Relative Efficiency of Ancillary and Small Scale Units

Abstract

Ancillary units are small firms manufacturing and supplying intermediate goods, typically to large firms. Several policy measures are under consideration to raise the output of the ancillary industry to the level of 15 per cent of the value of output of the large scale industry by 1985. The underlying assumption appears to be that the ancillary status enhances the prospect for the viability of the small firm. This paper examines whether ancillary units perform better than small scale units (small manufacturers of end products) under the conditions prevailing in India. The findings reveal no significant difference in the mean performance of the two classes of small firms. It also draws implications for policymakers and management from the findings.