Effects of Different Learning Mechanisms on the Performance of MSME: A Case of Ludhiana’s Machine Tool Industry

Abstract

This study investigates the effects of various learning mechanisms on the performance of machine tool manufacturing firms in Ludhiana, exploring potential differences or similarities in these effects across different firm sizes within the micro, small and medium enterprise (MSME) framework, in light of the 2020 MSME reclassification by the Indian government. The study categorises learning mechanisms into science, technology and innovation (STI) and learning by doing, using and interacting (DUI), based on existing literature. Primary data were collected through a self-structured questionnaire. Results of multivariate analysis of variance analysis reveal no significant difference in the impact of STI and DUI learning mechanisms on overall firm performance across different size categories, even when considering the new MSME classification. Firms of all sizes are found to rely predominantly on informal (DUI) learning mechanisms, particularly ‘interpersonal ties’ and ‘imitation’, to enhance their performance. The study also employs Garret ranking to analyse the varying innovation bottlenecks faced by firms of different sizes. Notably, the lack of skilled labour emerges as the most critical obstacle hindering innovation capacity across the spectrum of firm sizes, affecting both smaller and larger enterprises in the machine tool manufacturing sector. These findings suggest that the recent MSME reclassification has not significantly altered the relationship between firm size and the effectiveness of learning mechanisms in this industry.

JEL Codes: D83, O31, L64, L25, O32, O33