Outsourcing to India—especially in information technology (IT)—has been going on for several decades. This case is on the final frontier of outsourcing to India—commercial surrogacy. Surrogacy arrangement is the carrying of a pregnancy by a woman who is a surrogate mother on behalf of the intended parents. There are two main types of surrogacy: 

(1) gestational surrogacy 

(2) traditional surrogacy. 

In gestational surrogacy, a surrogate is implanted with an embryo created by in vitro fertilization (IVF) using the intended mother’s egg and a donor’s sperm. The resulting child is genetically related to the intended mother but genetically unrelated to the surrogate. In traditional surrogacy, the surrogate mother uses her own egg to produce a child that she carries for the intended parents. The child is genetically related to the surrogate mother. Altruistic surrogacy, for which no financial gain is provided to the surrogate mother, has existed for some time.

However, from a business standpoint, this case deals with commercial surrogacy: The surrogate mother receives compensation for her services apart from the medical expenses. Until 2016, India had a booming outsourcing industry—commercial surrogacy. However, the government passed a law in 2016 to ban it. We focus on the key question: What factors determines the success and failure of commercial surrogacy in India?

A Global Industry 

Although low profile, commercial surrogacy has become a sizable multibillion-dollar industry. In the United States, California is the pioneer in surrogacy legislation that supports surrogacy arrangements. For the entire country, the laws are different from state to state and sometimes even county by county within a state.

In the United States, the cost for a gestational surrogacy including all agencies’ fees, attorneys’ fees, screening and surrogate fees, and medical and insurance expenses is approximately $100,000 to $150,000, depending on the chosen program. There is an increase in demand for the intended parents to have their own biological children. However, the high cost in the United States and the cost competitiveness of India have made most couples interested in commercial surrogacy to go to India—the same compelling logic for IT outsourcing to India. This interest has opened up a new classification in the medical tourism industry called fertility tourism or reproductive tourism. India is now one of the most popular destinations for international commercial surrogacy. Similar to the competition for outsourcing in other industries, India has several competitors.

With increased demand and available good medical facilities and legal regulations, the commercial surrogacy industry has spread to countries such as Cambodia, Nepal, and Thailand.

Players of Commercial Surrogacy 

Before proceeding, it is useful to outline the “cast of characters”

involved in commercial surrogacy.

● Intended parents: Heterosexual couples who face issues with infertility as well as homosexual couples and single parents.

● Surrogate mother: A woman who carries a child from either her own egg fertilized by another woman’s partner or the implantation of a fertilized egg from another woman into her uterus.

● Doctor: A physician who performs the IVF procedure and the gynecologist.

● Attorney: A lawyer who is the expert in surrogacy laws and helps make the transnational commercial surrogacy arrangements possible for intended parents.
Next, we proceed with our analysis, starting with the institution-based view.
The Institution-Based View 

The institution-based view has two components: formal and informal. From a formal institutions standpoint, the formal rules that surround surrogacy in India greatly impact the availability and the outcome of surrogacy as an assisted reproductive technology option.
India’s Surrogacy Regulation Bill of 2016 offers formal rules to the unregulated commercial surrogacy industry in that country. To protect poor women who become surrogates as a source of income, the bill proposes a ban on commercial surrogacy. Instead, only altruistic surrogacy will be tolerated. Altruistic surrogacy is when a surrogate women is given no financial gain for carrying an infertile couple’s child. In addition, surrogacy will only be allowed for heterosexual couples, whereas surrogacy was previously available for single parents and homosexual couples.
The bill clearly outlines the conditions that must be met for surrogacy. For instance, those permitted to apply must be infertile couples between ages 23 and 50 for women and 26 and 55 for men who have been married for five years with no children. Surrogate mothers should be close relatives of the couple and between ages 25 and 35. In addition, the surrogate mother is allowed to act as a surrogate only once in her lifetime.
The Surrogacy Regulation Bill also establishes strict punishments for those who fail to comply with its restrictions. Establishments that allow commercial surrogacy, abandonment of a child, exploitation of a surrogate mother, and selling or importing a human embryo are punishable with imprisonment of at least 10 years and fines up to $16,000. Prior to this bill, attempts were made to regulate surrogacy.

In 2005, the Indian Council of Medical Research (ICMR) and National Academy of Medical Sciences, a government funded agency, constructed the National Guidelines for Accreditation, Supervision, and Regulation of Assisted Reproductive Technology Clinics in India. These guidelines attempted to highlight the potential for misuse, support the research of reproductive technology, and create a national database to track infertility. In 2008, the Assisted Reproductive Technology Bill was drafted and redrafted several times afterward. The bill featured the creation of a National Advisory Board for Assisted Reproductive Technology.

In addition, the bill helped to catch the legal pitfalls that ICMR guidelines failed to recognize. Although efforts were made to create formal rules to regulate surrogacy, little was said on the commercial aspect of surrogacy. From an informal institutions standpoint, the general public perception of commercial surrogacy is very negative.
“Surrogate Mothers Exploited,” “Wombs Being Rented,” 

“Money Is Corrupting this Whole Technology”—these are just some of the media headlines that showed the darker sides of commercial surrogacy. But the media’s reports are not without justification. There are many cases that contributed to this unfavorable view of commercial surrogacy. There is no easy way for the public to find information about how surrogacy firms deal with special circumstances that may go wrong during surrogacy arrangements. The questions that may arise include: How do we deal with a miscarriage? What happens when the newborn baby has a disability or mismatch of DNA? What happens when the newborn baby is rejected from his or her intended parents’
home country? These are questions for which the surrogacy centers are unable to offer acceptable solutions. There are more extreme cases that even many attorneys felt truly distressed when they heard about them. One of these cases was with a US attorney, Theresa Erickson, who was charged with running a baby-selling racket in the United States in 2011.
The other case was with an Australian gay couple who had taken surrogacy for the sole purpose of sexually exploiting their own son. All these incidents have added fuel to the media’s attacks on commercial surrogacy. From an informal ethical and legitimacy standpoint, such phenomena made the public consider commercial surrogacy as a very dirty deal.
The surrogacy arrangements made between the intended parents from developed countries such as the United States and the surrogate mothers from developing countries such as India can be misinterpreted as rich people exploiting poor women by using them as reproductive machines.
Another consideration is that the intended parents could simply leave the babies behind and pay very little compensation if they were unsatisfied with the baby. Because of the absence of laws and regulations, the responsible party was set free without legal punishment.

Other informal institutional considerations include the following.

● Attachment of the surrogate mother: Surrogacy can be a very taxing process with the physical and emotional attachments the surrogate mother may develop with the baby.

● Identity of the child: Similar to adoption, would it be ethical for the (intended) parents to not inform the child that he or she was born under surrogacy arrangements?

● Religious constraints: Paragraph 2376 of the Catechism of the Catholic Church states, “Techniques that entail the dissociation of husband and wife, by the intrusion of a person other than the couple (donation of sperm or ovum, surrogate uterus), are gravely immoral.” While this statement from the Catholic Church seems to be condemnation, it may have been loosely interpreted.
The original meaning could have been meant for a different topic altogether. The book mentioning the above statement was written in 1992 by John Paul II. At the same time, we need to look at the surrogate mothers, who are poor individuals seeking to support their families.

Women who are interested in surrogacy arrangements are typically in desperate situations. The money earned as a surrogate mother can potentially significantly improve their living standard. In addition, the success rate of surrogacy is significantly higher in India than in other countries, including the United States.

The Resource-Based View 

The resource-based view can be used to determine the factors that result in the success and failure of commercial surrogacy in India. The value, rarity, imitability, and organization (VRIO) framework can be used to evaluate the considered resources.

In terms of value, surrogacy is very valuable because it is the only method that infertile heterosexual couples, homosexual couples, and single parents can use to have a child who is genetically related to the intended parents.
Surrogacy in India also delivers more value than that in other countries such as the United States because of the higher success rate and the more affordable cost. Even though the medical facilities in India are not as outstanding as those in the United States, India still has fairly good medical facilities and English-speaking doctors who are trained in reputable medical centers abroad. It is reflected in the differences in the success rate: The United States only has a 31% success rate, whereas India has a 44% success rate. The operation done in India is also only one-third to one-fifth of the cost in the United States.

In terms of rarity, commercial surrogacy is only allowed—in addition to India—in a few countries around the globe: Cambodia, Georgia, Mexico, Nepal, Russia, Thailand, Ukraine, and the United States (in some but not all states). Therefore, on a worldwide basis, commercial surrogacy is quite rare. However, India alone hosts more than 3,000 fertility clinics. While international competition does not appear to be very strong, domestic competition in India is fierce.
It is difficult for other countries to imitate India’s success in commercial surrogacy. Although the first successful IVF surrogacy was performed in the United Kingdom, India was quick to follow and delivered the second successful IVF procedure 67 days after the British baby was born. India was also the first country to try to push for legal commercial surrogacy. This first-mover advantage has allowed India to host the largest number of surrogacy centers in the world and to become the most favorable location for surrogacy arrangements, especially for people who are unable to afford the expensive care in the United States. Its competitors in Asia are a distance away from catching up because of higher costs and lower-quality medical facilities.
A majority of surrogacy centers around the globe lack organization. Only a handful of surrogacy centers around the world seem to successfully organize and exploit their resources. The complementary assets for surrogacy centers are not how well the doctors can perform and how good the medical facilities are, but it is managers’ abilities to create a good working system that provides clear guidance for both surrogate mothers and intended parents. Unfortunately, a majority of the surrogacy centers in India have many of these organizational problems. Some surrogate mothers mentioned that the Indian surrogacy centers did not clearly explain the compensation, and some surrogate mothers felt cheated by the centers. The centers also did not thoroughly explain the international legal issues associated with intended parents from other countries. Most centers also do not have legal experts or insurance that could resolve any issues during or after a surrogacy procedure.
Overall, even though Indian surrogacy centers excel at delivering value and inimitability in comparison to those centers in other countries, value and inimitability will not help them with the domestic competition because most surrogacy centers in India are competing at the same level.
Although only a limited number of countries allow commercial surrogacy, the fact that India has 3,000 centers does not make it rare domestically. Finally, a majority of surrogacy centers lack solid organization and do not have good systems in place. 

Expert Input: Mr. Hari G. Ramasubramanian 

Our preceding analysis can help address some of the ongoing issues in the commercial surrogacy industry that would help a developing country such as India become a dominate global player in this new form of outsourcing.
In addition, we have also obtained excellent insights after speaking to Mr. Hari G. Ramasubramanian on the actual truth versus negative impressions created by the media.
Mr. Ramasubramanian founded India’s first law firm specializing in fertility law through which he has helped hundreds of international and domestic couples navigate the daunting and uncertain legal issues. He is currently a full-time litigation lawyer practicing at Madras High Court and in India’s Supreme Court. This section shows a few highlights of our Q&A session with him.

Question 1. What was Mr. Hari G. Ramasubramanian’s motivation to start the first law firm in India on surrogacy law?

He was part of a law firm with a core practice in criminal litigation and medical–legal litigation. He came to know about surrogacy when engaged by a client in 2008.
His research showed that India was the worldwide leader of surrogacy, but there were no specialized law firms in India. He was then motivated to specialize in third-party reproduction and private international law issues related to surrogacy. In his own words:
I was able to identify the vacuum in this space at the earliest point of time and was able to forecast the possible growth in the foreseeable future. There were no law firms in India that specialized in third-party reproduction at that time. I came to understand through my research that every country has different laws with regard to surrogacy. People from different countries came down to India and it is pertinent to be a core practitioner in the field for the client to benefit. I then chose to specialize in this field and to have a dedicated practice for which I started up India’s first surrogacy law firm.
Question 2. What are the laws and medical benefits currently available to protect the surrogate mother?
The intended parents and surrogate mother come to a written agreement on several aspects of the surrogacy arrangements, including the rights of the child, pregnancy period arrangements, and postpartum arrangements before going through hospital formalities. Intended parents also have the rights to obtain the medical fitness certificate from the physician on the surrogate mother to eliminate the risks associated with the pregnancy and to make sure the surrogate mother is not currently affected with any disease.
When it comes to the medical benefits, there are no medical insurance policies from Indian insurance companies through which “a surrogacy health package” could be provided to the surrogate mother. The intended parents are responsible for any such medical complications, and the surrogacy clinics are recommended for providing some medical benefit packages, which could be beneficial to the surrogate mother.
Question 3. We are hearing a lot about the Surrogacy Regulation Bill 2016. How effective is this going to be for the surrogacy outsourcing industry for India in the future?
Even though the Indian government has proposed such a regulatory bill in the beginning of 2016, the government authorities are still evaluating the implications of this once it becomes effective. This is still under evaluation and has not been enforced. From the growth and size of commercial surrogacy in India—about a billion dollars each year—a major chunk of this comes from foreign nationals. The domestic intended parents still face a lot of religious and cultural setbacks for them to become motivated to engage in such surrogacy arrangements. Even though the government is taking actions to enforce such a regulatory bill, considering the tremendous growth and size of this industry, it is probable that the government will revisit some of the rules to encourage commercial surrogacy, taking into consideration that the best value is provided to players—surrogate mothers, intended parents, and hospital facilities.

Going Forward 

Going forward, recommendations can be made along institution-based and resource-based dimensions. From an institution-based view, the Surrogacy Regulation Bill 2016, which bans commercial surrogacy, needs to be revised and improved. Creating a ban pushes a desired commodity into the black market. In other words, the demand for a child by infertile individuals and couples will remain despite the ban on commercial surrogacy. Also, finding women willing to take part in an altruistic surrogacy is difficult.
Instead, carrying a child for someone else should be paid.
Therefore, the unsatisfied demand and the low supply of potential surrogate mothers will trigger the emergence of a black market. Essentially, women who look to surrogacy as a last-ditch effort to support their families may expose themselves to hazardous situations. According to the Economist, the ban would “make it both more dangerous and more costly, and create legal uncertainty for all.”
It is imperative that a safe and fair environment where both parties can gain from the experience be established.
Journalists and the public should pay more attention to surrogate mothers and their surrogate clinics to closely monitor the operation and process of the surrogacy.
From a resource-based view, managers at surrogacy centers need to continue to build firm strengths based on the VRIO framework. Currently, Indian surrogacy centers have a lot of advantages in terms of value, rarity, and inimitability in comparison to surrogacy centers in other countries. Indian surrogacy centers need to improve their organization, and managers need to set clearer guidelines for both surrogate mothers and intended parents. Managers will need to work with legal professionals and insurance companies to make these guidelines clearer. Improving on organization will not only help the Indian surrogacy centers compete with surrogacy centers from other countries, but also help them outcompete domestic rivals.

Case Discussion Questions 

1. ON ETHICS: What is driving the demand for this industry?

2. ON ETHICS: From a resource-based view, what are the characteristics of winning countries and surrogacy centers?

3. ON ETHICS: From an institution-based view, how can the Surrogacy Regulation Bill 2016 be revised and improved?