IIM study says 'cultural governance' binds India's diamond industry

So-called 'cultural governance' has helped the Indian diamond industry succeed in shifting the global landscape of the business, says a study by the Indian Institute of Management-Ahmedabad.

Praising India's diamond industry for being highly organised, it says the sector has a unique 'cultural governance', where the smaller diamond cutting and polishing units have been flourishing like a "close-knit community".

Despite little formal education, professionalism exists where verbal commitments are honoured and met, and a high order of integrity is exhibited, it said.

The study takes example of Surat, which is popularly known as India's Antwerp, given that 11 out of every 12 diamonds set in jewellery worldwide are polished in this city of Gujarat.

Surat finishes 95% of all the diamonds processed in the world, where rough diamonds are procured from the countries such as Russia, Canada, South Africa, Botswana and Australia by Indian entrepreneurs.

"The firms in the Indian diamond industry are embedded in the so-called unorganised sector..The results of a survey interestingly suggest that they are in fact highly organized," says the study conducted by K Indu Rao, Officer on Special Duty in Gujarat Technological University (GTU) and Visiting Research Scholar, University of Twente of Netherlands, for Research and Publications Committee of IIM(A).

"In the Indian diamond industry, instead of using some documented strategies, structure and practices, the organizing occurs through cultural governance. In such case, members in the diamond industry align their values and beliefs in order to arrive to a common understanding of the way of doing things in their business and organization," the study said.

"We found that the informal sector firms are not just local firms but also have global reach. They acquire diamond rough from global sources, and supply the finished diamonds to the global diamond industry," it said.

"These informal sector firms, which have made it big on the global front, have flourished like a close-knit community. They have accomplished it through a cultural governance where culture governs business practices," it said.

The industry culture in the Indian diamond cutting and polishing business helps align the small, medium and large firms into a network, it said.