| Type | Journal article (empirical study) |
| Title | “Trends and Patterns of Technology Acquisition in Indian Organized Manufacturing: An Inter-industry Exploration” |
| Authors | Jaya Prakash Pradhan & S. Puttaswamaiah |
| Published | 2008 · The Indian Journal of Economics, 89(353), pp. 269–315 · University of Allahabad |
| Data | Indian manufacturing industries (NIC-1998, 3-digit) · 1991–2002 · a new composite technology index |
| Read | Full article · PDF |
This is a plain-language summary of “Trends and Patterns of Technology Acquisition in Indian Organized Manufacturing” (Pradhan & Puttaswamaiah, The Indian Journal of Economics, 2008).
In short:
- After India opened its economy in 1991, manufacturers could build technological capability through four channels — their own R&D, foreign licences, imported machinery, and domestic machinery.
- The headline surprise: even as national R&D intensity fell, manufacturing R&D actually rose — and firms leaned heavily on foreign licences, which complemented rather than replaced their own research.
- To compare industries fairly, the study built a new composite technology index across Indian manufacturing.
When the rules changed
For decades before 1991, India tightly controlled how firms could obtain technology. Liberalisation rewrote those rules, and the question this study asks is what manufacturers did with the new freedom — and how technology accumulation actually changed across industries from 1991 to 2002.
| Before 1991 | After 1991 |
|---|---|
| Strict controls on foreign technology imports | Free import of capital goods |
| Limited foreign ownership | Automatic approval for many foreign investments |
| Complex approval procedures | Liberal technology-collaboration policies |
| Protection for local technology | Reduced import barriers |
Four ways to acquire technology
A firm can build technological capability along two dimensions: from a domestic or a foreign source, and in the form of disembodied knowledge or technology embodied in equipment. Those two dimensions define four distinct modes — and Indian manufacturers used all of them.
In-house R&D builds knowledge inside the firm; foreign technology licences buy proven know-how from abroad; foreign capital goods bring in advanced machinery with technology embedded in it; and domestic capital goods supply locally made equipment. The interesting questions are which of these firms leaned on after liberalisation, and whether the channels substituted for or reinforced one another.
What the study found
Three findings stand out:
A manufacturing R&D revival. Although R&D intensity fell at the national level in the 1990s — the very fact that worried policymakers — R&D intensity in organised manufacturing actually rose. Sharper competition after liberalisation appears to have pushed firms to invest more in their own research, even as the aggregate numbers pointed the other way.
Foreign technology as a complement, not a substitute. Firms spent more on foreign technology licences than on in-house R&D — but the two went together. Imported technology complemented domestic research rather than displacing it, and the spillovers from it fed local innovation.
A capital-goods puzzle. Investment in capital goods — both foreign and domestic — actually declined over the period. Firms increasingly preferred to license technology rather than buy it embodied in machinery, though domestic capital goods remained important.
Which industries led
Technology acquisition was concentrated in the more sophisticated sectors. The leaders were pharmaceuticals and chemicals, motor vehicles, electronic components, general machinery, and basic metals — the industries where the returns to acquiring and absorbing technology are highest.
What it means
The study’s policy message is one of balance. India needs to keep foreign technology flowing and strengthen the capacity to absorb it — by supporting domestic R&D, paying attention to high-technology sectors that were slipping, and not neglecting the domestic capital-goods base. For firms, the lesson is that the channels work best in combination: foreign technology pays off most when a company also invests in the in-house research needed to absorb and build on it.
Read the academic abstract
With the liberalisation of foreign technology import policy in the 1990s, India saw declining R&D intensity at the national level. This generated a general concern about how Indian industries were faring in technology accumulation under the new policy regime. This study makes a preliminary attempt to analyse different modes of technology acquisition — including R&D — for Indian manufacturing industries, classified by National Industrial Classification (NIC) Revision 1998 at the 3-digit level. It constructs a new technology-indicators database for Indian industries at NIC (1998), and a composite technology index for Indian manufacturing, to examine how high-technology industries performed during 1991–2002. The research reveals several interesting facts about the nature and character of technology accumulation in Indian manufacturing, with important policy implications.Cite this article
Pradhan, J. P., & Puttaswamaiah, S. (2008). Trends and patterns of technology acquisition in Indian organized manufacturing: An inter-industry exploration. The Indian Journal of Economics, 89(353), 269–315.
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Related on this site
- On the puzzle of falling national R&D and where firms’ R&D actually concentrates: Why Location Matters: The Geography of Innovation in Indian Manufacturing
- On the same R&D struggle among smaller firms: The R&D Divide: India’s Small Businesses and Innovation
- On how firms also acquire technology by investing abroad: Innovation Without Borders: How Indian Auto Companies Learn by Going Global
