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To focus on new and emerging areas of research and education, Centres of Excellence have been established within the Institute. These ‘virtual' centres draw on resources from its stakeholders, and interact with them to enhance core competencies

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IIMB Management Review

Journal of Indian Institute of Management Bangalore

IIM Bangalore offers Degree-Granting Programmes, a Diploma Programme, Certificate Programmes and Executive Education Programmes and specialised courses in areas such as entrepreneurship and public policy.

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About IIMB

The Indian Institute of Management Bangalore (IIMB) believes in building leaders through holistic, transformative and innovative education

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Productivity and capital investments: An empirical study of three manufacturing industries in India

Vol 22, No 3; Article by Atanu Chaudhuri, Peter Koudal and Sridhar Seshadri ; September 2010

 

While manufacturing has long been recognised as an engine of growth and wealth creation in India, the share of manufacturing in the GDP has stagnated at 17% for almost two decades. In particular, the investments in this sector do not seem to match the rate of growth of sales. However, there is significant firm to firm variation in the rate of investment. This study empirically determines factors that explain the within-firm variation in investment growth in three manufacturing industries—auto components, chemicals and electronics—using panel data for the five years spanning 2002 to 2006. In particular, it examines whether successful firms are able to translate their productivity achievements into short and medium term growth when opportunity exists to grow in emerging markets. The results show that there are common firm-specific factors across industries and also some industry-specific factors that explain variation in investments within firms. Factors related to capital or labour productivity account for a large amount of variation within firms. Capital productivity is a significant factor in auto components and chemicals while capital intensity is significant for chemicals and electronics. Labour productivity is significant only for the electronics industry. The role of productivity in explaining variation in investment growth suggests that there is a need to manage productivity improvements from growth point of view and not only for efficiency improvements; firms should also use the right mix of labour and capital and involve industry associations in educating industries on their needs. Firm size and firm-specific interest rate on long-term loans are the other factors, significantly affecting investment growth in all the three industries. We discuss the implications of the findings for firms and policy makers, based on the central tendencies and trends of the data, as well as an analysis of the outliers.