Technology acquisition, de-regulation and competitiveness: a study of Indian automobile industry

Abstract

This paper has attempted to analyse the effects of de-regulation policy, introduced in India during the mid 1980s, on technology acquisition and competitiveness [defined in terms of market share changes] in the Indian automobile industry during the 1980s. Following evolutionary theoretical framework, the paper argues that asymmetry among firms in terms of technology acquisition [through technology imports and in-house efforts] explain much of the firm level differences in competitiveness. Asymmetry in technology acquisition is largely due to differences in the firms' ability to bring about technological paradigm and trajectory shifts. The results of the econometric exercise support the view that, even in an era of capacity licensing, development of competitive skills crucially depended upon the ability to build specific technology trajectory advantages. This is achieved by successfully complementing imported technology with in-house technological efforts. Competitiveness in a de-regulated regime would, however, depend upon the ability of the firm to bring about technological paradigm shifts. New firms who depended on intra-firm transfer of technology and firms with in-house R&D efforts, to accomplish paradigm shifts, appear more successful. Further, in a liberal regime, advantages of vertical integration over sub-contracting also appear to be important in the determination of competitiveness.