There is a tremendous prospect of development of ICT or knowledge intensive industries in South Asian countries, which could be an effective means of overall economic development in the region. India has already achieved a certain degree of world market share in the ICT sector, while Bangladesh and other South Asian countries are trying to increase their share gradually. The government of Bangladesh envisions creating a “Digital Bangladesh” by 2021. However, development of this sector critically depends on strategic alliance and networking as well as on proper infrastructure development. There is strong evidence that forming alliances, clustering and networking help small firms to compete, grow and cooperate with large firms. By working together, firms can gain the benefits of collective efficiency, enabling them to link with larger producers and make inroads into national and global markets.

By surveying ICT firms both in India and Bangladesh, this study aims to explore modalities and mechanisms through which ICT firms could forge horizontal links among them, and vertical linkages with larger manufacturing and service industries for increasing market access, enhancing investment flows, promoting skills development and fostering technological advancements. The study makes use of the spatial econometric model to capture the spatial interdependence (integration) effect on the profitability of ICT firms. The study is sponsored by the Asian Development Bank (ADB) through SANEI under RETA 6417 (Phase II).