Demand conditions, access to foreign knowledge and technological change: evidence from India’s spinning machinery manufacturing

ABSTRACT

This paper examines the technological change in spinning machinery manufacturing in India. This is accomplished by employing the sectoral system of innovation framework that identifies three important building blocks – technological regimes, demand conditions and the lead actor – in the spinning machinery manufacturing. The paper underscores that Lakshmi machine works limited (LMW) – the lead manufacturer of spinning machinery – explains most of innovations occurred in the spinning machinery manufacturing. The favourable demand conditions and the access to foreign knowledge via long-term international collaborations are crucial to the innovation accomplishment by the lead actor. Nevertheless, because of the imports of advanced spinning machinery and the second-hand spinning machinery in particular, the technological success of spinning machinery manufacturing is restricted to the conventional spinning machinery, i.e. ring spinning machinery, not to the advanced spinning machinery (e.g. rotor and air-jet spinning).

KEYWORDS:

• Technological change
• sectoral system of innovation
• spinning machinery manufacturing
• LMW
• India

Acknowledgements

The earlier version of this paper is available as working paper at Institute for Studies in Industrial Development (ISID), New Delhi, India. The paper is a part of author’s doctoral work. The author is grateful to Sunil Mani and M. Parameswaran at Centre for Development Studies (Trivandrum, Kerala) for their careful and critical observations on the work. He is thankful to Chalapati Rao and Satyaki Roy at ISID for the careful feedbacks on the paper. He is also thankful two anonymous referees for their useful comments which have improved the paper substantially. Any errors that remain are mine only.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The spinning machinery manufacturing accounted for a three-fifth of total production of the textile machinery manufacturing in India during 2004–05 to 2013–14 (see Table A1 in Appendix); and around four-fifth of total innovation (measured in terms of Indian patent grants) of India’s textile machinery manufacturing during 1995–2010 was attributed to the spinning machinery manufacturing.

2 The existing technological regimes can explain the specific pattern of innovation activities in a sector (Breschi et al., 2000).

3 Technological regime is characterised by the combination of technological opportunities, appropriability of innovations, cumulativeness of technical advances and the property of knowledge base (Malerba & Orsenigo, 1990; Nelson & Winter, 1982). However, for technological change in developing countries, as argued by Lee and Lim (2001), not all the components are relevant. For example, for R&D activities of firms, appropriability of innovation would be less relevant, since firms tend to emulate the existing technologies developed in industrialized countries. Lee and Lim (2001) added two more components, viz., predictability of technological trajectory and access to external knowledge base, to the definition of technological regimes, and these two components of technological regimes are very much relevant for firms in developing countries.

4 Access to foreign knowledge and access to external knowledge are used interchangeably throughout the paper.

5 Many studies record the influence of the public procurements on the development of machine tool manufacturing in Japan and the USA (Chokki, 1986; Rosenberg, 1976).

6 See Fransman (1986) for studies of Japan, South Korea and Taiwan, and Floud (1976) for the USA to see the examples of import protection for machinery manufacturing in these countries.

7 The ring spinning machine was invented by an American named Thorp in 1828, and Jenk – another American – added the traveller rotating around the ring in 1830 (Ahmed et al., 2015, p. 414). Over the last 192 years, the ring spinning has undergone considerable modification in detail, but the basic concept has remained constant (Ahmed et al., 2015, p. 414). The open-end (rotor) spinning machine was invented in 1937, but the commercial success of it came about in 1965 when the KS 200 rotor spinning machine was introduced to the market (Hearle, 2013, p. 89). It was the result of research and development by Jaromir Kasparek and colleagues at the Cotton Research Institute in Ústi nad Orlici during a period of great innovation in Czechoslovakia (Hearle, 2013, p. 89). Air-jet spinning machinery was originated from fascinated yarn proposed by DuPont Co. Murata Machinery Co. commercialized the fascinated yarn as MJS using two serial air-jet nozzles in 1980.

8 Domestic demand for spinning machinery is calculated as sum of production (minus exports) and import of spinning machinery. Here, the import of spinning machinery is net of parts imported by machinery manufacturers, i.e. 15 per cent of production (and the Ministry of Textiles, Government of India, employs this method to calculate domestic demand for textile machinery).

9 In 2008, LMW established a wholly owned subsidiary – LMW Textile Machinery (Suzhou) in China. It has also installed windmill with total power generation capacity of 36.50 M.G. in 2007.

10 External knowledge intensity is calculated as a ratio of external knowledge base (which is sum of expenses on embodied technology imports as well as on disembodied technology imports) to the sales or turnovers of LMW. Average external knowledge intensity is 2.75 per cent during 1983 through 1989–90, 3.05 per cent during 1990–91 through 1999–2000 and 2.14 per cent from 2000–01 through 2015–16.

11 Components comprise both spare parts and components.

12 Inverted duty structure is a situation where import duty on finished goods is less than the import duty on raw materials. For example, suppose the tariff on import of spinning machine is 10 per cent and the tariff on import of steel that goes in the production of spinning machine is 20 per cent; this is a case of inverted duty structure.

13 TUF scheme provides interest rate subsidy and capital subsidy to the textile-manufacturing units. The government’s EXIM policy allowed import of second-hand machinery of 10 years old in 2001–02.

Additional information

Notes on contributors

Sanjaya Kumar Malik

Sanjaya Kumar Malik is Assistant Professor at Institute for Studies in Industrial Development, New Delhi, India. His areas of research include innovation and technological change, foreign direct investment, and labour economics.