We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

See Pricing

What's Your Topic?

Hire a Professional Writer Now

The input space is limited by 250 symbols

What's Your Deadline?

Choose 3 Hours or More.
Back
2/4 steps

How Many Pages?

Back
3/4 steps

Sign Up and See Pricing

"You must agree to out terms of services and privacy policy"
Back
Get Offer

Globalisation and the Impact on Developing Countries

Hire a Professional Writer Now

The input space is limited by 250 symbols

Deadline:2 days left
"You must agree to out terms of services and privacy policy"
Write my paper

Globalisation and Opening Markets in Developing Countries and Impact on National Firms and Public Governance The Case of India Project Co-financed by the European Union under the EU-India Small Projects Facility Programme Scientific Coordinators Jean-Francois Huchet & Joel Ruet 2006 1 2 Executive Summary: India, Globalisation and Firms The question of ‘India in globalisation’ is relevant in a fundamental manner. It is important in itself on account of its billion-strong population, its enterprises and its development model.

Modern India nurses the ambitions of a continent and has the potential of a double gamble: The emergence of world-class Indian companies busy developing specific strategies to seek realignments and strategic partnerships in world network capitalism and aiming at becoming ‘price-makers’ in their niche markets.

Don't use plagiarized sources. Get Your Custom Essay on
Globalisation and the Impact on Developing Countries
Just from $13,9/Page
Get custom paper

Setting up a new development model for ‘emerging’ countries, which is not only designed to compete (and cooperate) with the Chinese model but can also be exported to developing countries of the South and which seeks above all to avoid the Manichaeism proposed to poor countries, viz.

he deadlock of importsubstitution vs. a dependent integration into the hierarchical world structure of liberalism. – No doubt a narrow path: India has the necessary industrial assets, the capacity to test its products in situ, the intellectual and human capital needed to entertain such an ambition, while it has to handle the issues of economic redistribution and social cohesion, with their strong and structuring Indian specificities.

Economic globalisation of India has materialised as major changes in trade (imports of equipment as well as opening of opening of the domestic market), has combined with new regulatory and industrial policies, been accompanied by new World Trade Organisation (WTO) agreements and recent evolution on Foreign Direct Investment (FDI) policies. It is important to understand how the functioning of firms has further been impacted on three main areas: 1. The impact on industrial policy and the relationship between the economic administration and firms.

Various studies show the central role of the State in the take-off of national industries and services. Not necessarily through simple protectionist measures, but also through an overhaul of regulation, research transfer and targeted infrastructure investment. 3 i The related question is, from the viewpoint of the state, how to redefine its role and position in the context of an open internal market? 2. The impact on the corporate governance of industrial groups.

Industries like manufacturing, cars, equipment that find themselves in the public sector for either historical or maturity reasons, now globalise worldwide. Our research concentrates on firm-level strategies, but also broadens the discussion to how and whether the compulsions created by the opening of the internal market (more FDI, growing private sector) are providing an impetus for a better corporate governance system for public and private corporate groups. 3. Technological catching-up and emancipation

For national groups to emerge from former planned, command or imports substitution systems, they have to catch-up technologically, and to achieve emancipation through R&D and both technological and commercial agreements and partnerships. The question is whether they go for sub contracting, on producing for “niches”, or directly target global competitions. More and more FDI are also dominating internal markets in different sectors through joint-venture or Greenfield affiliates, which put everal limitations on the possibility for national firms to achieve technological catch up. This report presents initial findings on the evolution of Indian firms along these three lines, at times with comparison with the Chinese case. It is to be completed by July 2006 with a report entitled “Globalisation and Opening Markets in Developing Countries and Impact on National Firms and Public Governance: The Case of China. ii 4 Acknowledgments This report presents the preliminary findings of an international group of economists on impact of globalisation of firms in India.

It is part of a larger pluri-annual attempt at comparing India and China for this matter. This study has been feasible thanks to the financial support of the Small Projects Facility Program of the EU Delegation in Delhi, of the Centre de Sciences Humaines of New Delhi, the French Ministry of Foreign Affairs, the Observer Research Foundation, the National Council for Applied Economic Research, as well as financial contributions from the institutes of affiliation of the researchers involved in the project.

In the name of our colleagues, we thank the Centre de Sciences Humaines of New Delhi, the Observer Research Foundation New Delhi, the National Council for Applied Economic Research, India International Centre New Delhi and the London School of Economics Office in Delhi, as well as Prof M. R. Narayana, Head, Institute for Social and Economical Change, Prof Gopal K. Kadekodi, Director, Institute for Social and Economical Change, Bangalore, for their organisational support in seminars and lectures organisation, as well Mr Ajay Prasad from ORF and Dr Manfred Haack from Friedrich Ebert Stiftung for their early support to this project.

We particularly thank Jawaharlal Nehru University, the IIM Ahmedabad, the Friedrich Ebert Stiftung (Delhi), the EHESS (Paris), the University Rennes II, the University Paris III, the CEPII (Paris), the CERNA (Paris), the London School of Economics, the Institute of World Economics & Politics of the Chinese Academy of Social Sciences (Beijing) for their contribution to the elaboration and organisation of this project. At various stages of this project we had fruitful exchanges and received invaluable comments and support and from: Mr Mani Shankar Aiyar, former Union Minister for Oil and Gas, Prof.

Y. K. Alagh, former Minister & former Member Planning Commission, Mr Jean Arthuis, former Minister, French Government, Dr N. K. Singh, former Deputy Chairman, Planning Commission, Dr Rakesh Mohan, Deputy Governor, Reserve Bank of India, H. E. Dominique Girard, Ambassador of France to India, H. E. Mr. Sun Yuxi, Ambassador of China to India, Dr Suman Bery, Director General NCAER, Prof. S. L. Rao, Chairman ISEC, Prof. B. B. Bhattacharya, Vice-Chancellor JNU, Dr Lant Pritchett, Senior Economist, World Bank, Dr. Ashok Desai, Former Economic Adviser to the Finance Minister, Prof.

Bibek Debroy, Director, Rajiv Gandhi Foundation, Mr. Nazeeb iii 5 Arif, Secretary General Indian Chamber of Commerce, Prof. Ashok Guha, Jawaharlal Nehru University), Dr. Shashanka Bhide, NCAER, Dr. Jean-Joseph Boillot, former Financial Counsellor, French Embassy in India, Dr Richard Herd, OECD Paris, Prof. Chalapati Rao, Institute for Studies in Industrial Development, Mr. Rajiv Kumar, Chief Economist Confederation of Indian Industry, Prof. Subhashis Gangopadhyay, Director, India Development Foundation, Dr J. V. Rao, NITRA Faridabad, Prof. Biswanath Goldar, Institute of Economic Growth, Dr. Y. S.

Rajan, Principal Adviser, Confederation of Indian Industry, former Scientific Sec to Govt of India, Former Executive Director TIFAC, Mr Pradip Baijal, Chairman, TRAI, Dr Wilson John, ORF, Dr TCA S Raghavan, Consulting Editor, Business Standard, Mr Jayanta Roy, Principal Adviser, CII, Prof. Manoj Pant, CITD, JNU, Prof TCA Anant, Delhi School of Economics, Mr Sunil Jain, Business Standard, Dr Lawrence Saez, London School of Economics, Mr T. N. Ninan, Business Standard, Prof. Wang Haisu, Dean of MBA School Zhong Nan University of Economics and Law in Wuhan, Mr Pankaj Gupta, Senior Director SIAM, Prof.

Robert Boyer, EHESS, Mr R. Saluja, Fellow, IDF, Prof. Joel Thoraval, EHESS Dr Subir Gokarn, Chief Economist, CRISIL, Dr Ravni Thakur, Reader, Chinese Studies, University of Delhi, Department of East Asian Studies. In the names of our colleagues we wish to thank for their time, warm welcome and essential inputs in interviews, P. C. Rajiv, Vice President Human Resources India, ABB Limited, Vinay Konaje, Vice President – Business Development, Avesthagen Gengraine Technologies Pvt. Ltd, Gilles Amsallem, Chief Operating Officer, Avesthagen Gengraine Technologies Pvt.

Ltd, Jean-Charles Demarquis, Consul General de France and chef de la Mission Economique, Bombay, Hughes Jacquet, Press Attache, Consulat General De France – Mission Economique, Patrice Pous, Adjoint au chef de Mission, Consulat General De France – Mission Economique, Rajiv Salkar, Geometric Software Solutions Co. Ltd. , K. Thiagarajan, Managing Director & Chief Executive Officer, Hinduja Group India Ltd, Alvin K. Das, Vice Chairman, Hinduja Group India Ltd, J. N. Chatterjee, Group President – Finance, Hinduja Group India Ltd, Ramesh Lingaiah, Senior Principal Engineer – Sourcing, Honeywell Technology Solutions Lab Pvt.

Ltd. , K. Dinesh, CoFounder And Member Of The Board, Infosys Technologies Limited, Aditya Nath Jha, Head – Brand And Communication, Infosys Technologies Limited, Anand Giridharadas, Journalist, South Asia Correspondent, International Herald Tribune, Sanjay Dave, Chartered Accountant, K. S. Aiyar & Co, Shivesh K. Sinha, Chief Financial Officer, Lafarge, Udai Khanna, CEO, Lafarge India, Bharat Doshi, Executive Director; Finance & Corporate Affairs, Mahindra & Mahindra Ltd, Vishnu K. Garg, Vice President; Operations & Business Development; Telecom & Software Sector, Mahindra & Mahindra Ltd, M.

Lakshminarayan, Joint Managing Director, Mico Bosch Group, Shetty K. Jayaprakash, General Manager, Mico Bosch Group, B. S. Iyer, Legal Counsel & Company Secretary, Mico Bosch Group, J. V. Rao, Director, Northern India Textile iv 6 Research Association – Nitra, Arun Mehra, Vice President, Observer Research Foundation, C. S. Gokhale, President Corporate Development, Reliance, Nikhil R. Meswani, Executive Director, Reliance, Satish Seth, Executive Vice Chairman, Reliance, Subodh Shah, Director, Reliance, Ashwani Kumar, Business Development, Reliance, Vivek Shrivastava, Asst.

Vice President (Shipping & Logistics), Reliance, Krishna Maheshwari, Business Development, Reliance, Joseph A. J. Pereira, Vice President Finance & Corporate Services, Saint Gobain, Sebastien Jaulerry, Managing Director, Snecma Group, Bangalore, Jai Prakash Singh, Vice President, Engineering Business Development for Asia, Snecma Group, Snecma Aerospace India Pvt Ltd, Alan Rosling, Executive Director, Tata Sons Limited, A. R. Shankar, General Manager, Corporate Planning Division, Toyota Kirloskar Motor Pvt Ltd, Shripad Bath, Deputy General Manager, Corporate Planning Division, Toyota

Kirloskar Motor Pvt Ltd, Amith Prakash, Officer, Corporate Planning Division, Toyota Kirloskar Motor Pvt Ltd, Mohan K. Manikkan, Sr Manager (Insurance & Pr), Welspun, – Gujarat Stahl Rohren Ltd. , Akhil Jindal, President, Welspun, Laxman K. Badiga, Chief Executive – Talent Transformation & External Relations, Wipro Technologies, Anoop Pillai, Company Secretary, Zodiac Clothing Co. Ltd. , Anees Noorani, Vice Chairman & Managing Director, Zodiac Clothing Co. Ltd. We wish also to warmly thank our colleagues who have joined their efforts in this research, Ms. Wang Wei, Chinese Academy of Social Sciences, Prof.

Ajitava Raychaudhury, Jadavpur University, Prof. Manmohan Agrawal, Dean, SIS, JNU, Prof. Xavier Richet, University Paris III, Mrs. Francoise Lemoine, Senior Researcher, CEPII, Centre for prospective studies and international informations, Paris, Dr. Kong Xinxin, Researcher, Institute of Venture Capital, National Centre for Science and Technology for Development, Beijing, Ministry of Science and Technology, Prof. P. R. Shukla, Institute of Management Ahmedabad, Dr Deepa Menon-Choudhary, CSH, Dr Dipankar Sengupta, CSH, Prof. Athar Hussain, LSE, Dr. Debashis Chakraborty, Rajiv Gandhi Institute, Dr.

Basanta Pradhan, NCAER, as well as particularly mention the assistance of Ms Attreyee Roy Chowdhury, Mrs Mallika Hanif and Mr Kulmohan Singh from CSH, as well as strong and efficient research support from Ms Meenakshi Dhawle and Mr Zakaria Siddiqui. This report only expresses views of its authors, and of no institution or company. All errors and interpretations remain of course our sole responsibility. Jean-Francois Huchet & Joel Ruet 7 v v 8i Contents Executive Summary: India, Globalisation and Firms Acknowledgments Contents i iii vii Part I – Issues and main findings

Theoretical Background and Issues General Context for Developing Countries: Impact of Globalisation and Geopolitics Catching-up Growth and « Globalisation of Firms – induced Growth » Industrial catching-up: from a ‘hierarchised’ catching-up through cost-competition, towards strategic competition through technological capitalisation Indian take-off: China as a backdrop Questions on the Role of the State, Industrial policies and support for national firms: the Limitation of Service Specialisation, and the compelling example of China Role and Impact on corporate governance, and Indian specificities with the backdrop of China Technological catching-up: industrial trajectories, modes of entry in value chains, and technological emancipation Findings on State-Industry Relationships, Technological Catching-up and Corporate Governance in India Indian specificities 1. Role of the State, Industrial policies and support for national firms 2.

Impact on corporate governance in Indian public and private corporate groups 3. Technological catching-up and emancipation, internationalisation strategies On two macro-economic bottlenecks: energy supply & infrastructure provision, and labour & training 1 3 3 4 7 8 11 12 16 19 19 20 21 24 26 Part II – Seminars and Sectoral Studies Seminar Programs Evolution of Indian Industry in the Post-Liberalisation Era 1. Growth Trends in the Indian Economy: A Review 2. A Review of the Performance of Manufacturing Sector: 3. Change in Structure of Production in Manufacturing: 4. Employment During the Reforms Period 5. The Spatial Distribution of Manufacturing 6 Conclusion References 29 31 39 39 43 46 58 65 71 73 vii 9

China and India : Trade Specialisation and Technological Catch-up India and China display two different patterns of export specialisation Their specialisation patterns stem from different involvement in the international segmentation of production processes. New export specialisation associated with technological upgrading China’s and India’s export performance in high-tech goods relies in price competitiveness Two different ways of taking part to globalisation Conclusions Firm-Level Strategic Implications of Oil and Gas Reforms in India Introduction Role of the State 1. Response of firms to reforms 2. Ad hoc pricing policy: Key concern for firms 3.

Perceived role of the State Role of technology Implications of reforms on corporate governance of firms Conclusions References Indian and Chinese electricity industries: reforms, national champions and private industrial dynamics The regional electricity politics Manufacturing-driven and Power sector-driven IPPs ‘Regulation’ and the market structures Conclusion References The Textile and Garment Industry in India Introduction The Textile and Garment Industry The Location of Clothing firms in the Value Chain Changing Government Focus: Bid to save the Golden-egg laying Goose Technology Adaptation Finance and Corporate Governance Business Strategy of Firms in the Era of Globalisation The Hurdles to Future Growth? Conclusion The Chinese and Indian Automobile Industry in Perspective : Technology Appropriation, Catching-up and Development Introduction 1. Some assumptions: 77 77 78 80 81 83 85 87 87 88 94 100 103 105 110 111 112 115 116 125 130 138 140 141 141 142 145 148 152 155 157 159 161 163 163 163 viii 10 2. The actors on the playing field The World Oligopoly in the Car Production and Emerging Asian Markets: Cooperation and Competition The Growth of the Automotive Sector in China and India Import substitution strategy in China and India: An Industrial Base for Further Developments?

Opening-up and joint-venturing in the car industry 1. Strong impact in India: 2. FDI in China: A Dualistic or an Integrating model? Localisation and Industrial Districts in the industry 1. Industrial districts in India 2. Industrial districts and supply chains in China Conclusion References Asset Specificity, Partnerships and Global Strategies of Information Technology and Biotechnology Firms in India Introduction 1. Services, products, and markets 1. 1. Stylising the Indian IT sector 1. 2. Stylising the ‘Pharma-BT’ Sector 2. Asset specificity and partnerships 2. 1. Asset Specificity and Economic Integration 2. 2. Assets of the Indian IT Sector? 2. 3.

The Nascent Indian BT Sector and the Assets to be Built 2. 4. Assets in BT vs. Assets in IT 3. Global Strategies 3. 1. Contractual Arrangements and Compulsion to Globalise 3. 2. Globalisation of Indian IT Firms 3. 3. Globalisation of Indian BT Firms Conclusion References Ownership Pattern of the Indian Corporate Sector: Implications for Corporate Governance Introduction Evolution of Corporate Governance Code in India Induction of Independent Directors Shareholding Pattern Non-Promoter Shareholding Conclusion 165 167 169 175 178 178 180 182 182 185 186 188 191 191 191 192 198 202 202 204 207 209 211 211 212 215 216 216 217 217 221 225 227 233 236 11 ix

State Intervention in Labour Legislation and Employment Repercussions: Empirical Evidence Abstract Introduction The Background Criticisms of the Industrial Dispute Act The analysis A Model for Labour Demand Interpreting the Results Conclusion References 239 239 240 240 242 246 249 250 252 253 Part III – Industrial Case Studies Framework for the Interviews Reliance Energy Ltd 1. Facts and figures 2. Analysis 3. Conclusions 4. Information sources Reliance Industries Limited Facts & figures Interviews verbatim Analysis Information sources Tata Sons I. TATA Group A. Origins B. Present C. Evolution D. Challenges II. Tata Consultancy Services (TCS) A. Key figures B. Activities C. Customers D. Potential synergies with TATA Group III. Tata Corporate social responsibility A. Claimed priorities B.

Examples of actions C. Value creation within the business IV. Conclusion Textile case studies: Industry Overview and concerns of Globalisation (Zodiac & Welspun) Brief Comments 1. Zodiac Clothing Company Limited 255 257 265 265 266 271 272 273 273 275 279 280 281 281 281 281 288 290 291 291 292 293 293 294 294 294 296 296 283 283 284 x 12 Overview Public Governance and Support for National Firms Corporate Governance Technological Change Firms’ response to Globalisation 2. Welspun India Limited Overview Public Governance and Support for National Firms Corporate Governance Technological Change Firms’ response to Globalisation Geometric Software Solutions Co. Ltd.

Background Corporate governance Relationship with State Information sources Hinduja Group India Ltd Facts & figures Interviews verbatim Analysis Information sources Addendum: case study of Gulf Oil Corporation Ltd Addendum (2): case study of Ashok Leyland Ltd(ALL). Lafarge India Facts & Figures Indian Cement Industry – Basic Facts Lafarge India Interviews verbatim Analysis Information sources Mahindra & Mahindra Avesthagen Gengraine Technologies Interview Verbatim Analysis The pharma industry in India New challenges ahead References Infosys Facts Corporate Global Strategy 284 285 286 287 287 288 288 288 290 291 291 293 293 297 299 299 301 301 305 307 307 308 312 319 319 319 319 322 324 327 329 331 331 332 333 334 336 339 339 345 13 xi

Technology Policy State Firm Interaction Corporate/Business Governance Toyota Kirloskar Motor Main findings Entry mode of foreign firms: When to make India a manufacturing base Verbatim Wipro Technologies Background Performance Corporate Global Strategy Technology Policy State Firm Interaction Corporate/Business Governance ABB Verbatim Additional information MICO-Bosch Background Performance Corporate governance Relationship with State Strategy Concerns SNECMA Development centre – Bangalore Facts Verbatim Analysis 345 345 347 349 349 350 351 353 357 357 357 357 358 358 358 359 359 361 363 363 363 364 365 365 367 369 369 369 371 xii 14 Part I – Issues and main findings

Theoretical Background and Issues State-Industry Relationships, Technological Catching-up and Corporate Governance in India 15 16 Theoretical Background and Issues Jean-Francois Huchet & Joel Ruet Globalisation of firms in India occurs today in the larger context of acute changes in the political economy of reforms and of decision-making in India as a whole, and of a rapid change in capitalist modes at the world level. The former aspect is beyond the scope of this study but we will however touch upon it through our analysis of the relationships between the state and the industry, for it is a constitutive part of the political economy of any country.

The latter issue is in fact an important aspect of our work, for the evolution of technological catching-up strategies in particular and of business models in general, but also the evolution of corporate governance regimes do proceed in relationships with the larger evolutions of the world capitalism. Just as the ‘new political economy of India’ revolves around a new interaction with national and world capitalism, our report on the Indian industry touches as much upon the Indian state as upon the current transformations of capitalism. Let us flag a few issues related to this. General Context for Developing Countries: Impact of Globalisation and

Geopolitics Increased flows of foreign direct investment (FDI) and lower tariff barriers have been among the main pillars of the process of globalisation of the world economy since the 1980’s. Although FDI have been mainly concentrated among the richest countries, developing countries have changed dramatically their views on the consequences of FDI on their economic development. Notwithstanding a slowdown since the burst of the internet bubble on the stock market and a different assessment of world security following the 9/11 terrorist attack in the USA, the United Nations Conference on Trade and Development (UNCTAD) reports a steady growth in the promulgation of pro FDI legislation in developing countries.

Although the wide exposure of developing countries to international trade is widely recognised as more effective than inward looking strategies in promoting industrial catch up, many aspects of the open door strategy remain to be analysed so as to inform policy formulation. Against the advocacy of unhindered international trade as the fast road to development, the experience of Japan, Korea, and Taiwan show that, at least in the period of catch-up with industrialised countries, the promotion of particular 17 industries and a cautious opening of the economy to competition from imports can play a very positive role. More generally, the history of economic development shows that industrialised countries pursued a policy of selective opening to international trade in order to develop and maintain their comparative advantage.

The range of choices where development and catch-up strategies are concerned has, it is true, been somewhat narrowed under the impact of the globalisation of production and finance, as well as of the trade liberalisation brought about by the multilateral negotiations under the aegis of the GATT/WTO. Developing countries can no longer so easily play the protectionist card in order to assure their development. However, in the light of the Asian experiences mentioned above, as well as the experiences of developed countries, one is entitled to ask serious questions about the impact of the opening of internal market of developing countries on their enterprises and on the way the State conducts its intervention in the national economy. This holds especially concerning three crucial questions at the heart of the impact of globalisation on developing countries, on which much research remains to be done: (1) How does greater ompetition from imports and FDI in the internal market of developing countries affects the role of the State in promoting national industrialisation? Are we witnessing the end of “developmental” States, such as those witnessed in Japan, South Korea, or Taiwan in the past? In this new competitive environment, what forms would the interventions of the State at the local level take to help small and medium size enterprises? Does the “invisible hand of the market” on its own provide sufficient incentive and pressure to change the behaviour of firms and improve the deficient corporate governance system in developing countries? Or does the international market simply increase the vulnerability of the domestic firms in the face of well-organised multinational corporations?

What are the chances of at least selected developing economies o catch up with the technology in developed economies and eventually achieving technological breakthroughs in the foreseeable future? How significant are the chances of firms from developing economies to grow into world-class companies within the present framework of globalisation? Are we witnessing a faster and wider technological spill over as a result of the opening of the internal markets of developing economies to foreign imports and FDI? (2) (3) Catching-up Growth and « Globalisation of Firms – induced Growth » Let us detail two key concepts for the understanding of economic dynamics in the contemporary world, that will be central in our analysis, Catching-up Growth and « Globalisation of Firms – induced Growth ». 18

Catching-up Growth occurs beyond a threshold of capital, through availability (imported or national) of technologies having reached a low cost at the mid of their life cycle trajectory (they have been conceived, tested, they still remain relatively efficient in numerous contexts compared to ‘new’ technologies). This growth can operate across various modes, as its slow taking-off in the Indian case shows or more rapid and sudden implementation in the Chinese case contrasts. It articulates to national policies: initial capital accumulation through public finance, territorial equipment, ‘probusiness’ reforms in India in the 1980s, industrial restructuring in China, and these dynamics are now more focused geographically.

This mode of catching-up has redistributive impacts, but is mostly based on: Scale, An articulation of ‘non-strategic’ industries (even if ‘technological catchingup’ happens), An impact that is enough to give a notable macro-economic growth, for India, for instance, a 6% for the last twenty years under different regimes, and for China the whole of the growth from the mid-1980s till date. – Similar dynamics happened post-war in Europe, or for Japan and South Korea. It is not necessarily an ‘endogenous growth’, far from that, but it articulates to a sound auto centred dynamics and to territorial economy as a structure. By contrast, in what we call « Globalisation of Firms – induced Growth », we mean the territorial and organisational recomposition through (internal and external) multinationalisation of the productive processes and R&D, from conception to commercialisation. These processes intra and inter firms offer new economic potentials, that turn into new business models for entrants firms.

The impact in terms of growth is conversely characterised by: Differential effects (of specialisation among which ‘niches’ but not only) agglomeration (network production and simultaneous presence of varied competences on a localised territory: this economy is not de-territorialized, but re-concentrated), A strategic character (technological and organisational), On the short run it accounts for only a limited part of Growth National Product, 19 – but for an important part of revenue polarisation, segmentation of labour markets, choices on strategic investments. It is what allows the emerged part of the economy to ‘globalise’, and certainly is at the core of the early formation of multi-national companies from catchingup countries. These latter aspects, all things being equal, are more advanced in China than in India as far as energy and raw material sourcing is concerned. But these mechanisms are however more advanced in India as far as globalisation of service and large industry companies is concerned, especially in the higher end of value added and value chains.

In other terms, « globalisation growth » allows new models of firms, but thus leads to difficulties in ‘measurement’. It is often linked to economic facts that are of an organisational nature more than a direct quantitative nature, like ‘quasi-integrations’, acquisition of strategic assets towards price making power on a niche, or simply technological: distinction between modern and classic biotechnologies. Both economic information and the general debate tend to neglect these characteristics, and underrate these dynamics with an econometric system that was framed for national economies and material production. Simplistic analysis in ‘liberalisation’ terms is not enough to explain the rapid rise of large groups.

It calls for more refined level of analysis: direct interviews to analyse the industrial economics of (often unstabilised) business models, analysis of technological contents of trade with respect to capital control over its various sub-segments, analysis of assets creation and portfolio building, analysis of assets specificity, indirect measure through evolution of input-output sectoral linkages. – – These are a few analytical techniques we perform here. But, corporate and industrial issues further link-up with public governance. A key point we shall study is the degree of dissemination and integration of know-how across districts of a same economic territory, and the possibility to move from the catching-up of a few firms towards the national catching-up, and especially focus on the public policies and public-private interaction on these issues. 20

Industrial catching-up: from a ‘hierarchised’ catching-up through costcompetition, towards strategic competition through technological capitalisation The phasing of economic liberalisation was a key parameter in the modernisation of productive machinery and the consolidation of its financial structure. The state’s supportive role continues to be of prime importance in some key sectors, e. g. energy, R&D for the new economy, etc. Today, the key question for the growth of large private groups, which have reached a turning point in their restructuring, also has a bearing on their ability, either alone or through partnerships, to become world-class industrial groups.

The use of strategies for moving up in the value chain in R&D has shown that large multinational firms tend to retain control of strategic branches of their activity. Indian industrial groups looking for a spectacular growth and a qualitative jump are obliged to develop a strategic control over all the key links in the chain from conception to production to marketing. They are faced with choices regarding orientation and modalities for acquiring these skills: they have to decide between cost-related strategies and design-based strategies; similarly, there is a choice between external acquisitions, normally through partnerships, and internal development.

Making the right choice and achieving a proper balance between the domestic market, the markets of the South and the international market, and also adapting to them is crucial for the strategies of these groups. Taking perspective, these micro-economic decisions will in turn certainly lead to a proper symmetry between the many sub-segments of the world economy: these choices will be made by groups in developed countries not only keeping in mind their own interests but also those of Indian capital, while some choices will be made by the latter. Indian capitalism will acquire its own assets, create comparative or absolute advantages, and even impose certain norms. Finally, these choices will at least structure the energy and raw materials markets (if only due to the relocation of the world economy) and make environmental sustainability possible.

Beyond, the elements that would be particularly important to characterise at the theoretical level and for which the current report lays the ground are: Problems of industrial climbing-up: from a cost-based dependent catching-up towards strategic competition based on development and capitalisation of intellectual property and the role of Indian higher education. Restructuring during the 1990s and present-day strategies of companies – from non-stabilised to stabilised models? – 21 – Stylising and modelling strategies of ‘Leveraging on costs’, the role of ‘other emerging markets’ (than India and China) to finance or amorticise a technological catching-up. Indian take-off: China as a backdrop

China and India have just ‘changed their orbit of growth’ and their economies have started catching up with the rest of the world. But there is more to it. With both populations of one billion and low production costs, this catching-up is going to influence the realignment of the world’s economy for a long time to come. Some of their enterprises are entering into strategic partnerships in key sectors that were until now under the hegemony of developed countries. These enterprises are now looking beyond just cost-advantage competition to become price-makers. Others are developing specific assets articulated to these billion-strong markets waiting to make their mark in international markets.

Let us first take a few examples, ultimately of the same kind. At the end of 2004, the biggest steel manufacturing group, Mittal, was set up by an overseas Indian over a period of ten years while a Chinese group bought the computer-manufacturing branch of IBM. The battle fought by Mittal to purchase the European steel group and world n° 2, Arcelor, is not finished yet but it gives a clear indication of an emergence of multinational from India. In early 2005, China and India announced a strategic alliance between their gas companies to submit a joint global tender. What does one make of these facts: do they herald a more structural change? Or are they just isolated incidents?

We have to be more precise than the ongoing debate on this issue. Our research is based on a working hypothesis which take into account that a structural upheaval is occurring in India and China, but that in this respect all facts are not equally significant. In this particular case, apart from the structural changes taking place in the Indian and Chinese economy, at the first order these three pieces of economic news mirror mostly one thing: the speedy reorganisation of the industry and economy… in developed countries which, following the diversification of their tertiary sector, are climbing in the added value ladder and are getting rid of highly energy consuming, lower added value, branches.

The first example we took is of an industry dating back to the first industrial revolution – while conversely the manufacture of special alloys and products having a high added value still largely controlled by multinational corporations in developed countries. The second used to be a key industry of the 1980s and is now already outmoded – that why IBM wanted to get rid of. It is certainly not surprising that these industries, which are no longer strategic, should pass into the hands of countries that are catching up economically and are therefore much more interested in 22 them, and in that manner the third example reflects the developed countries-dictated transfer of energy-intensive and raw-material consuming industries towards emerging countries.

These facts show the mechanisms of what we can call a ‘realignment capitalism’ that is, the cost-realignment of developed countries’ capitalisms. These facts serve as an analyser to emerging countries in as much as they are now one of the places of this world capitalism evolution. Looking at the whole process, after all, the GDP of the USA increases every two years and that of the European Union every four to five years by a figure equivalent to the totality of India’s GDP. Looked at from emerging countries’ perspective, this sole kind of facts and many other stylised facts that corroborate them, would only indicate a form of integration of emerging countries in the world economy actually largely led by developed countries.

This realignment capitalism has actually started due to three factors: India and China have launched a rapid and massive exports-oriented process of economic catching up and this is something fairly new for developing countries which do not always have access to this level of financing and technical skills. These capabilities are the result of their critical size and of a massive investment in human capital, Indian as well as Chinese enterprises are no longer absent from the constantly changing scene of world capitalism, have become a parameter for what is now a network capitalism, and therefore present possibilities of expansion and complexification of the latter. – – True, India and China are more massive and more susceptible to impact in a deeper and longer manner this realignment capitalism, if compared to the previous wave constituted with the emergence of ‘dragons’. However, this kind of facts leaves many factors in the shadow.

First, these facts by themselves say next to nothing of the comparative positions and advantages of these two economies of continental proportions in the world economic system. This may come only from a more internal analysis, and in that way they are rather vague about the fact that India has certainly not caught up uniformly in all sectors and that, from this point of view, the order of taking off/catching up in the concerned sectors matters as much as their strategic importance in present-day and future capitalism (and not only that which existed twenty years ago) or is but negligible. That way, such facts reveal hardly anything about the real mechanisms connecting deindustrialisation, delocalisation and economic development (because, after all, we no 23 onger produce large amounts of steel and the fact that a totally new market is coming up elsewhere and in other sectors is also good news; finally, analysing the outcome of this development is what is more complex). Besides, and worse, they say nothing at all about the choices and the major changes within these economies of continental proportions or about the constraints and opportunities created in terms of economic and social models, that is to say the entire issue of economic, social and environmental durability. Indeed, they leave aside the analysis of strategies that national groups develop, that are articulated to a market of unseen magnitude and aim at echnological catching-up, a cost-leveraging ‘catchingup capitalism’ that constitute a ground swell of wealth and assets creation. It is therefore necessary to interpret these facts as a change of system while necessarily placing them in the context of India’s and China’s economic, political and intellectual history. It is necessary to replace these facts, confined at this stage to these sub-segments, in the wider framework of India’s continent-sized economy and subsequently in the world economy. But first, it is necessary to specify the number of sub-segments, describe their business models and explain whether the latter have stabilised, and also describe their partnership strategies and financial strength.

Then, it must be shown how well they are articulated with India’s domestic economy and the Indian administrative system. It is also necessary to know whether a spill-over effect is possible, whether the construction of a homogeneous national economy, a sine qua non condition for any lasting economic take-off in the history of the last two hundred and fifty years, can be established and whether there will be a beneficial ‘mass effect’ as a result of the critical size of Indian markets. Or whether, on the contrary, these islands will remain isolated in the middle of a poorer environment. And what will be the effect of these two scenarios on the rest of the world economic system?

It is difficult to make long-term forecasts regarding these matters without defining their interdependence with government policies, with strategies of large Indian and international groups and, finally, with the degree of coordination between the objectives of the state and the interests of these groups. These points cannot be neglected today because China and India have enterprises that are already playing a major part in the world economy, or would like to do so, and their governments have understood this perfectly. In this context, one has to detail aspects of Public Governance and support for national firms, Impact on corporate governance in Indian public and private corporate groups, modes of Technological catching-up and emancipation.

We now detail these for India while giving in contrast an overview of these for China, which despite severe differences shows commonality and contemporaneity in joining the world economy, as well as increasingly become cross-references to each other.. 24 Questions on the Role of the State, Industrial policies and support for national firms: the Limitation of Service Specialisation, and the compelling example of China Various studies show the central role of the State in the take-off of national industries and services. Not necessarily through simple protectionist measures, but also through an overhaul of regulation, research transfer and targeted infrastructure investment. The related question is, from the viewpoint of the state, how to redefine its role and position in the context of an open internal market?

In India, it is interesting to notice that the sectors and firms which first globalised, are those which either target external diasporas, or involve them in their management. The example of the information technologies is in that respect perfectly clear, and new Information Technology firms emerge and are set up right from the day one with different offices in the world by Indian ‘transnationals’. In that case, the role of the Government (as seen by the Government itself and by the firms) seems to be confined to a mere withdrawal from the regulation and licensing of the activity. Rarely does it go up to the level of an actual support through some facilitating agencies.

These policies have two main limitations: practically, for instance in the IT, the sector is not really dynamic outside ‘high tech cities’. In other ‘classically exporting’ sectors, like textile, most of the progress has come from an industry-driven modernisation. The role of the state was limited to the ending the restrictions on machine-tool imports, and deeper forms of sectoral state support is still unclear in its take-off. If one goes now by the heavy industry, it is interesting to see the example of the car industry. Even though it was initially started from a public-private Joint Venture, the sector has finally picked-up through private sector dynamics and, both foreign and domestic.

The role of the State has solely revolved around tariff policies (co-designed with the industry) and rhythms of norms adoption, which rhythm has also been partly co-designed with the industry. Today, the Indian State has a key role in maintaining a sound State-industry dialogue, but has no clarity in whether in should/ could have an industrial policy per se in this field. Finally, in some other sectors where the State does not disengage from the direct regulation, like the power sector, facilitating agencies and measures are helpless in achieving any increase of partnerships. The question of an industrial policy is open at a theoretical and practical level given the specificities of India and of the world conomy today, but the fact is that earlier sequences of catching-up occurred in countries which had one. By contrast, and without 25 under-estimating the specificity of the Chinese economic transformation, nor discussing the pertinacity and industrial efficiency of it, China does have an industrial policy. In China, despite the pro-market nature of the WTO agreement, economic nationalism and desire to create through some administrative measures some competitive industrial groups are still high on the agenda. The consequences of the opening of the domestic market on how Central and local policy makers will shape their industrial policy to help national firms is still unclear.

The WTO agreement contains many aspect were China will have to improve its public governance concerning different aspect of the business environment (deregulation, rule of law, corruption, transparency of information). The research will try to analyse if there is a tendency to continue to restrict access into the internal market through the creation of nontariff barriers to protect national firms and to continue a direct intervention through administrative measures? There are indeed great pressures coming from different directions both at the local level of the administration and from national firms to contain the foreign competition and to maintain rent seeking activities.

Another direction that the research will try to assess in relation between the State and the national firms, is to see if we are witnessing in the post WTO agreement, a real shift in the role of the State at its different levels with a less direct intervention through some reforms of different aspects of the public governance in order to enhance business environment (not only for national firms but also for foreign firms) and to level the playing field in the competition. Role and Impact on corporate governance, and Indian specificities with the backdrop of China The opening of the internal market will necessarily lead the governments and public administrations to question their role and scope, and ways of making and implementing decisions in the different categories of national firms. A sound understanding necessitates both concentrating on firm-related strategies and broadening the debate on how the compulsions created by the opening of the internal market (more FDI, growing private sector) could materialise into an impetus for a better corporate governance system.

In India, some industries like manufacturing, cars, equipment that find themselves in the public sector for either historical or maturity reasons, now globalise worldwide. However, power, water and environment management, but also public works, or mining remain despite reforms profoundly embedded into an administrative-style management. A key question is whether the progressive deregulation of the internal market combined with a series of privatisation in different industrial sectors can bring an evolution in this administrative-style management. The goal is indeed to develop 26 public – private partnerships, while at the same time focusing on reforming the management for public group, possibly with the help of the private as providers, or co-managers.

In this latter scope, the example of the Chinese State Owned Enterprises (SOE’s) is carefully analysed by the Indian side. In China since the mid 90’s, non-performing loans in the biggest commercial banks have grown at an alarming rate, representing according to some foreign analysts up to 40% of China GDP (official figures put it at 25% of GDP). This phenomenon is the direct result of serious inefficiencies in the corporate governance system of State Owned Enterprises (SOE’s). Policy makers have given a great attention to this problem and China has been trying to improve the situation through different important reforms (privatisation, external control mechanism through the banking system and stock exchange).

Despite these reforms, internal and external control mechanisms are still inefficient to curb rent seeking activities, corruption and poor investment planning. Here again China accession to WTO is supposed to speed up the reform in this area by exposing national firms to more competition. A bottom up reform have contributed to the emergence of millions of small and medium size companies in the collective and the private sectors, creating new competition pressure on SOE’s in nearly all the industrial sectors. Despite these evolutions, core industrial activities are still in the hand of SOE’s where bureaucratic interferences are endemic and corporate governance institution efficiency is still very poor. A privatisation process has started in the mid 90’s with very mix results ccording to size and location of the firms, but except for small and medium size companies in financial difficulty, national groups remain off limit for foreign companies. China’s adhesion to WTO will certainly bring some evolution (new rules for foreign capital in the stock exchange, more transparency in M&A acquisition, less regional barriers) but serious uncertainties remains on the role played by the political authority in the urban economy. More precisely, in India, the reform of corporate governance system is facing different challenges compared to China: Corporate landscape is dominated by private companies in India. This is especially true for listed companies with 2 953 private owned companies on a total of 3016 companies listed in Bombay stock exchange 1.

In China, most of the companies listed on the stock market in Shanghai, Shenzhen (1300 companies), and Hong Kong are State controlled (with 60% on average of their capital composed of non-tradable shares). Both China and India have to face the problem of introducing more counter powers within formal institution of 1 As for September 2005 27 corporate governance (more external directors in the board of directors and in auditing committees, better protection minority shareholders). But the problem is more serious in China given the fact that the State remains the biggest shareholder and has great difficulties to monitor the behaviour of managers. At least, private ownership in India prevents the phenomenon of asset stripping, and of inefficient use of capital.

The Bombay Stock exchange has a much longer history than China’s two stock exchanges in Shanghai and Shenzhen. Different reforms have also been implemented following the recommendations of the Kumar Mangalam Birla Committee in 2000 and the Narayana Murthy Committee in 2003 on corporate governance and have contributed to a certain extent to a convergence with international standards. On the contrary, Shanghai and Shenzhen stock markets are still plagued with serious financial scandals, poor transparency on financial information, no international auditing of listed firms, absence of take-over. All these factors are contributing to a very low correlation between firm financial performance and their share prices.

Stock exchange is exerting a very low pressure on managers of listed State-Owned firms. One of the main external control mechanisms (see table 1) on manager behaviour is linked with the efficiency of the banking system, especially on its capacity to assess risk on lending activities to the corporate sector and to enforce its creditor rights in case of failure from firms to pay back their loans. India has cleaned up its banking system in the late 80’s and beginning of the 90’s, reducing to a very low level the amount of Non Performing Loans (NPL’s) as it is shown in table 2. In comparison, China continues to have the most highly politicised decision-making process in Asia for corporate loans.

In China since the mid 90’s, non-performing loans in the biggest commercial banks have grown at an alarming rate, representing according to some foreign analysts up to 40% of China GDP. This phenomenon is the direct result of serious inefficiencies in the corporate governance system of State Owned Enterprises (SOE’s). Policy makers have given a great attention to this problem. The Chinese government has been trying to improve the situation through different important reforms (privatisation, external control mechanism through the banking system and stock exchange, recapitalisation of the main banks) but the banking system is far from being an efficient mechanism of control on the behaviour of SOE’s managers. – 28 Table 1 : Typology of corporate governance mechanisms

Intentional Mechanisms Specific mechanisms – Board of shareholders – Board of directors – Remuneration system for managers – Internal auditors – “In-house” union Non-specific mechanisms – Legal and statutory environment (law on companies, labour laws, bankruptcy laws, social laws) – National unions – Legal auditors – Consumers’ associations – Degree of Competition – Financial intermediation and quality of the banking system – Loans between companies – Labour market for managers) – Political system – Market of “social” or “relational” capital – Business culture – General legal environment – Social environment – Media environment Spontaneous – Manager’s informal trust network Mechanisms – Mutual supervision between managers – Company culture – Manager’s reputation amongst employees Source : Adapted from Charreaux Gerard (ed. ), Le gouvernement des entreprises. Corporate Governance. Theorie et faits, Paris, Economica, 1997, p. 27 Table n°2: Non Performing Loans in Asia (% of total loans or ( ) % of GDP) 1997 China Hong Kong India Japan South Korea Taiwan n/a 1,3 (3) n/a 2,7 (5,4) 2,9 (5,1) 2,4 (3,2) 1998 2 (2,2) 4,3 (10,2) 7,8 (1,6) 5,1 (10,8) 4,8 (6,3) 3 (3,9) 1999 9,5 (10,6) 6,3 (13,9) 7 (1,6) 5,3 (10,9) 12,9 (12,9) 4 (5,7) 2000 18,9 (24,9) 5,2 (12,6) 6,6 (1,6) 5,8 (11,5) 8 (8,6) 5,2 (7,6) 2001 16,9 (22,7) 4,9 (12,9) 4,6 (1,7) 9,2 (15,3) 3,4 (3,4) 6,2 (9,4) 2002 12,6 (15,2) 3,7 (9,6) 2,2 (0,8) 7,4 (12,8) 2,5 (2,6) 4,1 (5,2) Source: Asian Banker data centre 2003 Other external mechanism supporting the corporate governance system (see table 1) such as juridical system, freedom of the press, labour market for managers, consumers association, labour unions are much more efficient in India than in China. Generally speaking and for the reasons stated above the corporate governance system has been more efficient in India than in China. Nevertheless, globalisation and the 29 opening of domestic market to foreign competition are also pushing India to improve certain aspects of its corporate governance system.

The research has tried to assess the result in the following two particular fields of the reform of the corporate governance system: The opening of the internal market will necessarily lead the governments and public administrations to question their role and scope, and ways of making and implementing decisions in the different categories of national firms. For example, water and environment management, but also public works, energy or mining remain despite reforms profoundly embedded into an administrative-style management. The research has tried to analyse if the progressive deregulation of the internal market combined with a series of privatisation in different industrial sectors can bring an evolution in this administrative-style management. One of the main goals of the current reform has been to develop public-private partnerships, while at the same time to focus on reforming the management for public group, possibly with the help of the private as providers, or co-managers.

In this latter scope, the example of the Chinese State Owned Enterprises (SOE’s) has been carefully analysed by the Indian side. The opening of the internal market is also creating more competition to Indian firms and pushing for further improvements in the corporate governance system within private group in India, which are dominated by a few family interests. More external “whistle blowers” (outside the limited circle of the families who are controlling the firms) are necessary within the Indian corporate governance system. These external “whistle blowers” can come from financial institution (either domestic or foreign) from corporation (here again either domestic or foreign) and from a further deregulation of some heavily protected industrial sectors.

Technological catching-up: industrial trajectories, modes of entry in value chains, and technological emancipation For national groups to emerge from former planned, command or imports substitution systems, they have to catch-up technologically, and to achieve emancipation through R&D and both technological and commercial agreements and partnerships. The question at stake is whether they go for sub contracting, on producing for “niches”, or directly target global competitions. More and more FDI are also dominating internal markets in different sectors through joint-venture or Greenfield affiliates, which put several limitations on the possibility for national firms to achieve technological catch up. India and China seems to have followed different strategies with different implications concerning technology emancipation. 30 India has seen till now very few joint ventures or Greenfield project.

They are rather joint ventures targeting the emerging local Indian markets (like cars or phone commuters), but producing surprisingly few products for the export market. The sector of information technologies is the most notable exception, where from a strategy of ‘body shopping’ and outsourcing, the sector is more and more ‘climbing the value ladder’ and achieving a world-integrated development of products and services. It is not clear whether the other exception of the textile can fit in that frame. Indeed, it is still largely based on regular trade, and hardly on co-development of products by trans-national firms or by firms under trans-national agreements.

The Indian capitalism has emerged under the shadow of the State and the pursuing of patronage links. Its enterprises have diversified up to a relatively important level, compared to the worldwide business. Today, in the emergence of new facilities, allowances, licenses, links with the government remain the key of success, to speed up the administrative processes under what remains from the “license Raj”. As well, in that game of catching the new opportunities, the Indian groups become even more diversified and potentially weaker to foreign raids and restructuring. The government knows it and goes on extending its support through a slow pace of opening up that, in a way, industrialists support.

In China, technology catch-up has been based since the open-door policy in 1978 on two different strategies. Hardware purchases in State-owned enterprises and Greenfield projects through the development of Sino-foreign joint ventures. The first strategy has encountered many bottlenecks due to lack of know how and management competences, fuzzy property rights, duplication of investments, inefficiencies in corporate governance. Despite some success stories in particular industries like consumer electronics, technological spin-off is essentially linked with the rapid take off of foreign direct investment at the beginning of the 90’s in the coastal region.

Although this strategy has enabled China to modernise its production capabilities, it also raise serious questions about how national firms can emancipate progressively from their current position at the bottom of the subcontracting pyramid and about their dependency from foreign capital and technology without developing a national system of innovation. 31 32 Findings on State-Industry Relationships, Technological Catching-up and Corporate Governance in India Jean-Francois Huchet & Joel Ruet With contributions by Debashis Chakraborty, Francoise Lemoine, Deepa Menon-Choudhary, K. S. Chalapati Rao, Dipankar Sengupta, P. R. Shukla We discuss here the main results in a general cross-sectors perspective and provide a separate outlook for the energy sector specificities. Indian specificities Though limited like any comparative exercise, it is a fruitful effort to start introducing the Indian corporate landscape with the backdrop of China.

Beyond a face value similarity (two ‘Low Salaries but with Technological Capacities’ countries, two economies that provide potentials for costs reduction), the trajectories of the national economic systems lead to two relatively different modes of insertion in the world markets. The ‘genealogy’ of the current take-off of globalising enterprises in India can be traced out from the ‘pro-business to pro-market’ evolution of public industrial policies and regulations, that allowed the industry to reorganise its activity portfolio. For such, the conglomeral form inherited form the ‘license Raj’ era today allows fast and steady transfer of business processes from one branch to another both internally to firm and externally (through suppliers). In contrast, Chinese firms have often seen a monoproduct strategy first, later on followed by diversification.

As far as opening of capital and control of it by foreign funds is concerned, one sees a paradoxical result. Despite (or maybe because) the Chinese government is focusing on strategic control or at least parity by Chinese firms in Joint Ventures, technological transfer happens in a very controlled manner. The capital control of the high added value segments is with foreign capital that uses it for local processing for re-exports strategies. Facing this –relative- weakness of private Chinese firms in processes control, a larger opening on paper in India actually leads to a long term ‘conservation strategy’ where, by accepting minority on a few segments the conglomeral groups can access 33 real transfer of technology at their group level.

The financing mode and the banking system are quite different, but this is beyond scope here. As a result, the insertion of Indian capitalism in the world economy lays at the interface of (i) emerging markets (allowing large, regular source of re-investment through the control of small margins on a large market) and (ii) the new international division of production (where these investment capacities are used into partnerships with multi-national companies and/or technology acquisition). There is a feed back between the two aspects: international multi-national companies willing to access the Indian and other emerging markets through Indian companies, go into technological JVs and partnerships.

At a second level, the R&D capacities of India are increasingly looked at by international MNCs so as to lower their R&D costs for their world markets. As far as this education-intensive economy is concerned, one is here again to mention differences between India and China in terms of higher education (the reverse stands in terms of primary education, unfortunately), financial system, and, as a drawback for future, infrastructure. That way India (like China) has engaged into world markets and global strategies of large multinational groups from developed countries. India, as well, and maybe more than China, has advanced into autonomisation of internationalising strategies for its most advanced private groups.

Even if out of scope of this study, this most likely offers space for industrial complementarities between India and China and re-definition to come of the Asian system of production. However, what is most likely central to the current transformation, is that not only size, but also scope, that is the capacity to engage into diversification thanks to low cost, will play a role in this. 1. Role of the State, Industrial policies and support for national firms The Indian State having gradually reduced protectionist measures, having meanwhile relaxed the Indian industry from a former dirigist form of overhaul of regulation, the State is today at a comparatively low level of engagement with the industrial evolution.

That seems obvious if one compares with China, and in one way it is still compelling if one compares with with the ‘catching-up Japan’ of the 1960s, or with South Korea till the 1990s. Even in a context of open economy, two sectors where this is worth analysing are research transfer and targeted infrastructure investment. The related question is, from the viewpoint of the state, how to redefine its role and position in the context of an open internal market? 34 It stands out form the interviews of Indian firms that they do not ask for any specific, sectoral industrial policy but insist on the need of “horizontal” policy in the area of infrastructures, labour market, and education.

Their development is hindered by the lack of infrastructure, so-called ‘rigid’ labour laws (though there is a fa

Cite this Globalisation and the Impact on Developing Countries

Globalisation and the Impact on Developing Countries. (2018, Feb 04). Retrieved from https://graduateway.com/globalisation-and-the-impact-on-developing-countries/

Show less
  • Use multiple resourses when assembling your essay
  • Get help form professional writers when not sure you can do it yourself
  • Use Plagiarism Checker to double check your essay
  • Do not copy and paste free to download essays
Get plagiarism free essay

Search for essay samples now

Haven't found the Essay You Want?

Get my paper now

For Only $13.90/page