Internationalisation process & upgrading prospects of Indian garment manufacturers
Patel, Sheetal Anil
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In the context of globalisation and liberalising economies, an increasing number of local firms based in developing countries and emerging markets are encouraged to internationalise their business activities and thus participate in foreign trade. Their sustained success is founded on two key factors; their ability to access potential foreign markets, and their ability to upgrade their capabilities and thus improve their positioning in global markets. This thesis investigates the internationalisation process and upgrading prospects of Indian Garment Manufacturers (IGMs). It begins by examining how IGMs gain access to foreign markets and discusses the factors that help or hinder their progress. The thesis subsequently explores the ways in which IGMs upgrade their activities to higher value-added activities and investigates the contributory factors that drive and shape their upgrading prospects. Existing studies employ the concept of ‘Diaspora networks’ or ethnic ties to explain how local firms from emerging markets are able to internationalise their business activities. These studies highlight the integral role played by Diaspora networks in enabling this internationalisation. Diaspora networks help connect local firms with foreign, world class buyers (or ‘lead firms’) using the Diaspora’s own pre-established ties and links with such lead firms. Similarly, Global Value Chain (GVC) proponents assume the upgrading prospects of these local firms can be enhanced as a result of linking up with ‘lead firms’ because of the benefits that can be derived from knowledge and technology transfer imparted through working with world class buyers. The extant literature however is vague on the internationalisation processes of IGMs. Furthermore, it does not adequately address the extent to which IGMs utilise Indian Diaspora networks to access foreign markets and to internationalise their business activities. It is also unclear what mechanisms are employed to impart knowledge from lead buyers to suppliers and to what extent the knowledge and technology transferred plays a key role in progressing IGMs upgrading activities; especially in the higher value added functions of design. This thesis contributes by addressing and shedding further light on these unresolved issues. It examines the issues using a combined approach, where theories and concepts from international business (IB) and GVC are employed in analysing the subject matter and thus allows for a more nuanced and comprehensive understanding of the issues under investigation. To explore the above themes a case study based approach was employed. Interviews were conducted with key decision makers/owners of 23 case companies. Further interviews with key industry, academic and government heads were conducted as a means of triangulation. Interviews were, in turn, supplemented with documentary evidence and published material from company websites, industry and academic journals, and newspaper articles, so as to arrive at a more comprehensive understanding of the issues in question. Findings from this study suggest that IGMs rarely use Diaspora networks to access foreign markets. Instead, the majority of IGMs have achieved internationalisation as a result of well-developed networks of formal intermediaries based in India who have facilitated connections with prospective buyers. Furthermore, their manner of internationalisation reveals IGMs tend to access foreign markets initially at a very young age and at a rapid pace. Thus process-based theories of internationalisation seem inappropriate in explaining this rapid pace of internationalisation; insights from the literature on Born Globals and International New Ventures (INVs) seem, at first, to offer better explanations. However, employing concepts such as the ‘mature’ born global and the ‘failed’ born global leads one to re-examine and reconsider these initial findings. Re-examined findings indicate that in fact maturing IGMs are realigning their internationalisation trajectories to be better positioned to take advantage of favourable domestic market conditions. These findings are better explained using a more inclusive definition of internationalisation; particularly, concepts of de-internationalisation and extra-regional expansion from the field of IB. Additional findings, related to the issue of upgrading, indicate that contextual factors, usually related to the domestic economy and the firm’s internal circumstances, play a significant role in affecting the upgrading prospects of IGMs. These findings are contrary to GVC-based explanations of what drives and shapes IGMs’ upgrading activities, which place excessive emphasis on the role of the ‘lead firm’. In particular, GVC-based assumptions regarding the knowledge and technology transfer benefits available to local manufacturers by linking with larger world class buyers or lead firms seem of limited applicability to IGMs; here, firm-specific factors seem more important in determining firm choices concerning upgrading trajectories.