Foreign Collaboration and Export Restrictions in Indian Industry: A Study of Automotive Components Industry
Pawan K. Chugan
Nirma University - Institute of Management
Pawan Kumar Chugan, FOREIGN COLLABORATION AND EXPORT RESTRICTIONS IN INDIAN INDUSTRY: A STUDY OF AUTOMOTIVE COMPONENTS INDUSTRY, Himalaya Publishing House, 1995
MNCs, generally stipulate certain clauses in foreign collaboration agreements (FCAs) governing the scope of local units for exporting the resultant output of new technology. These clauses are popularly known as export restrictions (ERs). Though ERs are commonly practised the world over and can be seen in many FCAs, their real impact in prohibiting/restricting the exports has so far been a topic of debate, because very limited work has been attempted to analyze this crucial aspect of technology import that gives the divergent findings. There is, however, ample evidence in the literature that shows that these MNE’s affiliates have not utilized their advantages in international markets to promote exports from host developing countries and even in many cases their export performance has been rather poor than their local counterparts. This could be attributed to existence of large lucrative and high profitable domestic market, other institutional factors affecting export performance and the strategies adopted by the technology suppliers of not permitting their affiliates to operate freely in international markets by putting the various restrictive clauses in foreign collaboration agreements (FCAs).
Therefore, it is alleged that these export restrictions may have produced the contrary results in promoting exports from developing countries. The real impact of export restrictions in prohibiting/restricting the exports, however, has so far been a topic of impugnment. And amidst miscellaneous cross currents, their impact on export performance is still a dispute and open to question, because the very limited work that has been attempted to analyze this crucial aspect of technology import could not be considered sufficient for generalization.
In this study, attempts have been made to analyze the export restrictions in Indian industry based on the data published by RBI in its four survey reports on foreign collaboration in Indian industry pertaining to the period 1960-61 to 1980-81. Further, based on firm level data, gathered through a specially designed questionnaire, attempts have been made to find out the impact of ERs on export performance of select units of automotive components industry. Thus, the study first describes various types of ERs and has analyzed their patterns, trends and intensities for the Indian industries in general and then for the automotive components industry in particular. The study has come out with some striking findings and conclusions, which not only have notable policy implications but are also very important for the current debate on globalization, foreign investment and international transfer of technology in the Indian economy as well as for the other developing nations.
The experience of Indian industry of having export restrictions in FCAs, reveals that the number of export restrictions, over the period has increased. The most severely affecting export restrictions, however, have been replaced with mild restrictions. Pure Technical Collaboration (PTC) group had always been accounting for more export restrictions than the Minority Capital Participation Group (MCP) and Subsidiaries (S). Intensity of export restrictions, however, has declined over the period. It is found that the tendency of export restrictions of acquiring higher intensities during the phases of liberalization can be checked if non-permissible export restrictions are discouraged while signing FCAs.
Further, it was found that the automotive components industry had higher incidence of export restrictions than all the Indian industries put together. The results, however, suggested that in the automotive component sector, the real impact of ERs was either marginal or potential and their presence in the FCAs had been considered reasonable by the Indian firms on various logistical or moral grounds. The firm’s own determination, willingness and profitability were the main areas of concern for export success and performance, rather than export restrictions and any other reasons. Although this study has thrown some light on the impact of export restrictions, more firm level studies are suggested to for generalization.
Keywords: Foreign Collaboration Agreements, Export Restrictions, MNCs, Intensity of Export Restrictions, Pure Technical Collaboration, Minority Capital Participation, Subsidiaries, Indian Automtive Components Industry
JEL Classification: F14, F2, F23, L62Accepted Paper Series
Date posted: June 12, 2011 ; Last revised: June 16, 2011
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