Abstract
How might we characterize and explain industrial variation within developing economies? The strategies of manufacturers in India and Pakistan exhibit this variation within countries, sub-national units, and sectors. I argue that, far from being driven by the incentives of state institutions, the practices of industrial firms are driven by the social orientation of industrialists. I demonstrate the presence of variation and explain the dichotomy primarily through empirical research on firms in the pharmaceutical industry, as a least likely case for variation.
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Notes
An alternative tradition in European political economy, emphasizing the dualism inherent within advanced economies, allows for greater internal diversity, but in general, focuses on specific cases such as Baden-Wurttemberg in Germany and Emilia-Bologna in Italy. See Piore and Sabel 1985; Sabel and Zeitlin 1985; Herrigel 1996. For an interesting example of arguments for industrial dualism in high growth Asian economies, see Fuller, 2010.
The majority of the firms in my sample are private (not publicly traded) with limited liability. This stance strikes a balance between insurance against risk and avoiding the reporting requirements necessary for public offerings. Many manufacturers consider such reporting to be hazardous; several refused to divulge their turnover in annual sales, stating that this is private information.
The political economy literature on corporate governance in advanced, industrial countries record differences between LMEs and CMEs in terms of the extent of interlocking ownership and patient capital, but not the autocratic nature of firm governance described here. See Vitols 2001.
By social orientation, I mean the dynamic product of an individual’s beliefs, working assumptions and experiences, particularly in this case with regard to the market and their place within it. I do not assume that social orientation is fixed and cannot be changed as the result of experiences or interaction with institutions. I do, however, argue that at least for South Asian manufacturers, social orientation, when it does change, changes relatively slowly and often along a trajectory. This is because external stimuli like an industrial action or a change in government policy are more likely to be understood or interpreted through the lens of social orientation than to cause a change in the lens itself, especially when such stimuli are often fickle and contradictory.
This distinction parallels one made by Mark Holmstrom, in his anthropological work on labor in small-scale industry in India, between “technicians” and “financiers.” See Holmstrom 1984, pp. 87–89.
Of course, educational backgrounds also reflect the broader preferences and capacities of families and communities, and thus individual social orientation picks up broader intergenerational community and cultural norms. Yet, focusing on the individual allows for clearer coding mechanisms than more aggregate categories that are inevitably fuzzier.
Author interview with yarn manufacturer, Lahore, March 6, 2007.
Author interview with former auto components manufacturer, Pune, April 30, 2008.
Such reliance is suboptimal as it depends on awareness and honesty on the part of respondents. However, such reliance is also completely unavoidable in the South Asian context, for two reasons. First, most firms in my sample and among South Asian industry as a whole are private companies—not listed in the stock market—due to the relative underdevelopment of public equity as a mechanism for investment for all but the largest corporations such as banks and utilities. These firms are not under any obligation to provide data to the public, although my respondents were kind enough to be quite forthcoming in the course of interviews. Reliance on public data would thus bias the sample. Second, even for public firms, the data that are available in annual reports or through securities filings—product profiles, turnovers, profitability, indebtedness, ownership structure—have very little bearing on industrial practices. Such data crucially does not include information about the character of investments over the life of the firm, let alone strategies for labor management and the nature of engagement with the world economy.
Such coding relied completely on the judgment of the researcher, unaided by tools such as discourse analysis software due to the nature of the data. I did, however, follow several basic decision rules for this coding exercise. First, I would see whether they were educated abroad; if yes, I coded this as technocratic. Second, I would see whether they were educated in an elite technocratic institution in either country (IITs in India, Lahore University of Management Sciences), or had received an advanced technical degree; if yes, then technocratic. Last, I would see whether their work experience involved elite technocratic or professional work (in the Indian Administrative Service, for example), or significant work experience abroad or with a multinational corporation; I would code this as technocratic. If all three were negative, I would code as embedded, after checking an additional affirmative test: whether they had significant experience in domestic markets.
Subsequent to WTO accession by India and Pakistan in 1995, Indian domestic firms could not reverse engineer and produce drugs under patent in other countries from 2005. As a result, most domestic firms produce drugs whose patents have expired, and the main distinction is between branded drugs and unbranded drugs (true generics). In addition, some firms manufacture drugs under license for patent holders or as license holders themselves.
Author interview with an API and branded drugs manufacturer, Chandigarh, January 9, 2008.
Author interview with a branded drugs manufacturer, Delhi, October 24, 2007.
Author interview with a branded drugs manufacturer, Chennai, November 19, 2007.
Author interview with a branded drugs manufacturer and exporter, Delhi, May 20, 2008.
Author interview with a branded drugs manufacturer, Mumbai, April 1, 2008.
Author interview with a branded drugs manufacturer, Ahmedabad, April 9, 2008.
Author interview with a branded drugs manufacturer, Lahore, February 20, 2007.
Author interview with a branded drugs manufacturer, Lahore, March 3, 2007.
Author interview with a branded drugs manufacturer, Karachi, April 18, 2007.
Author interview with a research, API, and branded drugs manufacturer, Ahmedabad, February 11, 2008.
Author interview with an API manufacturer, Mumbai, February 7, 2008.
Author interview with a branded drugs manufacturer, Mumbai, March 7, 2008.
Author interview with an API manufacturer, Mumbai, January 30, 2008.
Author interview with a branded/licensed drugs and API manufacturer, Mumbai, May 5, 2008.
Author interview with a branded drugs manufacturer, Lahore, February 9, 2007.
Author interview with a branded/licensed drugs manufacturer, Lahore, February 14, 2007.
Author interview with a branded/licensed drugs manufacturer, Lahore, February 19, 2007.
Author interview with a branded drugs manufacturer, Karachi, April 19, 2007.
E.g., author interview with a dermatological products manufacturer, Delhi, October 12, 2007.
Author interview with research molecules, API and branded drugs manufacturer, Bombay, February 4, 2008.
Author interview with branded drugs contract manufacturer, Chennai, November 27, 2007.
See f.n. 28.
See f.n. 18.
Author interview with branded drugs manufacturer and trader, Delhi, December 14, 2007.
Author interview with branded drugs manufacturer and trader, Delhi, November 1, 2007.
E.g., author interview with branded drugs manufacturer, Lahore, February 20, 2007.
E.g., f.n. 18.
E.g., author interview with branded drugs manufacturer, Karachi, April 19, 2007. (khi16)
E.g., f.n. 35.
Author interview with branded drugs manufacturer, Delhi, October 4, 2007. (del7)
E.g., f.n. 22.
E.g., f.n. 30.
Author interview with API, drug, and medical equipment manufacturer, Mumbai, April 22, 2008.
See f.n. 26.
For more on global value chains, see Thun 2008.
See f.n. 41, f.n. 27.
See f.n. 30, f.n. 21.
See f.n. 31.
E.g., see f.n. 40, f.n. 44.
See f.n. 20.
See f.n. 23.
See f.n. 33.
See f.n. 23.
See f.n. 27.
See f.n. 13.
See f.n. 25.
See f.n. 17.
See f.n. 18.
See f.n. 28.
Many firms, both large and small, considered their turnover figures to be proprietary information and thus would not divulge it. In these instances, I proxied for size by whether the firm had established itself as a limited liability company (either with private or public ownership) or remained a proprietorship or partnership. The latter form of industrial organization is commonly considered a small business.
The presence of these SMEs is the tip of the iceberg: outside of the pharmaceutical industry, the Indian and Pakistani economies are replete with tiny industrial enterprises such as workshops for the automotive aftermarket or sheds with four powerlooms. These enterprises are unlikely to be members of the industry associations from which I drew my sample, but constitute another source for industrial dynamism with heterodox practices.
The relatively small and non-random selection of my sample prevents me from conducting inferential statistical analysis.
For discussions on the autocratic or interventionist nature of firm governance, please see the discussion on pp. 11–12. The fragmented nature of the South Asian state can be understood as the consequence of the decline of the Nehruvian Congress party, the Muslim League, and the Ayub Khan-era developmental agencies as unifying forces in politics. At the same time, subnational politics have increased in importance and “demand groups” within society have become increasingly important for regime and government stability. These groups require more and more resources and political capital, thus leading to increased political competition and increasingly disjointed policies. See Chhibber and Kollman 2004; Rudolph and Rudolph 1987; Jalal 1995.
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Naseemullah, A. Mosaics of Manufacture: Understanding Industrial Variation in South Asia. St Comp Int Dev 48, 23–50 (2013). https://doi.org/10.1007/s12116-012-9123-6
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DOI: https://doi.org/10.1007/s12116-012-9123-6