Beyond tax breaks: exploration of Georgia’s Dual IT Ecosystem

The study focuses on the policy vision of the Government of Georgia (to support develop-ment of Georgia as an IT hub. To encourage IT development locally, Georgia offers tax benefits to ICT companies that qualify for ‘International Status’. The policy measures have visibly affected the local market – creating an uneven playing field for the local companies and the ones with ‘International Status’. The research explores the ways in which the state intervention in the form of providing tax breaks to IT companies with the 'international status' is shaping the local entrepreneurial ecosystem towards Georgia’s development as an IT hub. The question is addressed through a single case study technique and the analysis of primary data collected through qualitative interviewing technique. Data is analysed in terms of the components of the Entrepreneurial Ecosystem framework and discussed into three aggregate dimensions: (i) Government Policy; (ii) Local Ecosystem; and (iii) Inclusion in Global Value Chains. The research concludes that the current state measures have created two closed ecosystems of international and local companies, where local companies are fac-ing the risk of being driven out of the market. The paper proposes recommendations to encourage partnerships through participation in synergies created by the dynamics of two ecosystems for the achievement of the policy objective.