Aya Okada

Bangalore’s Software Cluster

Why do some industrial clusters remain robust while others do not? What helps build the competitiveness of such clusters, enabling them to thrive? This chapter empirically examines the conditions under which knowledge-based industrial clusters in developing countries build competitiveness, with particular focus on the dynamics of the local labour market, as an institutional mechanism for promoting innovation and strengthening industrial competitiveness.

Automobile Clusters in India: Evidence from Chennai and the National Capital Region

Empirical studies on agglomeration economies have primarily focused on the nature and sources of agglomeration, its impact on the performance of firms and industries, and the mechanisms that connect agglomeration to innovation and regional growth (Saxenian 1994; Breschi and Lissoni 2001; Rosenthal and Strange 2004). With regard to the sources of agglomeration economies, the classical literature, in particular Marshall’s (1920) seminal work, discussed highly localized industries and their contribution to the continued growth of the town and the industry (1920: 271), identifying three key factors: increasing returns to scale, labor market pooling, and knowledge spillovers. More recent works, particularly theoretical advances in economic geography, have expanded and built on Marshall’s classic arguments (Fujita et al., 1999; Rosenthal and Strange 2004). Some scholars have identified other relatively immobile resources, such as knowledge, skills, local institutions, and industrial and corporate structures and networks, as important determinants of growth-enhancing effects of agglomeration (Saxenian 1994; Breschi and Malerba 2001; Karlsson et al., 2005).

Institutional Change and Industrial Development: The Experience of the Indian Automobile Industry

India’s recent growth record is very impressive, making it one of the world’s fastest-growing emerging economies. Its economic reforms over the past two decades have resulted in dynamic restructuring, growing pressure to compete globally, and an increased inflow of foreign capital. The automobile industry is one of the industries that have gone through the most rapid transformations in recent years. Indeed, the industry has recently achieved remark ablegrowth, with its annual production volume soaring to over eleven million vehicles (including two and three wheelers) as of 2007. India is now the fourth largest car-producing country in Asia—after Japan, China, and Korea—and is rapidly emerging as a global hub for small car production.

Labour Market Participation in India: A Region- and Gender-Specific Study

This study in the Indian context focuses on the gender-specific labour force participation across regions and makes an attempt to identify the important determinants. Before turning to the Indian situation, the participation rates are examined for various countries in the Asia-Pacific region. In India like many other countries, the female participation rate is significantly lower than that among the males. The rural–urban differentials are more pronounced, and the interstate variations are sizable in the case of females than males. Even in the large cities the female labour market participation is lower than that in the rural areas despite higher levels of education. However, in terms of inter-spatial (rural/urban/city) variations, the impact of infrastructure, education, health and urbanization on labour force participation of both the gender is quite distinct. With improved infrastructure, the quantum of investment is expected to shoot up and the accessibility to growth centres offering better livelihood opportunities can perk up. While industrialization and growth in services show a positive effect on participation, economic growth unravels a positive impact on urban males only. Also, there is evidence on poverty-induced participation in agricultural activities, suggesting clearly the importance of rural diversification for creation of productive employment. Women’s participation improves child health significantly. Access of mothers to resources enhances the health status of the children as their nutritional status and access to curative health care get better. On the whole, women participation in productive activities has a double effect: first, it raises the household income; second, it contributes to the well-being of the household. These findings are important from policy point of view because different infrastructure variables are seen to improve both participation and labour productivity. Infrastructure (social, physical and financial) can to certain extent break the social and cultural barriers and help women join the labour market, thus enabling them to make productive contribution to the growth process. Though the level of urbanization raises the urban participation rate in an inter-spatial sense, a similar pattern is not evident in the context of rural females (at least at the state level). How urbanization can be made more generative with positive spillover effects in the rural neighbourhood is an important policy concern because increased urbanization ushering in greater concentration of non-farm activities holds the potentiality to create employment prospects and at the same time result in productivity gains.