The Big Picture In the 1990s, India embarked on an ambitious journey – opening its economy to the world and transforming how its industries acquired and used technology. This story explores how Indian manufacturing companies adapted to this new reality, what strategies they chose, and what it means for India’s industrial future.
Setting the Stage: The Policy Revolution Before 1991:
- Strict controls on foreign technology imports
- Limited foreign ownership
- Complex approval procedures
- Protection for local technology
After 1991:
- Free import of capital goods
- Automatic approval for many foreign investments
- Liberal technology collaboration policies
- Reduced import barriers
Four Paths to Technology Growth Think of technology acquisition like building a house. Indian manufacturers had four different tools in their toolkit:
- DIY Route (In-house R&D)
- Building knowledge within the company
- Creating unique solutions
- Developing local expertise
- Blueprint Purchase (Foreign Technology Licenses)
- Buying knowledge directly
- Getting proven technologies
- Accessing global expertise
- Imported Tools (Foreign Capital Goods)
- Getting advanced machinery
- Upgrading production capabilities
- Accessing embedded technology
- Local Tools (Domestic Capital Goods)
- Supporting local innovation
- Using context-appropriate technology
- Building domestic capabilities
The Surprising Findings
- The R&D Renaissance
- Manufacturing R&D intensity increased while national R&D declined
- Competitive pressure drove innovation
- High-tech sectors showed mixed performance
- The Foreign Technology Embrace
- Companies invested more in foreign licenses than R&D
- Technology imports complemented rather than replaced R&D
- Knowledge spillovers benefited local innovation
- The Capital Goods Puzzle
- Investment in both foreign and domestic capital goods declined
- Companies preferred technology licenses over equipment
- Domestic capital goods remained important
The Industry Leaders Top performers in technology acquisition:
- Pharmaceutical and chemical industries
- Motor vehicles
- Electronic components
- General machinery
- Basic metals
Practical Takeaways
For Policymakers:
- Focus on high-technology sectors showing decline
- Balance foreign technology access with local innovation
- Strengthen domestic capital goods sector
- Support R&D infrastructure
For Business Leaders:
- Combine multiple technology acquisition strategies
- Leverage foreign technology for local innovation
- Invest in R&D capabilities
- Focus on knowledge absorption
Looking Ahead The study raises important questions:
- How can India balance foreign technology dependence with local innovation?
- What’s the right mix of different technology acquisition strategies?
- How can policy support technology-intensive industries?
Academic Abstract:
With liberalization of foreign technology import policy in the 1990s, India has seen declining R&D intensity at national level. This has generated a general concern on how Indian industries are doing in technology accumulation under the new policy regime. The present study has made a preliminary attempt to analyze different modes of technology acquisition including R&D for Indian Manufacturing Industries by National Industrial Classification (NIC) Revision 1998 at 3-digit level. It has constructed a new technology indicators database for Indian Industries at NIC (1998) and also constructed a composite technology index for Indian manufacturing to examine how high-technology industries have performed during the period 1991-2002. The research revealed many interesting facts about the nature and character of technology accumulation in Indian manufacturing, which has important policy implications.
Learn More:
Full citation: Pradhan, Jaya Prakash and S. Puttaswamaiah (2008), ‘Trends and Patterns of Technology Acquisition in Indian Organized Manufacturing: An Inter-industry Exploration’, Indian Journal of Economics, 89(353), pp. 269–315, Publisher: University of Allahabad
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