Technology Acquisition and Growth of Firms

This paper attempts to analyse the determinants of growth of Indian automobile firms during three different policy regimes, namely, licensing (1980-81 to 1984-85, deregulation 1985-86 to 1990-91 and liberalisation 1991-92 to 1995-96). The analysis broadly follows the evolutionary theoretical framework. It is argued that differences among firms in terms of technology acquisition explain much of the firm level variation in growth. To incorporate firm specific and inter-temporal changes, the study has used two-way fixed effects estimation of the growth function. The results of this exercise support the view that inter-firm differences in growth in this industry in India are determined by variables capturing technology paradigm and trajectory shifts. The changing role of technology acquisition variables in determining growth is also borne out by the results of this exercise. Further, if one accounts for the role of technology, vertical integration, capital intensity and the age of the firm, size of the firm does provide a firm with positive advantages to grow.