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The growth of the Indian economy is presenting immense opportunities for development of new technologies to fuel this growth. However, developing new technologies by Indian firms is costly and risk as most of them do not posses the necessary technological capabilities. With the increasing cost and risk of technology development, it has come to be recognized that external sourcing of technology through collaborative technology development provides strategic advantage by providing faster access to new technology and markets through complementing resources and risks between partners. On the other hand, collaborative technology development also faces problems due to fear of opportunistic behaviour of partners. The balance of benefits and risks related to collaborative technology development is contingent on the nature of industry and technological characteristics surrounding the collaboration. The failure of collaborative technology development is due to the fact that partners do not have adequate understanding of context. Therefore it is important to understand the context and especially in the Indian context, where collaborative technology development is a new phenomenon and there is little understanding regarding the perception and practice of it.