Globalization and institutions in economic development (India)

Many scholars have argued that globalization will help to bring about a convergence in institutional structures, while others maintain that path dependence will block efforts at reform. This dissertation explores several elements of the globalization and institutional convergence debate. It tests the hypothesis that integration and convergence are correlated in the context of one institution—corporate governance. The study finds strong evidence of a relationship between economic integration and de jure similarity in governance but no evidence of such a relationship with de facto similarity in governance. Subsequent chapters examine two possible explanations for why institutions are converging in name but not in practice. One possibility is that institutions do not matter. This argument is assessed with relation to one indicator of economic competitiveness that has received little attention from economists studying cross-country differences, that of inventory holdings. The data show that market institutions have a significant impact on raw materials inventories. The financing cost for total additional inventories for developing countries is estimated to exceed 2% of GDP. A second explanation is that globalization is not as omnipotent a force as is sometimes argued. This point is made in a study of the Indian offshore industry, showing that imperfect information leads to the development of geographically localized assets that can create a competitive advantage for some firms and a barrier to entry for others. The value of these localized assets poses an obstacle to complete integration in an industry that is often cited as the classic case of integration in professional services.