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Perspectives on the Sources of Heterogeneity in Indian Industry

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  • Lall, Somik V.
  • Rodrigo, G. Chris

Abstract

The authors examine technical efficiency variation across four industrial sectors in India, using a stochastic production frontier technique. The results are comparable to technical efficiency distribution patterns obtained in other countries. The authors examine heterogeneity in firm-level efficiency against internal, firm-level characteristics and against external characteristics (industry and location). The results suggest that managerial effectiveness significantly influences efficiency and that considerable benefits derive from location within established industrial clusters for particular industries. The methodology and findings indicate that the study of industry-specific technical efficiency patterns is a useful analytical tool for tracking domestic firms'response to liberalization and the advance of market forces. An important policy implication of the authors'results: There is considerable room for efficiency gains through better organization and management of production processes and improved supply chain management, even in the highly organized corporate sector. These gains could be achieved by purely internal learning processes with no extra investment in physical plant or equipment, or with the help of outside consultants, or through business alliances with partners from industrial countries (a rising trend). The results also show that greater technical efficiency correlates with better energy use and higher investments in plant management. How firms can be induced to undertake such investments in the"software"of production is an important issue. Liberalization and globalization are likely to bring significant productivity gains even in low-technology industries as managers gear up to meet the challenges of competition.
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Suggested Citation

  • Lall, Somik V. & Rodrigo, G. Chris, 2001. "Perspectives on the Sources of Heterogeneity in Indian Industry," World Development, Elsevier, vol. 29(12), pages 2127-2143, December.
  • Handle: RePEc:eee:wdevel:v:29:y:2001:i:12:p:2127-2143
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    References listed on IDEAS

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    1. Lall, Somik V. & Shalizi, Zmarak & Deichmann, Uwe, 2004. "Agglomeration economies and productivity in Indian industry," Journal of Development Economics, Elsevier, vol. 73(2), pages 643-673, April.
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    7. Jacobsson, Staffan, 1985. "Technical change and industrial policy: The case of computer numerically controlled lathes in Argentina, Korea and Taiwan," World Development, Elsevier, vol. 13(3), pages 353-370, March.
    8. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
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    9. Lall, Sanjaya, 1999. "India's Manufactured Exports: Comparative Structure and Prospects," World Development, Elsevier, vol. 27(10), pages 1769-1786, October.
    10. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    Cited by:

    1. Michael Basch & Julio Peña-Torres & Sebastian Vergara, "undated". "Catch Efficiency in the Chilean Pelagic Fishery: Does size matter ?," ILADES-Georgetown University Working Papers inv140, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
    2. Sabyasachi Tripathi, 2013. "Do Large Agglomerations Lead To Economic Growth? Evidence From Urban India," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 25(3), pages 176-200, November.
    3. Lall, Somik V. & Shalizi, Zmarak & Deichmann, Uwe, 2004. "Agglomeration economies and productivity in Indian industry," Journal of Development Economics, Elsevier, vol. 73(2), pages 643-673, April.
    4. Sabyasachi TRIPATHI, 2014. "Estimating Urban Agglomeration Economies for India: A New Economic Geography Perspective," Theoretical and Empirical Researches in Urban Management, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 9(2), pages 5-34, May.
    5. Uwe Deichmann & Marianne Fay & Jun Koo & Somik V. Lall, 2004. "Economic structure, productivity, and infrastructure quality in Southern Mexico," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 38(3), pages 361-385, September.
    6. Fernandes, Ana M., 2008. "Firm Productivity in Bangladesh Manufacturing Industries," World Development, Elsevier, vol. 36(10), pages 1725-1744, October.
    7. Anup Kumar Bhandari & Pradip Maiti, 2007. "Efficiency of Indian Manufacturing Firms: Textile Industry as a Case Study," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 6(1), pages 71-88, April.
    8. Anup Kumar Bhandari, 2010. "Global Crisis, Environment Volatility and Expansion of Tthe Indian Leather Industry," Working Papers id:2500, eSocialSciences.
    9. Chakravorty, Sanjoy & Koo, Jun & Lall, Smik V., 2003. "Metropolitan industrial clusters ; patterns and processes," Policy Research Working Paper Series 3073, The World Bank.
    10. Tripathi, Sabyasachi, 2012. "Large Agglomerations and Economic Growth in Urban India: An Application of Panel Data Model," MPRA Paper 41574, University Library of Munich, Germany.
    11. Anup Bhandari & Pradip Maiti, 2012. "Efficiency of the Indian leather firms: some results obtained using the two conventional methods," Journal of Productivity Analysis, Springer, vol. 37(1), pages 73-93, February.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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