In this paper we analyze the emergence of R&D services in Bangalore, India, by focusing on the process of technological upgrading in the Indian software industry. The development trajectory of the Indian software industry and the upgrading it has experienced, from providing low-skill software services to providing high-skill R&D services, are examined using evidence from interviews with Indian firms in Bangalore. Whereas most research on the Indian software industry thus far has emphasized the role of the state and multinational corporations, in this paper we argue that active local entrepreneurship is playing an increasingly important role in technological upgrading and in the shift from low-skill to high-skill services in Bangalore. These shifts are being facilitated by growing institutional thickness, as evidenced by the accumulation of local expertise, increasing local entrepreneurship addressing specific market niches, and the development of a local technical community.
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