Learning and capability acquisition: Growth of the Indian automobile industry

Date of Completion

January 2005


Economics, General




This thesis is a study of the growth of a modern industry in India, the Indian automobile industry. As a late-comer to industrialization with relatively few satellite industries to support it in the post independence period, the automobile industry has shown tremendous growth within a decade in the post-liberalization period 1990-2004, surpassing Mexico to become the world's 13th largest producer of passenger cars. This growth has come despite a number of constraints, including huge income inequalities and bottlenecks in transportation infrastructure. Given the fact that Indian industrialization has been heavily circumscribed by policy, this thesis does a case study of the growth and learning of the Indian automobile Industry across three policy regimes. The objective is to study whether policy regime can influence firm level learning, highlighting the lessons to be learnt from successful learners from a developing country perspective. ^ The study relies on qualitative case study approach to analyze the product development and supplier development capabilities across two domestic---Tata Motors and Maruti---and two multinational---Ford and Hyundai India Limited---automobile firms. The cases studies are complemented by a model of learning estimated using cross-section and time series data. Specifically, the study applies a fixed-effects panel data analysis to estimate a model of learning for a sample of ten four-wheeler companies, across three policy regimes (protection, deregulation and liberalization). It also analyzes the export behavior of domestic and multinational component suppliers for a cross section of 179 firms in the Indian component sector, using Tobit analysis. The study finds that learning does vary by age, policy regime and by firm-specific factors. Further, firms may exit the industry despite learning because of inability to adapt to systemic changes. ^