Some Aspects of Deregulation-led Industrial Transformation and Inter-firm Differences

Abstract

Deregulation, an external stimulus, triggers industrial transformation. Increased entropy may cause fragmentation of existing industries in a sector, while systemic adaptation may lead to concentration of industries in one sector. The industrial organization perspective leads one to assume that because firms in an industry share a common technology or production function, their responses to external stimuli and likely outcomes are unlikely to differ qualitatively. However, from the resource-based view, one may make out a case for inter-firm differences in resources and capabilities, imprinting consistent patterns of outcome of increase in the market share of industry leaders. Exploring the transformation witnessed by the manufacturing industry in India, following the changes ushered in by the Exim policy (1997–2002), this article identifies distinct patterns that industry leaders have set for themselves. Capability, guerilla and complexity logic again posit different outcomes of firms’ efforts to sustain competitive advantages related to different assumptions of market conditions. The article seeks to discover the validity of this logic in the context under study.

Resolving an Inevitable Crisis: Whose Stake Is It?

“…Although the policy did not directly address the problems of industry and IR, it affected the fundamentals of growth strategy and the importance attached earlier to factors of production—such as capital and labour. Among others, the measures announced in the policy facilitated the entry of multinational corporations and gradual privatization (Putatunda, 2005), and laid greater emphasis on technology and the need to upgrade skills of existing and future workforces. This pointed towards possible unemployment due to closure of sick public and private sector industrial undertakings—an indication of reduced requirement for labour, signalling a change in the role of the state (Sodhi, 1995).…”