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Growth Effects of Industrial Clusters

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  • M.R. Narayana

Abstract

This article develops a simple methodology for calculation of growth effects of industrial clusters at national level and estimates the economic determinants of the clusters’ size-class of production by using data on 354 individual industrial clusters in India. Gross value of industrial clusters is indirectly measured and growth effects are calculated within the National Income Accounting framework. Determinants are estimated by using the grouped data on size-class of value of production by clusters. Results show that industrial clusters contributed to India’s economic growth of manufacturing sector (or Indian economy) between 8 to 3 per cent (or between 1 to 0.4 per cent) in 2002–2003 and 2003–2004, respectively. Binary Logit estimates show that industrial clusters with modern small scale industries and traditional art and craft products, high and medium heterogeneity, high and medium potential for technology upgradation and exports and those which are market or resource based are the important determinants of size-class of production of clusters. Other things being equal, an improvement in these determinants may contribute to higher gross value added and maximization of economic growth by industrial clusters. This analysis is useful to calculate the determinants of probability of individual clusters belonging to larger size-class of production at the state level. Further, the approach is relevant and applicable to estimate growth effects of industrial clusters in other South Asian countries as well.

Suggested Citation

  • M.R. Narayana, 2014. "Growth Effects of Industrial Clusters," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(1), pages 71-92, March.
    • Handle: RePEc:sae:soueco:v:15:y:2014:i:1:p:71-92
    DOI: 10.1177/1391561414525722
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    References listed on IDEAS

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    1. Tetsushi Sonobe & Keijiro Otsuka, 2014. "Cluster-Based Industrial Development," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-38511-6, December.
    2. M.R. Narayana, 2007. "Economic size and performance of dispersed and clustered small scale enterprises in India," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 34(9), pages 599-611, August.
    3. Sanjoy Chakravorty & Jun Koo & Somik V Lall, 2005. "Do Localization Economies Matter in Cluster Formation? Questioning the Conventional Wisdom with Data from Indian Metropolises," Environment and Planning A, , vol. 37(2), pages 331-353, February.
    4. Morosini, Piero, 2004. "Industrial Clusters, Knowledge Integration and Performance," World Development, Elsevier, vol. 32(2), pages 305-326, February.
    5. Aradhna Aggarwal, 2011. "PROMOTING AGGLOMERATION ECONOMIES AND INDUSTRIAL CLUSTERING THROUGH SEZs: EVIDENCE FROM INDIA," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 2(02), pages 201-227.
    6. Schmitz, Hubert & Nadvi, Khalid, 1999. "Clustering and Industrialization: Introduction," World Development, Elsevier, vol. 27(9), pages 1503-1514, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Industrial clusters; small and medium enterprises; size-class of production; Binary Logit Model;
    All these keywords.

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L69 - Industrial Organization - - Industry Studies: Manufacturing - - - Other

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