Economic size and performance of dispersed and clustered small scale enterprises in India

Abstract

PurposeThe purpose of this study is the empirical measurement and analysis of economic size and performance of dispersed and clustered small‐scale enterprises (SSEs) in India.Design/methodology/approachMethodology is descriptive and comparative, using a combination of different official databases. Economic size is measured by distribution of SSEs by employment, output, fixed capital investment, and export variables. Measurement of economic performance is focused on output/capital ratio, output/labour ratio, and labour/capital ratio.FindingsThe results offer evidence for economic diversity in the size compositions and performance variations of dispersed and clustered SSEs; and bigger economic size and higher economic performance of clustered than dispersed SSEs.Research limitations/implicationsSubject to the comparability of economic structure, the results and implications for India are of relevance for promotion and development of clustered SSEs in other developing countries.Practical implicationsFrom the viewpoint of policy formulation, the results offer a strong empirical basis for a cluster approach rather than a dispersed approach for promotion and development of SSEs in India. The cluster approach has implications for establishing linkages between formal and informal SSEs and for elimination of smallness of dispersed SSEs.Originality/valueThe paper provides a comparative analysis of economic size and performance of the dispersed and clustered SSEs by consolidating the diverse databases in India.