. Multinational Corporations and the Politics of Dependence: Copper in Chile. Princeton: Princeton University Press, 1974. . "Multinational Corporations and Dependency: A Dialogue for Dependentistas and Non-Dependentistas." In Dependence and Dependency in the Global System. Edited by James A. Caporaso. Special issue of International Organization 32 (Winter 1978): 170-200. Ness, Jr., Walter J . "Brazil: Local Equity Participation in Multinational Enterprise." Law and Policy in International Business 6 (Fall 1974): 1017-1057. Neto, J . M. "Multinationals in Brazil." Case Western Reserve Journal of International Law 8 (Spring 1976):311—328. Nye, Jr., Joseph S. "UNCTAD: Poor Nations' Pressure Group." In The Anatomy of Influence: Decision-Making in International Organizations. Edited by Robert W. Cox and Harold K. Jacobson. New Haven: Yale University Press, 1974, pp. 334-370. Organization for Economic Cooperation and Development. De-

198

Bibliography

velopment Cooperation 1980 Review. Paris: Organization for Economic Cooperation and Development, 1980. Penrose, Edith. The Large International Firm in Developing Countries: The International Petroleum Industry. London: Allen & Unwin, 1968. "Policy Framework for Up-Market Transition." Asian Finance, September 15, 1980, pp. 5 5 - 5 8 . Quasha, William H. "Laws Governing Foreign Investments in the Philippines." International Lawyer 14 (Winter 1980): 140-150. Radway, Robert J . "Venezuela: Certain Legal Considerations for Doing Business." Case Western Reserve Journal of International Law 8 (Spring 1976):311-328. "Renewed Campaign for Foreign Investment." Asian Finance, June 15, 1980, pp. 5 3 - 5 4 . Robinson, Richard D., ed. National Control of Foreign Business Entry: A Survey of Fifteen Countries. New York: Praeger, 1976. Rothstein, Robert L. Global Bargaining: UNCTAD and the Quest for a New International Economic Order. Princeton: Princeton University Press, 1979. Rowland, Walter S. "Foreign Investments in Brazil: A Reconciliation of Perspectives."youma/ of International Law and Economics 14 (1979):39-62. Roy, Barum. "The Pyramid of Growth." Asian Finance, April 15, 1980, pp. 77-81. Ryans, Jr., John K., and James C. Baker. "The International Center for the Settlement of Investment Disputes."/