The Big Question How do countries create their own multinational companies that can compete globally? While nations like Japan, South Korea, and China have successfully built world-class companies through strategic government support, India has taken a different path. Can India change course to build its own global champions?
The Global Playbook: How Countries Built Their Champions Stories from around the world show a consistent pattern:
The American Way
- Early protection of infant industries through high tariffs
- Military spending driving innovation in electronics, aerospace, communications
- Companies like Boeing, GM, and DuPont emerging as global leaders
- Only embraced free trade after firms became globally competitive
The Japanese Method
- Targeted support for strategic sectors
- Protected domestic market while pushing exports
- Heavy focus on technology absorption
- Result: Dominance in automobiles, electronics, machinery
The Korean Story
- Creation of chaebol (large business groups)
- Performance-based government support
- Emphasis on exports from day one
- Strict regulation to ensure competitiveness
The Chinese Approach
- “National team” of 120 large enterprise groups
- Massive state financial support
- Required technology transfers from foreign firms
- Focus on strategic sectors like electronics, machinery
India’s Different Path: The Three Phases
1950s-1980s: The Protection Era
- Focus on import substitution
- Restrictions on firm growth
- Limited access to foreign technology
- Result: High-cost, inefficient industries
1980s-1991: The Transition
- Initial steps toward liberalization
- Relaxation of licensing
- More export promotion
- But still highly regulated
1991-Present: The Market Era
- Dismantling of licensing system
- Open to foreign investment
- Export promotion
- But lacking strategic focus on building champions
The Missing Pieces: What India Needs
1. Strategic Selection
- Identify potential champions in key sectors
- Example candidates:
- Pharma: Ranbaxy, Dr. Reddy’s, Cipla
- IT: Wipro, Infosys, TCS
- Auto: Tata Motors, Mahindra
2. Targeted Support
- R&D funding
- Export assistance
- Technology acquisition help
- Performance-based incentives
3. Protection from Hostile Takeovers
- Legal framework to protect strategic companies
- Similar to US and French models
- Recent example: ICI’s attempted takeover of Asian Paints
Practical Takeaways
For Policymakers:
- Develop clear criteria for selecting national champions
- Create focused support programs
- Protect strategic assets while maintaining competition
For Business Leaders:
- Focus on building global scale
- Invest in R&D and technology
- Maintain export competitiveness
For Researchers:
- Study successful cases of government-business cooperation
- Analyze sector-specific opportunities
- Monitor policy effectiveness
The Bottom Line Building national champions requires deliberate strategy and sustained support. India must decide: continue with its current market-led approach or adopt a more strategic policy to build global champions. The evidence suggests that without targeted intervention, creating world-class Indian multinationals will remain challenging.
Academic Abstract:
This paper traces the evolution of Indian industrial policy and compared it with the picking up the winners (PUW) industrial policy adopted by many industrialized and industrializing countries. The study found that Indian industrial policy still lack the sectoral and firm-level targeting which was crucial in the emergence of third country enterprises as leading global players. India must rethink its industrial strategy if it wants to build its own multinationals.
Learn More:
Full citation: Pradhan, Jaya Prakash (2003), ‘Building Indian Multinationals: Can India ‘Pick Up the Winners’?’, MPRA Paper, No. 12403, University of Munich, Germany.
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