This article in the HBR is an interesting one. In my opinion is it is a matter of time before a country like India will shorten the gap with the West. Already major reforms are initiated in the education sector to make it more application driven. That, coupled with poor infrastructure, is the main reason why it’s lagging behind. (IT) Industries without (much) infrastructural demand are doing very well.
Each time we outsource we dispose not only of expensive labour but also of the tacit knowledge that walks out of the door. However, to not outsource is also a tragedy of the anticommons. You have to take hold of the future now or the future will take hold of you.
There are many MNC that are financially quite comfortable and where the economic crisis has been a stimuli to push through reforms. This was confirmed by some colleagues at a recent conference in Barcelona where I spoke on this topic. Outsourcing is therefore a prime example of utter brinkmanship. That is what entrepreneurship is all about though.