Mayank Project

7/30/2019 Mayank Project

1/21

AMITY BUSINESS SCHOOL

A PROJECT REPORT ONMacro Level Clustering of Countries to Identify their Potential

for Establishing IT & ITES Industry

SUBMITTED TO:

Ms. Amanpreet Kang

Dept. of International

Business

SUBJECTInternational

Economics & Policies

SUBMITTED ON:

12th October, 2012

SUBMITTED BY:

MAYANK GUPTA, A-34

SOURAV MUKHERJI, B-28

SURAJ KUMAR, D-47

MBA-Gen (2011-2013)


2/21

1

Table ofContents

INTRODUCTION ............................................................................................................................... 2

Macro-Level Indicators for IT and ITES Industry: ............................................................................ 2

LIST OF COUNTRIES TAKEN UP FOR STUDY: ................................................................................... 6

SPSS OUTPUT:- ................................................................................................................................ 7

Agglomeration Schedule ................................................................................................................. 9

List of Countries in Different Cluster ............................................................................................ 11

Mean of Clusters Under Variables ................................................................................................ 13

INTERPRETATION:- ........................................................................................................................ 17

STAGE-1 ............................................................................................................................................................. 17

STAGE-2 ............................................................................................................................................................. 17

CLUSTER 1: "Pioneers- The trailblazer technocrats" ......................................................................................... 18

CLUSTER 2:"Challengers- The striving bullyboy" ............................................................................................... 18

CLUSTER 3: "Laggards- The shoddy Lazybones" ............................................................................................... 19

CLUSTER-4: "Mediocres- The under-achieving strugglers" ............................................................................... 19

REFERENCES: ................................................................................................................................. 20


3/21

2

INTRODUCTION

The objective of this project was to classify countries on the basis of various macro-economic factors

that affect the establishment of IT and ITES Industry in a country. To achieve our objective, first we identified

20 macro-economic variables that play significant role in providing right environment for development of IT

and ITES Industry. Then, we collected the data on these macro-economic variables for 77 countries. After that

we compiled the latest available data of the given indicator on a excel sheet. Then, the data was exported to

SPSS.19 & cluster analysis was done. Finally, based on the characteristics of clusters, we have given names for

each cluster.

Macro-Level Indicators for IT and ITES Industry:

1) GDP (per capita growth) - Gross domestic product (GDP) is the market value of all officially

recognized final goods and services produced within a country in a given period. GDP per capita is often

considered an indicator of a country's standard of living. GDP per capita is not a measure of personal

income. Under economic theory, GDP per capita exactly equals the gross domestic income (GDI) per

capita.

2) High technology exports (current US$) - High-technology exports are products with high R&D

intensity, such as in aerospace, computers, pharmaceuticals, scientific instruments, and electricalmachinery.

3) Literacy Rate, youth total (% of people ages 15-24) - Youth (15-24) literacy rate (%). Total is the

number of people age 15 to 24 years who can both read and write with understanding a short simple

statement on their everyday life, divided by the population in that age group. Generally, literacy also

encompasses numeracy, the ability to make simple arithmetic calculations.

4) ICT goods exports (% of total goods exports) - Information and communication technology goods

exports include telecommunications, audio and video, computer and related equipment; electronic

components; and other information and communication technology goods. Software is excluded.

5) ICT good imports (% of total goods imports) - Information and communication technology goods

imports include telecommunications, audio and video, computer and related equipment; electronic

components; and other information and communication technology goods. Software is excluded.


4/21

3

6) ICT service exports (% of service exports, BOP) - Information and communication technology

service exports include computer and communications services (telecommunications and postal and

courier services) and information services (computer data and news-related service transactions).

7) Secure Internet Servers - Secure servers are servers using encryption technology in Internet

transactions.

8) Mobile cellular subscribers per 100 people - Mobile cellular telephone subscriptions are subscriptions

to a public mobile telephone service using cellular technology, which provide access to the public

switched telephone network. Post-paid and prepaid subscriptions are included.

9) Compensation of employees (% of expense) - Compensation of employees consists of all payments in

cash, as well as in kind (such as food and housing), to employees in return for services rendered, and

government contributions to social insurance schemes such as social security and pensions that provide

benefits to employees.

10)Communications, computer, etc. (% of service exports, BOP) - Communications, computer

information, and other services (% of service exports, BoP) cover international telecommunications and

postal and courier services; computer data; news-related service transactions between residents and

nonresidents; construction services; royalties and license fees; miscellaneous business, professional, and

technical services; personal, cultural, and recreational services; and government services not included

elsewhere. Service exports refer to economic output of intangible commodities that may be produced,

transferred, and consumed at the same time. International transactions in services are defined by the

IMF's Balance of Payments Manual (1993), but definitions may nevertheless vary among reporting

economies.

11)Communications, computer, etc. (% of service imports, BOP) - Communications, computer

information, and other services (% of service imports, BoP) cover international telecommunications and

postal and courier services; computer data; news-related service transactions between residents and

nonresidents; construction services; royalties and license fees; miscellaneous business, professional, and

technical services; personal, cultural, and recreational services; and government services not included

elsewhere. Services imports refer to economic output of intangible commodities that may be produced

transferred, and consumed at the same time. International transactions in services are defined by the

International Monetary Fund's (IMF) Balance of Payments Manual (1993), but definitions may

nevertheless vary among reporting economies.


5/21

4

12)Research and Development Expenditure (% of GDP) - Expenditures for research and development

are current and capital expenditures (both public and private) on creative work undertaken

systematically to increase knowledge, including knowledge of humanity, culture, and society, and the

use of knowledge for new applications. R&D covers basic research, applied research, and experimental

development.

13)Researchers in R&D (per million people) - Researchers in R&D are professionals engaged in the

conception or creation of new knowledge, products, processes, methods, or systems and in the

management of the projects concerned. Postgraduate PhD students (ISCED97 level 6) engaged in R&D

are included.

14)Patent Applications, residents - Patent applications are worldwide patent applications filed through the

Patent Cooperation Treaty procedure or with a national patent office for exclusive rights for an

invention--a product or process that provides a new way of doing something or offers a new technical

solution to a problem. A patent provides protection for the invention to the owner of the patent for a

limited period, generally 20 years.

15)Foreign Direct Investment, net outflows (% of GDP) - Foreign direct investment are the net inflows

of investment to acquire a lasting management interest (10 percent or more of voting stock) in an

enterprise operating in an economy other than that of the investor. It is the sum of equity capital,

reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of

payments. This series shows net outflows of investment from the reporting economy to the rest of the

world and is divided by GDP.

16)Foreign Direct Investment, net inflows (% of GDP) - Foreign direct investment are the net inflows of

investment to acquire a lasting management interest (10 percent or more of voting stock) in an enterprise

operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of

earnings, other long-term capital, and short-term capital as shown in the balance of payments. This

series shows net inflows (new investment inflows less disinvestment) in the reporting economy from

foreign investors, and is divided by GDP.

17)Internet users - Internet users are people with access to the worldwide network.

18)Workers Remittances, receipts (BOP, Current US$) - Workers' remittances are current transfers by

migrants who are employed or intend to remain employed for more than a year in another economy in

which they are considered residents. Some developing countries classify workers' remittances as a factor


6/21

5

income receipt (and thus as a component of GNI). The World Bank adheres to international guidelines

in defining GNI, and its classification of workers' remittances may therefore differ from national

practices. This item shows receipts by the reporting country. Data are in current U.S. dollars.

19)Workers Remittances and Compensation of employees, paid (Current US$) - Workers' remittances

and compensation of employees comprise current transfers by migrant workers and wages and salaries

earned by nonresident workers. Remittances are classified as current private transfers from migrant

workers resident in the host country for more than a year, irrespective of their immigration status, to

recipients in their country of origin. Migrants' transfers are defined as the net worth of migrants who are

expected to remain in the host country for more than one year that is transferred from one country to

another at the time of migration. Compensation of employees is the income of migrants who have lived

in the host country for less than a year

20)Workers Remittances and Compensation of employees, received (Current US$) - Workers

remittances and compensation of employees comprise current transfers by migrant workers and wages

and salaries earned by nonresident workers. Data are the sum of three items defined in the fifth edition

of the IMF's Balance of Payments Manual: workers' remittances, compensation of employees, and

migrants' transfers. Remittances are classified as current private transfers from migrant workers resident

in the host country for more than a year, irrespective of their immigration status, to recipients in their

country of origin. Migrants' transfers are defined as the net worth of migrants who are expected to

remain in the host country for more than one year that is transferred from one country to another at the

time of migration. Compensation of employees is the income of migrants who have lived in the host

country for less than a year.


7/21

6

LIST OF COUNTRIES TAKEN UP FOR STUDY:

Argentina

Armenia

Australia

Austria

Belarus

Belgium

Bosnia and Herzegovina

Brazil

Bulgaria

Canada

Chile

China

Colombia

Costa Rica

Croatia

Cyprus

Czech Republic

Denmark

Ecuador

Egypt, Arab Rep.

El Salvador

Greece

Guatemala

Hong Kong SAR, China

Hungary

Iceland

India

Ireland

Israel

Italy

Japan

Jordan

Kazakhstan

Kenya

Korea, Rep.

Kyrgyz Republic

Latvia

Lithuania

Luxembourg

Malaysia

Malta

Mauritius

Nigeria

Norway

Pakistan

Panama

Paraguay

Peru

Philippines

Poland

Portugal

Romania

Russian Federation

Saudi Arabia

Serbia

Slovak Republic

Slovenia

South Africa

Spain

Sweden

Switzerland

Tanzania


8/21

7

Estonia

Finland

France

Georgia

Germany

Mexico

Moldova

Morocco

Mozambique

Netherlands

New Zealand

Tunisia

Turkey

Uganda

Ukraine

United Kingdom

Sri Lanka

SPSS OUTPUT:-

DESCRIPTIVE STATISTICS

N Minimum Maximum Mean Std. Deviation

Communications,

computer, etc. (% of

service exports, BoP)

77 2.0757 71.7958 34.907684 17.2739175

Communications,


service imports, BoP)

77 8.9057 92.3660 33.604424 15.5391486

Compensation of

employees (% ofexpense)

77 3.5405 53.1533 20.058014 11.0147708

Foreign direct

investment, net inflows

(% of GDP)

77 -29.2288 392.3369 8.014834 44.7818310


9/21

8

Foreign direct

investment, net outflows

(% of GDP)

77 -7.0371810000 486.89102000

00

11.089567117

337

60.260040606

6604

GDP per capita growth

(annual %)

77 -6.8124685000 8.9171110000 2.6921661074

49

2.7707335454

653

High technology exports

(current US$)

77 549792.0000 1.5851E11 1.337278E10 2.9012661E10

ICT goods exports (% of

total goods exports)

77 .0048 49.0706 6.272071 10.0029936

ICT goods imports (% of

total goods imports)

77 1.8254 42.7614 8.919870 7.0573362

ICT service exports (% of


77 1.2230 38.9552 7.971393 7.2225944

Internet Users 77 289239.2310 1.0060E8 14826956.032

355

20358111.418

8755

Literacy rate, youth total

(% of people ages 15-24)

77 70.869370 100.000000 95.74627457 7.428002906

Mobile cellular

subscriptions (per 100

people)

77 32.8267 209.6399 115.248781 30.8002500

Patent applications,

residents

77 1 290081 7672.44 36395.963

Research and

development expenditure

(% of GDP)

77 .0261 3.4739 .986651 .9162458

Researchers in R&D

(per million people)

77 15.828320 7371.709500 1862.1139475

9

1872.1126762

82

Secure Internet servers 77 14 124255 9856.86 23670.617


10/21

9

Workers' remittances and

compensation of

employees, paid (current

US$)

77 4900000.0950 2.7069E10 3.077666E9 5.9401530E9


compensation of

employees, received

(current US$)

77 3200000.0480 2.2048E10 3.376910E9 4.4371203E9

Workers' remittances,

receipts (BoP, current

US$)

77 178612.944256

5250

5.3043696000

E10

3.3922436755

86E9

7.7429233256

377E9

Valid N (listwise) 77

Table 1: Minimum, Maximum, Mean and Standard Deviation of all Variables

Agglomeration Schedule

Stage

Cluster Combined

Coefficients

Stage Cluster First Appears

Next StageCluster 1 Cluster 2 Cluster 1 Cluster 2

1 23 29 3.910E16 0 0 8

2 12 50 8.008E16 0 0 10

3 39 76 9.805E16 0 0 11

4 57 73 1.508E17 0 0 8

5 31 41 2.299E17 0 0 15

6 9 43 3.020E17 0 0 9

7 5 69 3.924E17 0 0 15

8 23 57 4.446E17 1 4 12

9 9 51 4.558E17 6 0 17

10 12 34 4.875E17 2 0 21

11 39 54 5.189E17 3 0 2012 23 63 5.438E17 8 0 28

13 11 52 5.708E17 0 0 22

14 37 64 5.831E17 0 0 24

15 5 31 6.291E17 7 5 24

16 4 65 6.551E17 0 0 27

17 9 14 6.677E17 9 0 39

18 58 66 7.051E17 0 0 30


11/21

10

19 6 22 8.535E17 0 0 23

20 39 71 9.535E17 11 0 25

21 12 77 1.002E18 10 0 27

22 11 27 1.112E18 13 0 33

23 3 6 1.298E18 0 19 36

24 5 37 1.300E18 15 14 25

25 5 39 1.324E18 24 20 28

26 46 61 1.337E18 0 0 5027 4 12 1.452E18 16 21 31

28 5 23 2.161E18 25 12 31

29 33 67 2.431E18 0 0 53

30 18 58 3.114E18 0 18 44

31 4 5 3.136E18 27 28 33

32 8 62 3.377E18 0 0 38

33 4 11 3.483E18 31 22 36

34 2 30 4.409E18 0 0 39

35 13 56 4.817E18 0 0 40

36 3 4 5.117E18 23 33 45

37 25 42 5.292E18 0 0 46

38 8 49 6.803E18 32 0 48

39 2 9 7.873E18 34 17 44

40 13 17 8.755E18 35 0 46

41 47 68 9.814E18 0 0 52

42 21 60 1.437E19 0 0 53

43 19 70 1.481E19 0 0 50

44 2 18 1.490E19 39 30 45

45 2 3 1.810E19 44 36 49

46 13 25 2.008E19 40 37 47

47 13 75 2.239E19 46 0 49

48 8 74 2.507E19 38 0 52

49 2 13 2.543E19 45 47 51

50 19 46 3.653E19 43 26 57

51 2 38 4.434E19 49 0 54

52 8 47 4.803E19 48 41 64

53 21 33 4.846E19 42 29 60

54 2 59 5.025E19 51 0 57

55 1 35 5.272E19 0 0 58

56 24 26 6.746E19 0 0 60

57 2 19 7.512E19 54 50 65

58 1 28 8.751E19 55 0 68

59 16 36 1.018E20 0 0 62

60 21 24 1.041E20 53 56 66

61 45 72 1.157E20 0 0 64

62 10 16 1.654E20 0 59 65


12/21

11

63 40 55 1.935E20 0 0 71

64 8 45 2.525E20 52 61 67

65 2 10 2.637E20 57 62 66

66 2 21 3.212E20 65 60 69

67 8 20 4.832E20 64 0 69

68 1 7 5.007E20 58 0 72

69 2 8 5.762E20 66 67 70

70 2 15 7.898E20 69 0 7371 40 44 8.344E20 63 0 75

72 1 32 1.399E21 68 0 74

73 2 48 2.703E21 70 0 74

74 1 2 2.871E21 72 73 76

75 40 53 3.181E21 71 0 76

76 1 40 1.336E22 74 75 0

Table 2: Coefficients of each of the variables

List of Countries in Different Cluster

CLUSTER 1 CLUSTER 2 CLUSTER 3 CLUSTER 4

UNITED KINGDOM JAPAN UKRAINE PERU

SWITZERLAND GERMANY UGANDA NIGERIA

NETHERLANDS TURKEY MAURITIUS

MEXICO TUNISIA ICELAND

MALASIA TANZANIA CHILE

KOREA,REP SWEDEN

FRANCE SRI LANKA

SPAIN

SOUTH AFRICA

SLOVENIA

SLOVAK REPUBLIC

SERBIA

SAUDI ARABIA

RUSSIAN FEDERATION

ROMANIA

PORTUGAL


13/21

12

POLAND

PHILIPPINES

PARAGUAY

PANAMA

PAKISTAN

NORWAY

NEW ZEALAND

MOZAMBIQUE

MOROCCO

MOLDOVA

MALTA

LUXEMBURG

LITHUANIA

LATVIA

KYRGYZ REPUBLIC

KENYA

KAZAKHSTAN

JORDAN

ITALY

ISRAEL

IRELAND

HUNGARY

HONG KONG SAR, CHINA

GUATEMALA

GREECE

GEORGIA

FINLAND

ESTONIA

EL SALVADOR

EGYPT, ARAB REP.


14/21

13

Table 3: Different Countries under different Cluster Categories

Mean of Clusters Under Variables

Cluster Number of Case

1 2 3 4

Mean Mean Mean Mean

Communications,



58.4287 40.7622 27.2048 34.1218

ECUADOR

DENMARK

CZECH REPUBLIC

CYPRUS

CROATIA

COSTA RICA

COLOMBIA

CANADA

BULGARIA

BRAZIL

BOSNIA AND HERZEGOVINA

BELGIUM

BELARUS

AUSTRIA

AUSTRALIA

ARMENIA

ARGENTINA


15/21

14

Communications,


service imports, BoP)

36.3317 37.1707 27.7465 33.5865

Compensation of

employees (% of

expense)

6.0861 13.2084 23.9125 20.9567

Foreign direct

investment, net inflows

(% of GDP)

.7081 1.7340 4.2605 9.2426

Foreign direct

investment, net outflows

(% of GDP)

1.7372251500 3.7363953286 43.9054448073 9.5990512127

GDP per capita growth

(annual %)

1.0373970000 1.7005926445 4.2444179400 2.7316786994

High technology exports

(current US$)

1.4028E11 6.4480E10 1.8894E8 4.7119E9

ICT goods exports (% of

total goods exports)

7.8781 14.2811 .3307 5.8027

ICT goods imports (% of

total goods imports)

10.5816 13.9876 6.3104 8.5111

ICT service exports (% of


5.1350 6.3343 3.2312 8.6195

Internet Users 84399070.363

7

31859300.349

8

13398686.7651 10839189.4840


16/21

15

Literacy rate, youth total

(% of people ages 15-24)

99.000000 98.710253 92.768436 95.549987

Mobile cellular

subscriptions (per 100

people)

117.4819 114.1724 100.7640 116.4471

Patent applications,

residents

168564 24061 89 1346

Research and

development expenditure

(% of GDP)

2.9860 1.8403 .7506 .8471

Researchers in R&D

(per million people)

4466.852850 2792.977941 1541.249961 1701.459887

Secure Internet servers 89363 44949 621 4167


compensation of

employees, paid (current

US$)

1.0191E10 1.2478E10 40120620.6410 2.0485E9


compensation of

employees, received

(current US$)

6.5700E9 8.8100E9 2.5667E9 2.7362E9

Workers' remittances,

receipts (BoP, current

US$)

1.6505317750

E9

5.5445641929

E9

2.6159806881E1

0

1.4014399319E9

Table 4: Mean of each Cluster under different Variables


17/21

16

Figure 1: Dendrogram using Average Linkage (Between Groups) depicting different cluster formations


18/21

17

INTERPRETATION:-

The output is first derived by doing a hierarchical analysis to find the number of clusters that exist in the data. In

order to find the mean rating, descriptive statistics has been performed. The final step was a K-Means outputwith a predetermined number of clusters to be specified.

STAGE-1

At first, the data was analysed with the help of descriptive statistics. From the descriptive data, we have got the

mean rating of the countries based on the 20 macro-economic indicators. From the mean rating, we got the

average mean for the entire set of countries which gave us an idea of the mean value of each macroeconomic

variables.

An agglomeration schedule helped us to identify large differences in the coefficients. From the agglomeration

schedule, we use the difference between rows in a measure called coefficient in order to identify the number of

clusters in the data. A large difference in the coefficients values between any two rows indicates a solution

pertaining to the number of clusters which the lower row represents. Finally, based on our judgment, we chose

4-cluster solution.

The dendrogram, in addition to agglomeration schedule, provides a rescaled distance measure between various

clusters combines at various stages.

STAGE-2

In the second stage, we performed a K-MEANS cluster. This is because a K-Means Cluster procedure generally

gives more stable clusters, since it is an interactive procedure compared with the single pass hierarchical

methods. The output of the K-Means Cluster gave us the initial cluster centers, the country listing of cluster

membership i.e. which country belongs to which of the clusters.

Based on the study, we describe each of the characteristics of 4 clusters as follows:


19/21

18

CLUSTER 1: "Pioneers- The trailblazer technocrats"

The countries belonging to this cluster are United Kingdom, Switzerland, Netherlands, Mexico, Malaysia,

Korea Republic and France. The countries has a higher mean in the service exports of Communication

computer etc. and a high mean in the service imports in the communication, computer etc. This means that the

countries are engaged in covering international communications, postal services, computer data, news related

services transactions between residents and non-residents. The countries are also engaged in exports and

imports of information and communication technology goods. Also, the countries has maximum number of

internet users as well as the mobile cellular subscribers among the other clusters. The countries even has secure

internet servers. The clusters has highest mean in the case of patents applications, Research and development

expenditure and the number of researchers in the R&D. This implies that these countries are engaged in

conceptions or creations of new knowledge, products, processes, methods or systems and in the management ofprojects concerned. A high mean score on patents applications denotes that the intellectual property and patents

of a new company entering in that company will be safe and protected by the Government rules and regulations.

This also verifies the fact about the literacy rate which is the highest as compared to other clusters.The clusters

also has a high mean in the case of workers remittances and compensations.

For a country, attracting an inflow of FDI strengthens the connection to world trade networks and finances its

development path. But the countries in this cluster are having a lowest mean of FDI inflow. This shows that

these countries might face a problem in the future regarding the development of the nation.

CLUSTER 2:"Challengers- The striving bullyboy"

The countries belonging to this cluster are Japan and Germany. The countries has a higher mean ratio in the

case of imports of communications, computer etc. This implies that the countries are spending heavily on

telecommunications, postal and courier services, computer data, news related service transactions between

residents and non-residents., construction services, royalties and license fees.

The countries also exporting products of high R&D intensity such as aerospace, computers, pharmaceuticals

scientific instruments and electrical machinery.


20/21

19

CLUSTER 3: "Laggards- The shoddy Lazybones"

This cluster is comprised of 63 countries. The cluster has a higher mean rating of compensation of employees as

a percentage of expense. This implies that the countries in this cluster provide a good wage structure, social

security, insurance and pensions to the employees working in that country which is a conducive environment

for employment in IT Sector.

However, the countries lag in the field of patent applications, R&D expenditure. This implies that the foreign

companies intending to enter into these countries will not prefer to open up a subsidiary in these countries. The

literacy rate is lowest for these countries which means that these countries will not be able to provide adequate

skilled workforce required by an IT company.

The countries have a low mean rating in the case of ICT Goods and Services import and export. This shows thatthese countries are not having infrastructure in the IT sector as well as the allied sectors of communications,

electronic components and technological services. So, there is an entry barrier for IT Companies to enter into

these countries because the basic required infrastructure are not supported by these countries.

CLUSTER-4: "Mediocres- The under-achieving strugglers"

The countries which fall under this cluster are Peru, Nigeria, Mauritius, Iceland and Chile. Taking into the

consideration of the various macro-economic indicators, the countries have an average rating in almost all of the

indicators. This shows that the countries are in the development stage of becoming an attractive destination for

the IT Service Industry. In other words, we can say that the countries are in an evolving stages of various

researches and patent applications. These countries are on the verge of becoming favorable for the development

of IT Sector, which requires a boost from the Government in the form of policies, and from the private sector in

the form of funds and infrastructure. The countries under this cluster has a higher mean rating in the case of FDI

Net Inflows. This shows that these countries are being considered to have potential to develop. So, the investors

are pouring money in the form of FDI.


21/21

20

REFERENCES:

TEXT-BOOKS:-

Nargundkar R.- Marketing Research 2nd edition Malhotra N.K.,- Marketing Research 5th edition

WEBSITES:-

http://data.worldbank.org/ http://data.worldbank.org/indicator
http://data.worldbank.org/http://data.worldbank.org/http://data.worldbank.org/indicatorhttp://data.worldbank.org/indicatorhttp://data.worldbank.org/indicatorhttp://data.worldbank.org/

Documents

Mayank Project