The Influence of the Software Industry on Developing Economies: The Case of China

Article excerpt

Software lies at the heart of the information technology industry. It is argued in this paper that it also influences the development of an economy, especially in a developing country. In this paper, we construct an index system to indicate the 'state of development' of the software industry based in Hubei, China. The effects of seven factorial ly-derived hypothesized determinants of such development were examined through regression analysis. Data was collected from the responses of 296 managers in 42 local software companies to a specially -derived questionnaire. When these seven factors were regressed onto a measure of development in the local industry, the order-in terms of the per cent of variance explained-were; knowledge integration capabilities (17 per cent), government support, technological innovation capability, marketing capabilities, finance capability, software project team collaboration, and system deficiencies (5 per cent). Practical recommendations are developed from the results for improving the local software industry and enhancing its contribution to the growth of the developing economy in China.

Introduction

With software applications developing, the software industry, a sunrise industry, has become an important force in promoting world economic growth and perhaps even social development. But in terms of economic globalization the development of software industry is unbalanced in different countries and regions. Software development centers are not only concerned with profits, but also performance and productivity. As a developing country, China can provide some lessons in developing the software industry in such a way that it contributes to the growth of the country, in a balanced and orderly way. Hence, with China economy developing fast it becomes useful to find out what are the factors that promote development in its software industry. This paper explores such China issues, based on a sample of 75 software companies in Hubei region of China. Specifically, it investigates the factors that influence the development of the software industry in Hubei, as an example.

Hubei is located in the central of China, with a variety of products being manufactured locally, attractive scenery, numerous historical sites, and little traffic congestion by Chinese standards, and good education facilities, there are undoubted advantages for software companies in being located there. However, there are comparatively few software companies in the region; the scale of the software companies inHubei is small, corporate champions do not exist, the technical level is relatively low and the products uncompetitive. The local industry lacks communication, domestic and international competition, and has a benign development mechanism. In 2006, the output value of the software industry in Hubei province was only 66.7 billion yuan [1] ,without any of its enterprises being among the top 100 enterprises in the industry in 2006, according to the Ministry of Information Industry. The scale (yuan values) of the main provinces and cities in China is shown in the following figure 1®.

However, some progress has still been made in Hubei Province during recent years. The value of the software industry output increased steadily from 2002 to 2006, as shown in figure 2®. There were 326 double-soft corporations and 753 software products registered by the end of 2006 in the region. Of these, eight belong to state planning key software enterprises, three passed the certification of CMM3, two the certification of CMM2, four have the certification of CMMI3, and 89 the Computer System Integration Qualification. But the software revenue in Hubei Province accounted for only 1.39 percent

of the National Total, which must be taken into careful consideration®. On the basis of an online and onsite investigation in Hubei Province, this paper attempts to assess the impact of a number of possible determinants of development in the software industry and measures the sensitivity of these factors, in order to put forward some suggestions for improving the software industry in the region or province. …