This article examines the determinants explaining the innovative behaviour of the firms operating in the Indian automotive components industry. The study uses an unbalanced panel of 114 firms operating in the components industry compiled from the Centre for Monitoring of Indian Economy database for the period 2000–2018 and employs the panel Tobit model estimated with the maximum likelihood estimator. The finding of the estimated models finds that various explanatory variables such as firm’s size, age, technology imports, overseas investment and affiliation to a business group exercise positive and significant effects on enhancing this industry’s technological capabilities, while other variables such as market share, firm’s leverage and business group affiliates with investments abroad have negative and significant effects. All these findings suggest that being outward-oriented in terms of overseas investments and being affiliated to a business group creates a significant difference in respect of the innovative behaviour of the firms in this industry.
AcsZ. J., & AudretschD. B. (1987). Innovation, market structure, and firm size. The Review of Economics and Statistics, 69(4), 567–574.
2.
AcsZ. J., & IsbergS. C. (1991). Innovation, firm size and corporate finance: An initial inquiry. Economics Letters, 35(3), 323–326.
3.
AdamsW. J. (1970). Firm size and research activity: France and the United States. The Quarterly Journal of Economics, 84(3), 386–409.
4.
ArmourH. O., & TeeceD. J. (1980). Vertical integration and technological innovation. The Review of Economics and Statistics, 62(3), 470–474.
5.
ArrowK. J. (1971). The firm in general equilibrium theory. In The corporate economy: Growth, competition, and innovative potential (pp. 68–110). Palgrave Macmillan.
6.
BasantR., & MishraP. (2014). Determinants of inter-industry variations in research and development efforts in Indian manufacturing sector: A dynamic panel data analysis. Innovation and Development, 4(1), 91–109.
7.
BelenzonS., & BerkovitzT. (2010). Innovation in business groups. Management Science, 56(3), 519–535.
8.
BhaduriS., & RayA. S. (2004). Exporting through technological capability: Econometric evidence from India’s pharmaceutical and electrical/electronics firms. Oxford Development Studies, 32(1), 87–100.
9.
BhagatS., & WelchI. (1995). Corporate research and development investments international comparisons. Journal of Accounting and Economics, 19(2-3), 443–470.
10.
BhattacharyaM., & BlochH. (2004). Determinants of innovation. Small Business Economics, 22(2), 155–162.
11.
BlanchardP., HuibanJ. P., & SevestreP. (2005). R&D and productivity in corporate groups: An empirical investigation using a panel of French firms. Annales d’Economie et de Statistique, (78/80), 461–485.
12.
BoundJ., CumminC., GrilichesZ., HallB., & JaffeA. (1984). Who does R&D and who patents. In GrilichesZ. (Ed.), R&D, patents and productivity. Chicago University Press.
13.
CarlssonB. (1989). Flexibility and the theory of the firm. International Journal of Industrial Organization, 7(2), 179–203.
14.
CastellacciF. (2015). Institutional voids or organizational resilience? Business groups, innovation, and market development in Latin America. World Development, 70, 43–58.
15.
CefisE., RosenkranzS., & WeitzelU. (2009). Effects of coordinated strategies on product and process R&D. Journal of Economics, 96(3), 193–222.
16.
ChangC. L., & RobinS. (2003). Doing R&D and importing technology: An empirical investigation on Taiwan’s manufacturing firms. Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
17.
ChangS. J., ChungC. N., & MahmoodI. P. (2006). When and how does business group affiliation promote firm innovation? A tale of two emerging economies. Organization Science, 17(5), 637–656.
18.
ChittoorR., AulakhP. S., & RayS. (2015). Accumulative and assimilative learning, institutional infrastructure, and innovation orientation of developing economy firms. Global Strategy Journal, 5(2), 133–153.
19.
ChuW. (2004). Are group-affiliated firms really more profitable than nonaffiliated?Small Business Economics, 22(5), 391–405.
20.
FrenkelA., SheferD., KoschatzkyK., & WalterG. H. (2001). Firm characteristics, location and regional innovation: A comparison between Israeli and German industrial firms. Regional Studies, 35(5), 415–429.
21.
FrygesH., KohnK., & UllrichK. (2015). The interdependence of R&D activity and debt financing of young firms. Journal of Small Business Management, 53(S1), 251–277.
22.
FuX., PietrobelliC., & 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.
23.
GhoshS. (2012). Does R&D intensity influence leverage? Evidence from Indian firm-level data. Journal of International Entrepreneurship, 10(2), 158–175.
24.
GhoshM., & RoyR. P. (2015). R&D, technology imports and total factor productivity in Indian manufacturing: Revisited [Conference paper]. X Annual Conference of Forum for Global Knowledge Sharing, November, Bangalore, India. http://fgks.in/images/pdf/conf/2015/13.pdf
25.
GronumS., VerreynneM. L., & KastelleT. (2012). The role of networks in small and medium-sized enterprise innovation and firm performance. Journal of Small Business Management, 50(2), 257–282.
26.
GuzziniE., & IacobucciD. (2014). Business group affiliation and R&D. Industry and Innovation, 21(1), 20–42.
27.
HallB. H. (1992). Investment and research and development at the firm level: Does the source of financing matter? (No. w4096). National Bureau of Economic Research.
28.
HallB. H., & LernerJ. (2010). The financing of R&D and innovation. In HallB. H. & RosenbergN. (Eds.), Handbook of the economics of innovation (Vol. 1, pp. 609–639). Elsevier.
29.
HambergD. (1964). Size of firm, oligopoly, and research: The evidence. Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique, 30(1), 62–75.
30.
HaoK. Y., & JaffeA. B. (1993). Effect of liquidity on firms’ R&D spending. Economics of Innovation and New Technology, 2(4), 275–282.
31.
HorowitzI., & ClemensE. W. (1962). Firm size and research activity. Southern Economic Journal, 28(3), 298–301.
32.
HsiehT. J., YehR. S., & ChenY. J. (2010). Business group characteristics and affiliated firm innovation: The case of Taiwan. Industrial Marketing Management, 39(4), 560–570.
33.
HueT. T. (2019). The determinants of innovation in Vietnamese manufacturing firms: An empirical analysis using a technology–organization–environment framework. Eurasian Business Review, 9(3), 247–267.
34.
IvarssonI., & AlvstamC. G. (2005). Technology transfer from TNCs to local suppliers in developing countries: A study of AB Volvo’s truck and bus plants in Brazil, China, India, and Mexico. World Development, 33(8), 1325–1344.
35.
KhannaT., & PalepuK. (2000a). Is group affiliation profitable in emerging markets? An analysis of diversified Indian business groups. The Journal of Finance, 55(2), 867–891.
36.
KhannaT., & PalepuK. (2000b). The future of business groups in emerging markets: Long-run evidence from Chile. Academy of Management Journal, 43(3), 268–285.
37.
KhannaT., & RivkinJ. W. (2001). Estimating the performance effects of business groups in emerging markets. Strategic Management Journal, 22(1), 45–74.
38.
KimJ. B.,& StewartC. T.Jr (1993). The relation between technology import and domestic R&D. The Journal of Technology Transfer, 18(3–4), 94–103.
39.
KomeraS., LukoseP. J., & SasidharanS. (2018). Does business group affiliation encourage R&D activities? Evidence from India. Asia Pacific Journal of Management, 35(4), 887–917.
40.
KumarN., & AggarwalA. (2005). Liberalization, outward orientation and in-house R&D activity of multinational and local firms: A quantitative exploration for Indian manufacturing. Research Policy, 34(4), 441–460.
41.
KumarN., & SaqibM. (1996). Firm size, opportunities for adaptation and in-house R & D activity in developing countries: The case of Indian manufacturing. Research Policy, 25(5), 713–722.
42.
KumarR. S., & SubrahmanyaM. B. (2010). Influence of subcontracting on innovation and economic performance of SMEs in Indian automobile industry. Technovation, 30(11-12), 558–569.
43.
KumaraswamyA., MudambiR., SarangaH., & TripathyA. (2012). Catch-up strategies in the Indian auto components industry: Domestic firms’ responses to market liberalization. Journal of International Business Studies, 43(4), 368–395.
44.
LallS. (1983). Determinants of R&D in an LDC: The Indian engineering industry. Economics Letters, 13(4), 379–383.
45.
LallS. (1993). Third world transitionals and their impact on home countries. United Nations Centre on Transnational Corporations.
46.
LeeM., & ChoiM. (2015). The determinants of research and development investment in the pharmaceutical industry: Focus on financial structures. Osong Public Health and Research Perspectives, 6(5), 302–309.
47.
LouZ., ChenS., JiaY., & YuX. (2019). Business group affiliation and R&D investment: Evidence from China. Emerging Markets Finance and Trade, 57(8), 2307–2322.
48.
MahmoodI. P., & LeeC. Y. (2004). Business groups: Entry barrier–innovation debate revisited. Journal of Economic Behavior and Organization, 54(4), 513–531.
49.
MahmoodI. P., & MitchellW. (2004). Two faces: Effects of business groups on innovation in emerging economies. Management Science, 50(10), 1348–1365.
50.
MajumdarS. K. (2011). Scalability versus flexibility: Firm size and R&D in Indian industry. The Journal of Technology Transfer, 36(1), 101–116.
51.
MansfieldE. (1963). Size of firm, market structure, and innovation. Journal of Political Economy, 71(6), 556–576.
52.
MukhopadhyayA. K. (1985). Technological progress and change in market concentration in the US, 1963-77. Southern Economic Journal, 52(1), 141–149.
53.
NarayananK., & BhatS. (2009). Technology sourcing and its determinants: A study of basic chemical industry in India. Technovation, 29(8), 562–573.
54.
NathP. (1993). Firm size and in-house R & D: The Indian experience revisited. The Developing Economies, 31(3), 329–344.
55.
NelsonR. R. (2004). The challenge of building an effective innovation system for catch-up. Oxford Development Studies, 32(3), 365–374.
56.
NelsonR. R., & WinterS. G. (1977). In search of a useful theory of innovation. Research Policy, 6(1), 36–76.
57.
NelsonR. R., & WinterS. G. (1982). An evolutionary theory of economic change. Harvard University Press.
58.
OkadaA. (2004). Skills development and interfirm learning linkages under globalization: Lessons from the Indian automobile industry. World Development, 32(7), 1265–1288.
59.
OkadaA., & SiddharthanN. S. (2008). Automobile clusters in India: Evidence from Chennai and the national capital region. In KuchikA. & TsujiM. (Eds.), The flowchart approach to industrial cluster policy. Palgrave Macmillan.
60.
PhillipsA.(1971). Technology and market structure. D.C. Health.
61.
PradhanJ. P. (2004). The determinants of outward foreign direct investment: A firm-level analysis of Indian manufacturing. Oxford Development Studies, 32(4), 619–639.
62.
PradhanJ. P., & SinghN. (2008). Outward FDI and knowledge flows: A study of the Indian automotive sector. Institutions and Economies, 1(1), 156–187.
63.
PrakashJ. V., & NauriyalD. K. (2022). Effects of business-group affiliation overseas investment and technology on firm-level export intensity: Evidence from Indian automotive component industry. South Asia Economic Journal, 23(2), 145–170.
64.
SalomonR. M., & ShaverJ. M. (2005). Learning by exporting: New insights from examining firm innovation. Journal of Economics and Management Strategy, 14(2), 431–460.
65.
SarangaH. (2009). The Indian auto component industry—Estimation of operational efficiency and its determinants using DEA. European Journal of Operational Research, 196(2), 707–718.
66.
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.
67.
SasidharanS., LukoseP. J., & KomeraS. (2015). Financing constraints and investments in R&D: Evidence from Indian manufacturing firms. The Quarterly Review of Economics and Finance, 55(C), 28–39.
68.
SchererF. M. (1965a). Size of firm, oligopoly, and research: A comment. Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique, 31(2), 256–266.
69.
SchererF. M. (1965b). Firm size, market structure, opportunity, and the output of patented inventions. The American Economic Review, 55(5), 1097–1125.
70.
SchererF. M. (1967). Market structure and the employment of scientists and engineers. The American Economic Review, 57(3), 524–531.
71.
SchumpeterJ. A. (1943). Capitalism, socialism and democracy (5th ed.). George Allen and Unwin Ltd.
72.
SheferD., & FrenkelA. (2005). R&D, firm size and innovation: an empirical analysis. Technovation, 25(1), 25–32.
73.
SiddharthanN. S. (1992). Transaction costs, technology transfer, and in-house R&D: A study of the Indian private corporate sector. Journal of Economic Behavior and Organization, 18(2), 265–271.
74.
SwitzerL. (1984). The determinants of industrial R&D: A funds flow simultaneous equation approach. The Review of Economics and Statistics, 66(1), 163–168.
75.
TyagiS., NauriyalD. K., & GulatiR. (2018). Firm level R&D intensity: Evidence from Indian drugs and pharmaceutical industry. Review of Managerial Science, 12(1), 167–202.
76.
WangK., & TaoW. (2019). Exploring the complementarity between product exports and foreign technology imports for innovation in emerging economic firms. European Journal of Marketing, 53(2), 224–256.
WuJ. (2019). Financing constraints for R&D in China: The role of state ownership. Applied Economics Letters, 26(14), 1162–1166.
79.
YuL., LiH., WangZ., & DuanY. (2019). Technology imports and self-innovation in the context of innovation quality. International Journal of Production Economics, 214, 44–52.
