The Nexus between Small and Large Factories in the Supply Chain of Indian Assembly Industries

Shuji Uchikawa and Takahiro Sato
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Shuji Uchikawa: School of Econimics, Senshu University, JAPAN

No DP2021-08, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: In India, numerous enterprises have entered the assembly industries to meet the expanding domestic demand. Due to competition, large enterprises chose only efficient suppliers of parts and components. Although some small enterprises grew to medium or large enterprises by joining the final assembly supply chain, several remain small enterprises. This study examines whether small factories are involved in the final assembly supply chain. We employed the least-squares dummy variable model to examine the effects of procurement by medium and large factories on the gross output of small factories, using pseudo-panel data at state- and industry-based cohort levels. The result shows the nexus between large factories and small factories in assembly industries is weak. On the other hand, the nexus between large factories in assembly industries and small factories in the material industries is strong; the small factories supply material to the large factories that are tier-one and -two suppliers. However, these small factories also face stiff competition. After assembly industries have developed, small factories in assembly and material industries face difficulty to join final assembly supply chain.

Keywords: Manufacturing; Supply chain; Small and medium enterprise; Assembly industries (search for similar items in EconPapers)
JEL-codes: L60 O14 O25 O53 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2021-03, Revised 2023-05
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