Catch-up strategies in the Indian auto components industry: Domestic firms’ responses to market liberalization

Arun Kumaraswamy, Ram Mudambi, Haritha Saranga and Arindam Tripathy
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Arun Kumaraswamy: Department of Strategic Management, Fox School of Business, Temple University, Philadelphia, USA
Haritha Saranga: Production and Operations Management Area, Indian Institute of Management Bangalore, India
Arindam Tripathy: Milgard School of Business, University of Washington-Tacoma, Tacoma, USA

Journal of International Business Studies, 2012, vol. 43, issue 4, 368-395

Abstract: Market liberalization in emerging-market economies and the entry of multinational firms spur significant changes to the industry/institutional environment faced by domestic firms. Prior studies have described how such changes tend to be disruptive to the relatively backward domestic firms, and negatively affect their performance and survival prospects. In this paper, we study how domestic supplier firms may adapt and continue to perform, as market liberalization progresses, through catch-up strategies aimed at integrating with the industry's global value chain. Drawing on internalization theory and the literatures on upgrading and catch-up processes, learning and relational networks, we hypothesize that, for continued performance, domestic supplier firms need to adapt their strategies from catching up initially through technology licensing/collaborations and joint ventures with multinational enterprises (MNEs) to also developing strong customer relationships with downstream firms (especially MNEs). Further, we propose that successful catch-up through these two strategies lays the foundation for a strategy of knowledge creation during the integration of domestic industry with the global value chain. Our analysis of data from the auto components industry in India during the period 1992–2002, that is, the decade since liberalization began in 1991, offers support for our hypotheses.

Date: 2012
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