https://orcid.org/0000-0003-4023-113X
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Abstract
The paper explores the relationship between innovation systems (IS) and participation in value chains (VCs) to understand the challenges concerning upgrading of an industrial cluster in a developing country. It is argued that the inter-linkages of various actors, organizations and institutions at one or more levels (MLs), viz., micro level (local), meso level (national) and macro level (global) led the firms in the industrial cluster to participate in one or more VCs, i.e., local, regional and global VCs, upgrading the cluster over time, which we termed as ‘Cluster Upgrading System’ (CUS). In this context, a case of one of the oldest industrial cluster producing sports goods in Jalandhar, India is examined. The analysis is based upon the information gathered through a primary survey of 45 firms. It was found that the cluster is largely labour intensive in nature and is facing challenges of competing with both low-cost clusters and technological advanced clusters, raising fears of it slipping into a low value-added trap. We found a lack of inter-linkages amongst firms, and their relationship with training and financial institutes that hampers mutual learning for upgrading the whole cluster, indicating some necessary policy implications.
Acknowledgements
The manuscript is a part of author’s ongoing major research project entitled “Technology, Employment and Institutions: A Study of manufacturing clusters of Indian Punjab” sponsored by Indian Council of Social Science Research (ICSSR), Ministry of Education, Government of India. The author thankfully acknowledges the financial support provided by ICSSR vide F.No.02/82/GEN/2021-22/ICSSR/RP/MJ. The author is also thankful to Ms. Harmandeep Kaur and Mr. Nirmal Dass for helping in research work. The author expresses his deep gratitude to Prof. Angathevar Baskaran and the two anonymous reviewers for their useful comments and suggestions that helped immensely in improving the paper. The usual disclaimer applies.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1 It is not necessary for the industrial clusters to be concentrated in a small geographical locale or one municipality. They can be spread across municipalities as well as occasionally regions. For example, Silicon Valley is the concentration of related firms in a certain small locality, while the dairy cluster in Nicaragua (Artola and Parrilli Citation2006) is a case of a cluster spread across municipalities.
2 The paper presents a discussion of the extensive scholarly work in the growing fields of ‘economics of agglomeration’, ‘economic geography’, ‘industrial districts’ and ‘industrial clusters’.
3 In Mexico, two shoe clusters of Guadalajara and Leon (Rabellotti Citation1997) have long histories, while the manufacturing clusters in South East Asia, mainly in and around China are of recent origin.
4 The Government of India (GOI) increased the investment criterion for classification of firms as micro, small and medium enterprises (MSMEs) in 2020 as with an Act to 1 Crores ∼ 10 million, 10 Crores ∼ 100 million and 20 Crores ∼ 200 million, respectively. The turnover was made 5 times of the investment. Furthermore, to increase investment, GOI introduced collateral-free loans for MSMEs.
5 Jurowetzki, Lema, and Lundvall Citation2018 presented the bibliometric analysis and qualitative review of literature of innovation systems and global value chains to understand the economic development process in developing countries and to generate a knowledge base. Mehta (Citation2022) presented the hypothesis of upgrading within the global value chains through accumulating technological capabilities.
6 The size of the sample is based on our initial collection of data from ASI for the year 2017–2018, that reported that there were 71 organized firms in Punjab. Therefore, based upon the World Bank’s Enterprise Survey (Citation2009) methodology, the sample size was calculated with a level of precision of 7.5% for a 90% confidence level.
7 We took the reference letter from the Office of Director of Industries and Commerce, which is highly thankfully acknowledged. The support from the officials of DIC, Jalandhar was extremely helpful. The reference helped us immensely in approaching the enterprises, trade associations and traders.
8 Sialkot was a major industrial centre of undivided Punjab (Pandit Citation1978). After partition, Sialkot became the part of Pakistan. The Wagah international border runs between the Indian and Pakistani side of Punjab. The distance between Amritsar and Sialkot is 101 kilometres.
10 These are the descendants of Jassa Singh Thoka, who freed a fort of Ram Rauni near Amritsar. The fort was renamed Ramgarh and Jassa Singh Thoka became the governor of the fort, it thus getting the name Jassa Singh Ramgarhia (McLeod Citation1974).
11 Italics denote the emphasis on the concepts.
12 Pandit (Citation1978) documented that non-Muslims in an undivided India held dominant positions with strong financial balances and urban non-movable property. It was stated ‘95 percent of the deposits of large joint stock banks, 92 percent of the insurance premium and 75 percent of the urban immovable property in terms of value was accounted by the non-Muslims’ (p. 1937).
13 Data are taken from the Statistical Abstract of Punjab, 2020.
14 Within the framework of ‘Industrial Classification’ 2008, ‘Manufacturing of Sports goods with NIC code’ 323 is kept under the broad group of ‘Other Manufacturing’ NIC code 32. However, under the NIC code 1410 ‘Manufacturing of wearing apparel, except fur apparel’, the manufacturing of leather sports gloves and leather headgear is included. Likewise, under the NIC code 2219 ‘Manufacturing of other rubber products’ and ‘manufacturing of rubber sports requisites’ is included. NIC code 2220 is ‘manufacturing of plastic sports requisites’ and NIC code 2599 has ‘manufacturing of sports goods’ with other fabricated metal products.
15 For the organized manufacturing sector, it was found that production has increased three times to INR 30208 lakhs (in constant prices) over the last decade.
16 Since 2010–11 (NSS 67th round) the percentage share of sports good units and employment in Punjab has declined substantially from around 4% to 0.23% and around 3% to 0.34% in 2015–16 (NSS 73rd round), respectively.
17 The data were converted from INR to US$ based on the exchange rate of 2 April 2023, unless otherwise stated.
18 It is a single page registration form for MSME enterprises that collects information like type of ownership, employment, production, fixed investment, social category, address, telephone number and email.
19 Jalandhar also has a number of manufacturers of hand and machine tools, surgical instruments, automobile parts, and agricultural implements.
20 Janbhawna Times: https://www.youtube.com/watch?v=JPX3WSGsPWU
21 Average exchange rate for 2022 was 1$US = 78.6048.
22 FIFA is a acronym of a French translation of ‘International Federation of Association Football, which is a governing body of association of football, soccer and futsal.
23 The Tribune: https://www.tribuneindia.com/news/archive/punjab/once-hub-of-sports-goods-in-country-jalandhar-in-crisis-165989
24 Along with Jalandhar, Meerut is also one of the oldest sports goods manufacturing clusters in the country. After the partition, some craftsmen directly migrated to Meerut and began producing the sports equipment.
25 The term 'intermediary' is defined under section 2(13) of the Integrated Goods and Services Tax (IGST) Act, ‘GOI’ as a broker, an agent, or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.
26 Amongst these, 30% firms are exporting 100% of their output.
27 The trader was a small-sized manufacturing unit that also produces weight-lifting and gym equipment.
28 The soccer ball is made from PV micro fibre and leather and has an eight-panel structure.
29 The willow is lighter in shade and is considered ‘best’ for the production of customized bats. These clefts are light-weight and have more finishing. These are professionally grown in different parts of England.
30 The manufacturers demand lifting of ban as: https://timesofindia.indiatimes.com/city/meerut/sports-body-bats-for-lifting-ban-on-kashmir-willow/articleshow/93993145.cms.
32 Suppliers of raw materials like PU, PVC, cloth, polyester, rubber, poplar wood willows, and leather mesh are available from areas like Basti Nau, Leather Complex, Model House.
33 The data were collected from the District Industrial Centres.
34 For footballs, there are international tournaments like the FIFA World Cup, BRICS Football Cup, NBAK tournaments, Olympic Games, National Premier League, Champions League, etc. There are the Championship League Twenty 20IPLs, etc. for cricket bats and the Rugby Championship and National Rugby League, etc. for rugby balls.
35 For aggregate data, we relied on data provided by DIC, Jalandhar; as for the year 2021–22, total employment in sports goods manufacturing cluster was 5,774.
36 These 31 firms are: F1–F18, F23–F24, F29–F30, F33–F34, F36–F37, F39–F43.
37 The exchange rate for converting INR to US$ was 1US$ = 83.17INR as on 2 April 2023.
38 Only 19 firms out of 45 responded to the question of ‘salary to management staff’.
39 The views of the respondents were translated from Punjabi/ Hindi to English and are presented in italics.
40 Founded in 1958, Sports Goods Exports Promotion Council is a Government of India sponsored organization working for the promotion of India’s exports of sports goods.
41 Established in 1973, the Sports Goods Manufacturers and Exporters Association represents the leading manufactures and exporters of sports goods.
42 With 36 members as of September 2021, the Sports and Fitness Welfare Association of SC-ST manufacturers was established in 2018.
43 Sports and Toys Exporters Association was founded by Sh. Sanjay Kohli in 2015 and had 70 members as of September 2021.
44 This Association has 60 members in Jalandhar. At the time of interview, the President of the Association was Sh. Arvind Singh Rana. The association was formed in 1994.
45 The Likert scale is a rating scale that helps in capturing the opinions of the respondents.
47 The share of Punjab was 47% and Uttar Pradesh was 40% of the total production of sports goods in India for the year 2017–18 (EXIM Citation2021).
48 Khalistani Movement in Punjab, Operation Blue Star and Anti-Sikh riots created serious law and order problem in Punjab: https://www.indiatoday.in/fyi/story/1984-operation-blue-star-amritsar-1251681-2018-06-06
49 https://indianexpress.com/article/india/one-year-of-farm-laws-timeline-7511961/; “Goods, not protests, stopped on their tracks,” The Hindu 14 Nov 2020.
50 The construction of Delhi-Meerut 14-lane Expressway for smooth and fast connectivity. https://www.sportzbusiness.com/meerut-outpaces-jalandhars-sports-industry/
51 https://report.adidas-group.com/2021/en/group-management-report-our-company/global-operations.html
52 https://www.yueyuen.com/en/manufacturing.html#manufacturingBusiness. The company has a network of manufacturing facilities in China, Vietnam, Indonesia, Bangladesh, Cambodia, Myanmar, etc.