Development strategies for Indian SMEs: promoting linkages with global transnational corporations

Abstract

PurposeThe purpose of this paper is to trace the scope and dimensions of global opportunities that emerge in the era of globalization through the rapid growth of transnational corporations (TNCs), which Indian small to medium‐sized enterprises (SMEs) could exploit. The backdrop to the discussion is the growth of small‐scale industries (SSIs) in the era of globalization relative to the pre‐globalization era, with a particular focus on their export performance.Design/methodology/approachBased on secondary data, the growth of SSIs is analyzed and the scope of global opportunities for Indian SMEs is explored.FindingsAlthough the growth of the SSIs segment of the SME sector in India has slowed in terms of the number of enterprises, level of people employed and production, SSI export performance has been impressive in the globalization period. The SSI sector has grown more towards the international market than the domestic market in the globalization era. Globalization has offered new markets to SMEs primarily through two major developments: the adoption of a complex integration strategy by TNCs for their production network, and the global procurement strategies and global expansion of TNC supermarket chains.Practical implicationsThe paper prescribes a dual strategy of vertical integration of local SMEs with global TNCs for the production of intermediate goods and horizontal cooperation through networking among local SMEs to link up with global TNCs for the production and marketing of consumer goods. The role of Indian policymakers as a facilitator in the process is emphasized.Originality/valueThis paper throws light on recent growth performance of small‐scale enterprises in India and provides insight on the emerging global opportunities to Indian SMEs, which need to be given due consideration by Indian policymakers for exploitation.