R and D Spillovers Across the Supply Chain: Evidence from the Indian Automobile Industry

This study attempts to capture the impact of vertical and horizontal R and D spillovers across the supply chain. Empirical studies have captured vertical spillovers while finding the role of horizontal spillovers in R and D to be negligible, as the pool of accessible knowledge is the same for a cross section of firms within an industry. However, from a supply chain perspective, though firms may be suppliers to an industry, they belong to different industries themselves; and different tiers of the supply chain. The automobile industry is a good case in point: though auto component firms supply to the automobile sector, they come under diverse industrial classification schemes like rubber, electronics and engineering. The present study attempts to measure the horizontal spillovers within Indian Indian auto components Industry as well as spillovers coming vertically from the original equipment manufacturers (OEM) from a flow and a stock perspective. The trend in R and D expenditures undertaken by various component types suggests that most of the R and D occurs in the engine, suspension and tyre category indicating the adaptive nature of R and D, given India’s infrastructure. The study finds spillovers from within the component group are a substitute for firm’s own in-house R and D, while spillovers coming from outside the component group act as complements, thus indicating the integral nature of automobile design, requiring collaborative R and D effort. Among the OEMs, spillovers vary based on vehicle category suggesting that nature of OEM-supplier collaboration differs by vehicle types.