Manufacturing imperatives of the electronics industry require technological capability across components to develop a strong supply base. With domestic value addition being less than 25%, catapulting domestic production capability would necessitate promoting productivity enhancing innovations at the firm level, particularly in design and development capabilities. For assessing the technological orientation of the electronics manufacturing Industry, the empirical investigation of this article focuses on two important channels of influence, namely imports and firm productivity and exports and firm productivity under a liberalised regime, thereby identifying the determinants of production growth of electronics manufacturing in India. The econometric analysis has underlined the low technological capability of manufacturing firms. While the import of raw material is significant for both domestic-oriented and export-oriented firms, import of capital goods is significant for only export-oriented firms. Further, R&D expenditure is low which is statistically significant. Taken together, these results highlight that high imports are on account of domestic non-availability, and imports have substituted domestic R&D that underlines low technological capability of Indian firms. Further, export-oriented firms have technologically advanced products possibly to face the competitive pressures in the international market. To supplement these insights, the descriptive analysis focused on the trade orientation of the sample firms and cost structure in determining their market behaviour. The share of firms engaging in domestic activity surged post liberalisation, suggesting that the focus was primarily on fast expanding domestic market. As such, import engagement has increased significantly but export engagement has decreased. This suggests that imports have not facilitated export growth but only bridged the gap of non-availability of inputs domestically. The analysis of cost structure points to a decline in the share of capital goods and R&D, both implying lack of technological capability of the firms. Further, increasingly firms are turning to trading, that is, import of finished goods. As such, to promote a conducive manufacturing ecosystem, there is a need to promote technological capability and encourage export orientation of the firms.
Abdul-AzizS. N., ZulkifiN. (2017). International production networks in East Asia’s electronics industry. Review of Integrative Business & Economics Research, 6(1), 116–140.
2.
AwB. Y., ChungS., RobertsM. J. (2000). Productivity and turnover in the export market: Micro level evidence from the Republic of Korea and Taiwan (China). The World Bank Economic Review, 14(1), 65–90.
3.
AwB. Y., RobertsM. J., XuD. Y. (2008). R&D investments, exporting and evolution of firm productivity. American Economic Review, 98(2), 451–456.
4.
AyogN. (2016). Make in India strategy for electronics products. Government of India.
5.
BernardA. B., JensenJ. B. (1999). Exceptional export performance: Cause, effect or both? Journal of International Economics, 47(1), 1–25.
6.
BernardA., EatonJ., JensonJ. B., KortumS. (2003). Plants and productivity in international trade. American Economic Review, 93(4), 1268–1290.
7.
BuckleyP. J., CleggJ., WangC. (2004). Inward FDI and host country productivity: Evidence from China’s electronics industry. Transnational Corporations15(1).
8.
CainelliG. (2008). Spatial agglomeration, technological innovations, and firm productivity: Evidence from Italian industrial districts. Growth and Change, 39(3), 414–435.
9.
ChoiI. (2001). Unit root tests for panel data. Journal of International Money Finance, 20, 249–272.
10.
DashA., ChandaR. (2017). Indian firms in electronics global value chains: Sectoral analysis. CWS Working Paper No 41, Centre for WTO Studies, New Delhi.
11.
DeitY. (2012). Notification on National Policy on Electronics (NPE) for electronics system design manufacturing sector in India. Government of India.
12.
ErnstD. (2004). Global production networks in East Asia’s electronics industry and upgrading perspectives in Malaysia. In S. Yussuf, M. Anjum Altaf, & K. Nabeshima (Eds.), Global production networking and technological change in East Asia. World Bank & Oxford University Press.
13.
ErnstD. (2014). Upgrading India’s electronics manufacturing industry: Regulatory reform and industrial policy. East–West Centre.
14.
FrancisS., (2018, August 25). India’s electronics manufacturing sector: Getting the diagnosis right. Economic and Political Weekly, 53(34), 112–117.
15.
FuX., GongY. (2011). Indigenous and foreign innovation efforts and drivers of technological upgrading: Evidence from China. World Development, 39(7), 1213–1225.
16.
FuX., PetrobelliC., SoeteL. (2011). The role of foreign technology and indigenous innovation in the emerging economies: Technological change and catching-up. World Development, 39(7), 1204–1212.
17.
GoldbergP., KhandelwalA., PacvnickN., TopalovaP. (2009). Trade liberalisation and new imported inputs. American Economic Review, 99(2), 494–500.
18.
GoldbergP., KhandelwalA., PacvnickN., TopalovaP. (2010). Imported intermediate inputs and domestic product growth: Evidence from India. Quarterly Journal of Economics, 125(4), 1727–1767.
19.
GreeneW. H. (2003). Econometric analysis. Pearson Education India.
20.
GreenwayD., YuZ. (2004). Firm-level interactions between exporting and productivity: Industry-specific evidence. Review of World Economics, 140(3), 376–392.
21.
GrossmanG. M., HelpmanE. (1991). Trade, knowledge spillover and growth. European Economic Review, 35(1991), 517–526.
22.
GuariniG. (2011). Innovation and growth in the Grossman–Helpman’s model with increasing returns: A note. Economic Bulletin, 31(1), 147–155.
23.
HakansonL., ZanderU. (1986). Managing international research & development. Mekanpublikation.
24.
HalpernL., KorenM., SzeidlA. (2015). Imported inputs and productivity. American Economic Review, 105(2), 3660–3703.
25.
HasanR. (2000). The impact of imported and domestic technologies on productivity: Evidence from Indian manufacturing firms. East–West Centre Working Papers, No. 6, September, Hawai, Honolulu.
26.
HeloP. (2004). Managing agility and productivity in the electronics industry. Industrial Management & Data Systems, 104(7), 567–577.
27.
HelpmanE., KrugmanP. R. (1985). Market structure and foreign trade. Increasing returns, imperfect competition and the international economy. MIT Press.
28.
HelpmanE., MelitzM. J., YeapleS. R. (2004). Export Vs FDI with heterogenous firms. American Economic Review, 94, 300–316.
29.
KallumalM. (2012). Process of trade liberalisation under the Information Technology Agreement (ITA): The India Experience CWS Working Paper No. CWS/WP/200/3. Centre for WTO Studies, New Delhi.
30.
LiuW. S., AgbolaF. W., DzatorJ. A. (2016). The impact of FDI spillover effects on total productivity in the Chinese electronic industry: A panel data analysis. Journal of Asia Pacific Economy, 21(2), 217–234.
31.
MaddalaG. S., WuS. (1999). A comparative study of unit root test with panel data and a simple new test. Oxford Bulletin of Economics & Statistics, 61, 631–652.
32.
MajumdarR. (2010). Indian electronics hardware industry: Growth and productivity (1993-2004). Economic and Political Weekly, 45(14), 72–77.
33.
McKinsey. (2014). Understanding ASEAN: The manufacturing opportunity. McKinsey Productivity Sciences Centre
34.
MelitzM. J. (2003). The impact of trade on intra-industry reallocation and aggregate industry productivity. Econometrica, 7(6), 1695–1725.
35.
Ministry of Electronics & Information Technology MeitY. (2019). National Policy on Electronics (NPE 2019). Notification No. 26(1)/2019-IPHW.
36.
Ministry of Electronics & Information Technology MeitY. (2020a). Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. Notification No. 86 (CG-DL-E-01042020-218-9910, F.No. 36(7)/2018-IPHW-(Vol. II) dated 1 April 2020.
37.
Ministry of Electronics and Information Technology MeitY. (2020b). Production liked Incentive Scheme (PLI) for Large Scale Electronics Manufacturing. Notification No. W-28/1/2019 – IPHW – Meity.
38.
Ministry of Electronics and Information Technology MeitY. (2020c). Scheme for Promotion of Manufacturing of Electronic Component and Semiconductors (SPECS). Notification No. W-18/30/2019 – IPHW – MeitY.
39.
NarayanaD., JosephK. J. (1993). Industry and trade liberalisations: Performance of motor vehicles and electronics industries. Economic and Political Weekly, 28(8–9), M13–M20.
40.
NSDC. (2018). Human resources and skill requirements in the electronics and IT hardware sector (2013-17, 2017-22) (Vol. 9). National Skill Development Corporation, Ministry of Skill Development & Entrepreneurship, GOI.
41.
ParameswaranM. (2009 September). International trade, R&D spillovers and productivity: Evidence from Indian manufacturing industry. Journal of Development Studies, 45(8), 1249–1266.
42.
PattnayakS. S., ThangaveluS. M. (2014). Productivity and learning-by-exporting: A firm level analysis of Indian manufacturing. World Economy, 37(7), 1016–1026.
43.
RajuS. (2020 June 11). Electronics manufacturing policy: India should move beyond self-reliance. Trade Promotion Council of India. https://www.tpci.in/blogs/electronics-manufacturing-policy-india-should-move-beyond-self-reliance/
44.
RasiahR. (2004). Exports and technological capabilities: A study of foreign and local firms in the electronics industry in Malaysia, The Philippines and Thailand. The European Journal of Development Research, 16(3), 587–623.
45.
RijeshR. (2015). Technology import and manufacturing productivity in India: Firm level analysis. Journal of Industry, Competition and Trade, 15(4), 411–434.
46.
SanidasE., ShinW. (2017). Lean production system and economic development across the world today. International Journal of Economics & Management Sciences, 6(06).
47.
SasidharanS., KathuriaV. (2011). Foreign direct investment and R&D: Substitutes or complements – A case of Indian manufacturing after 1991 reforms. World Development, 39(7), 1226–1239.
48.
SharmaC. (2014). Imported intermediate inputs, R&D, and productivity at firm level: Evidence from Indian manufacturing industries. The International Trade Journal, 28(3), 246–263.
49.
TeiglandR., FeyC. F., BerkinshawJ. (2000). Knowledge dissemination in global R&D operations: An empirical study of multinationals in the high technology electronics industry. Management International Review, 10(1), 49–77.
50.
TiralapA. (1992). Technology measurement: Searching for a useful framework. TDRI Quarterly Review, 7(3), 30–33.
51.
TopalovaP., KhandelwalA. (2011). Trade liberalisation and firm productivity: The case of India. The Review of Economics and Statistics, 93(3), 995–1009.
52.
TsaiK.-H. (2004). The impact of technological capability on firm performance in Taiwan’s electronics industry. Journal of High Technology Management Research, 15, 183–195.
53.
TsaiK.-H., WangJ.-C. (2004). The R&D performance in Taiwan’s electronics industry: A longitudinal examination. R&D Management, 34(2), 179–189.
54.
TsangC.-Y. (2008). Internal R&D effort, external imported technology and economic value added: Empirical study of Taiwan’s electronic industry. Applied Economics, 40, 1073–1082.
55.
TsouM.-W., LiuJ.-T., HammittJ. K., WangK.-H. (2008). Exporting and productivity growth: Evidence from the Taiwan electronics plants. Scottish Journal of Political Economy, 55(2), 190–209.
56.
UN. (2005). A case study of the electronics industry in Thailand. UNCTAD/ITE/IPC/2005/6.
57.
UNIDO. (2018). Global value chains and industrial development: Lessons from China, South – East and South Asia.
