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Title Page
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Acknowledgment
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Table of Content
Serial
No.
Topics PageNo.
1. Abstracts 4-5
2. Introduction (6-7)
2.1 Background and Rationale 6
2.2 Aims and Objectives 6-7
2.3 Research Questions 7
3. Literature Review (8-21)
3.1 Introduction 8
3.2 Role of SMEs in Economy 8-10
3.3 Role of SMEs in Indian Economy 10-12
3.4 SMEs and Employment Generation 12-16
3.5 SMEs and Export Growth 16-20
3.6 Summary 20-21
4. Research Methodology (22-26)
4.1 Aims and Objectives 22
4.2 Research Questions 22
4.3 Research Approach 22-23
4.4 Research Method 24-25
4.5 Data Collection 25-26
5. Findings and Analysis (27-47)
5.1 Introduction 27
5.2 Analysis of Findings 27-46
5.3 Summary 46-47
6. Conclusion (48-49)
6.1 Introduction 48
6.2 Summary of Findings 48-49
7. Bibliography 50
8. Appendix (51-54)
8.1 Questionnaires 51-54
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ABSTRACT
The sole objective of this research was to study the contribution and responsibilities of small scale
industries for the sustainable development of Indian economy, and to accentuate their potential.
Following objective has been achieved:
To perform a literature review to analyze the contribution and responsibility of small scale
industries towards the overall development of economy in the context of employment
generation and export promotion
To carryout a field studies to observe contribution and responsibly of small scale industries
towards the overall development of economy in the context of employment generation and
export promotion
The research has answered following research questions:
What is the contribution and responsibility of small scale industries towards the
development of Indian economy in the context of employment generation?
What is the contribution and responsibility of small scale industries towards the
development of Indian economy in relation to export growth?
Whether the potential of Indian small scale industries have been underestimated or
exaggerated.
To answer these set of questions, data was collected using both secondary and primary sources.
Secondary data comprises of literature review and primary data was collected through first hand
questionnaire survey. Following are the major findings of the research.
There is no doubt in the highly creative role of small scale industries in economic restructuring and
development of India. Majorly their contribution can be said to be employment generation and
export growth which lead to economic development of India. Government followed a
discriminatory policy for small scale industries in India comparing large scale industries.
Government of India very effectively dealt with financial constrains and labor issue which lead to
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healthy growth of small scale industries. Globalization had a average favorable (not highly
favorable) for the augmentation of small scale industries. Unquestionably small scale industries
have lead to employment generation in India. It is said, small scale industries are the greatest
employment creators in India and as well greatest employment destructors in India as it lack
providing effective training to the employees. As a result it leads to a detrimental effect on our
knowledge based economic activity. To overcome this and to achieve a faster growth, small scale
industries in India should conform the policies of labor market reforms. Small scale industries role
in export growth of India is very commendable, this is due to active support of export promotion
agencies and government incentives.
Indisputably if India wishes to augment its export performance then the export policy should be
more oriented toward the small scale industry. Generally small scale industries role in Indian
economy is undermined.
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Chapter 1
INTRODUCTION
1.1 BACKGROUND AND RATIONALE
India witnessed a remarkable growth of small-size enterprises in India since independence. In
manufacturing sector Small and Medium Enterprises (SMEs) have a vital position because of their
creative role in employment generation and earnings and struggle against provincial inequalities.
SMEs policies have witnessed change due to New Economic Policy 1991, but even in the early
1980s SMEs policies were revised so to adapt with changing external environment. Change in
policies accentuated on significance of the globalization of commerce and mutual dependence in
many areas such as modernizing functions, teaching, promotion and commercial course of action.
To achieve equality in growth, SMEs have played an active role as they create massive
employment opportunities in the rural and semi-urban area and thus minimize inequalities in
different state and provinces. Small scale industries have served domestic as well as international
market at a realistic cost. Indian government to protect its newly developed indigenous industries
and to minimize import, Indian official embarked a route of trade and industry reforms of
correction in its economic policy but unremitting to shelter its small-size enterprises. This new
strategy focused on external accustom, contest and partnership with internal and external
organizations, the strategy outline confirms the latest noticeable variation in spotlight.In view of
these assumptions, we try to find out the contribution of small-size enterprises in growth of Indian
economy and to ascertain if their prospects are weakened or strengthened.
1.2 AIMS AND OBJECTIVES
The aim of this research is to study the contribution and responsibilities of small scale industriestowards the development of Indian economy and to understand whether their potential is
underestimated or exaggerated. The research have accomplished following objectives:
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To perform a literature review to analyze the contribution and responsibility of small scale
industries towards the overall development of economy in the context of employment
generation and export promotion
To carryout a field studies to observe contribution and responsibly of small scale industries
towards the overall development of economy in the context of employment generation and
export promotion
1.3 RESEARCH QUESTIONS
What is the contribution and responsibility of small scale industries towards the
development of Indian economy in the context of employment generation?
What is the contribution and responsibility of small scale industries towards the
development of Indian economy in relation to export growth?
Whether the potential of Indian small scale industries have been underestimated or
exaggerated.
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Chapter 2
LITERATURE REVIEW
2.1 INTRODUCTION
SMEs are becoming one of the important contributors in the national wealth of the country and its
importance is increasing day by day. SMEs include many small enterprises that are more labor
intensive and are more reluctant to face the external uncertainties. The SMEs working is such that
it attracts both foreign direct investments and exports of the country. It also makes significant
contribution towards increasing the employment of the countries as well.
2.2 ROLE OF SMES IN ECONOMY
Small size enterprises have significant contribution in the economic growth of the country. Big
organizations pose some challenges for the SMEs because of its small size. Its working is greatly
affected by the range of agents. To overcome this constitution of cooperatives can be made that
will encourage SMEs more effectively. Being organized is one way by which SMEs can be more
competitive and can also enhance their negotiation power. The growth of small enterprises cannot
be overlooked in both developed and developing countries as it is linked with employment andcreates opportunities for new jobs. Expansion of SMEs has now become very important as the
numbers of jobless people are increasing and there is a great need to provide employment to these
new entrants.
It is widely recognized that the SMEs, particularly those enterprises which have inherent ability for
rapid development, are an important contributory factor in creation of employment opportunities
and play a significant part in modernization and generation of competitive capabilities (Doi and
Cowling, 1998). Moreover, the growing small enterprises are mainly targeted by financiers,
advisors and management consultants.
The working of small enterprises is not that easy and they face some serious challenges by big
organizations. For an economy facing complex political and economic challenges it is important
for small enterprises to undertake some new and risky projects improving the economic condition
of the country. SMEs are somehow not able to meet these challenges and are finding it hard to
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survive upfront. They are considered to be a dynamic source of employment generation and as
soon as the barriers to their progress are removed they will become sizeable input for the economy.
SMEs made significant contribution in the growth of the economy. It creates job opportunities for
both rural and urban people. The dependency of people on SMEs is quite large and is increasing
rapidly. Many big organizations were once small enterprises which have developed themselves and
grown with time. Insecurity, novelty and progression are the three basic differences between small
and large scale enterprises. On the basis of the size of the SME it can be divided into three broad
categories- very small enterprises, small enterprises and medium enterprises. Its only when
economy starts getting industrialized the Small and medium enterprises evolve. SMEs also help
economy in division of earnings, tax proceeds, opportunities of jobs, well-organized deployment of
assets and steadiness of wages and income.
A small and medium enterprise absorbs more labor as compared to big enterprises and thus creates
more employment opportunities. SMEs also make some good contribution in changing the
agriculture based economy to industry based economy. This helps in accelerating the rate of
growth of the economy. Small and medium enterprises also assist in establishing links between
small and large businesses in the economy. This helps in attracting businesses from other
countries.
Big organizations are more economic stable and they can sort out their difficulties on their own on
the other hand SMEs do not have that much competency that can help them to continue their
operations smoothly. Although small enterprises do not face direct legal or governmental bias but
they are found to be the victims of unequal dealings that results in non competitive working
atmosphere.
In Pakistan the Small and medium enterprises faces various hurdles such as governmental
volatility, social insecurity, economic limitations, unreliable power supply, excise and duty
problems, workers unrest, dearth of management and absence of normal information flow system
between organizations, etc.
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SMEs are transforming endlessly these days due to the internationalization and liberalization and
to make them more powerful tool clear cut government policies and more enhanced regulatory
system should be adopted.
2.3 ROLE OF SMES IN INDIAN ECONOMY
The small and medium industries have good command in the overall Indian market. The presence
of creative entrepreneurs adds new dimensions in the small and medium industry. They are
competitive and offer goods at the minimum operating costs. One more distinctive feature of
SMEs in India is their ability to work in groups that helps them to evolve according to their field of
offerings.
The SME sector is one of the important parts of the Indian economy. It accounts for about 40% of
the manufacturing sectors value while around 95% of the industrial units. It absorbs
approximately 80% of the workforce of the manufacturing sector. The SME sector is the second
largest employment providing sector in India after agriculture. It also accounts for around 35% of
the total Indian exports. The Indian economy is growing at a good rate of 8% and is targeting a
growth rate of more than 9 % in the time to come. To do this SME sector would be the prime focus
for the economy as it smooth the progress of the small size units into medium and large
organizations.
The small enterprises have variety of products and huge offerings but due to the fact that the goods
produced in the small enterprises are not of superior quality and are made mainly for Indian rural
and semi urban population so its contribution to the total exports is not defensible. The goods in
the small enterprises are mainly from artisans, handicrafts, handlooms etc.
The biggest limitation for the small enterprises is the lack of favorable credit policy. The Reserve
Bank of India (RBI) and the Ministry of Finance has taken some steps to encourage the small
enterprises. They have given directives to the commercial banks to ease credit facility for small
scale enterprises. But this step is not working for small enterprises since banks are controlled by
RBI and the nature of instructions posed by RBI and the absence of an incentive system based on
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accomplishment of proactive bankers is not allowing the commercial banks to smoothen the credit
policy for small enterprises. According to a study there are strong structural underpinnings to the
inadequate flow: the organizational structure of banks, and processes within them, have taken them
far from task orientation, and have created a specific bias against small loan portfolios (Morris et
al., 2001: 11). The small scale enterprises are finding it difficult to take loans from the banks due
to the tight RBI directives. Although some commercial and other financial organizations are
helping SMEs by introducing some loan assurance schemes for them.
The policy in which some items were completely meant to be manufactured by the small
enterprises has now become obsolete and uncompetitive. Examining the results the effect of this
greatly contentious scheme, researchers have pointed out the problem of practical incompetence of
goods produced under reserved class in contrast to the non-reserved class of goods
(Balasubrahmanya, 1995; and Morris et al., 2001). Studies have also proved the irrationality and
irrelevance of putting some goods in the category that is meant to be completely manufactured by
small enterprises.
A number of the usual matters concerning the reserve list are: (i) repeated revision (addition and
deletions) of listed goods were not reasonable every tome and believed to have been manipulated
by political considerations; (ii) attempts to make policy wide-based were careless because
investigations have revealed that broad-basing, as surveys found that manufacturers of reserved
products did not have any inkling about the policy; (iii) the medium and large scale units were also
engaged in producing some reserved items as they were manufacturing them before their
inclusion in the list; and (iv) in most of the cases the quality of items which were reserved was
substandard (Das, 2006: 116-117).
SMEs in India are not competitive enough when it comes to international market due to several
reasons. These are- they are not easily adhered to the laws, lack of suitable knowledge regardingmeasures for global subcontracting, unfamiliarity with complex routine processes relating to
external trade on international front and making use of e-commerce for executing deals. For
increasing the awareness of MNEs towards increasing their investments in India particularly in the
fields like garments, automobiles, electronics, chemicals, etc a decent change in the norms
concerning FDI is made. This change is quite different from the earlier policies. Some
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administrative steps are also been taken so as to establish strong link between SMEs and foreign
business.
The objective of SMEs has changed over a period of time. It was known for creating job
opportunities earlier but now SME sector is developing in such a way so that it becomes more
competitive in the international market. The SME sector in India is moving towards a new
direction where it is positioning itself in the bigger and fresh market. Currently the proficiencies,
raw materials and huge market to target are the three main advantages for the SME sector. Seeing
the growth of the market the people who will be associated wit this sector will surely be benefited.
2.4 SMEs AND EMPLOYMENT GENERATION
The job generation capacity of the small scale enterprises were focused by two studies in 1970s.
The first study made use of cross sectional data for calculating the job share of small units and
found some appealing proof that shows that the relevance of small scale units is increasing because
of the reduction in the share of big enterprises in the total employment. On the other hand the
second study uses size and area of the enterprises for calculating the same. (Acs and Audretsch ,
2001).
These two studies show that the job generation capacity of small unit enterprises is increasing
rapidly. Economists at that time use various tools to prove this point. They counted the number of
people employed in the same category in two different periods. This line of analysis was based on
the presumption that movement between different classes was insignificant. On the other hand,
according to study done by Birch it was found that the increase in the total employment is due to
the conversion of small units into large enterprises. Birchs method of analysis was later
challenged by Davis, Haltiwanger and Schuh in 1996.
The increase in the employment in small units may be reflected in two ways- By the reduction inthe jobs opportunities in the big enterprises or increase in the job opportunities in the small
enterprises. Hence a careful analysis of generation of jobs at the unit levels should be done so as to
find the reason behind the increase in job opportunities. Despite of higher .job generation rate in
small enterprises its contribution to the overall scenario is small as compared to bigger
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organizations. Furthermore these studies also help in analyzing the factors that creates differences
in the generation of jobs between small and big enterprises.
While designing the policies for the SMEs the output and the business environment should be kept
in mind. The data based study is more effective in the establishment and development of the
SMEs. This study is based on the fundamental principle that the small enterprises are the only job
creating sector for the industrialized economy even in the times of recession.
We cannot apply our understanding of enterprises to the whole economy as there are differences in
the industrial and service sector enterprises. The number of job changes in the service sector is
quite higher as compared to the industrial sector. Other factors that cause differences between these
two sectors are manpower requirements, rates of entry and exit, periodic variations in demand,
differences in the capability of facing external competition.
In some other region it has been stated that elsewhere that jobs generation business replacement
(settled businesses) is a lot higher (lower) significant in businesses of service sector compared to
the manufacturing one (Armington and Acs, 1999; and Audretsch et al. , 1998). In order to
confirm whether the overall scenario is similarly applicable in all segments, we proceed to work
out the provision to job generation and part of small enterprises in total number of jobs in different
sectors such as manufacturing, construction and services.
According to Audretsch (1995), Audretsch and Thurik (2001) and Acs and Audretsch (2001) the
businesses these days are now more technology driven due to internationalization and technical
changes. The business involving information technology has become more beneficial and the main
attention in these businesses is on the person and not on the company. This is due to the fact that
the lack of regularity in the knowledge results in the varied opinions by the company and the
person. This kind of situation led the person to make a shift from the company where he is working
to his own business. This is the evolution stage of entrepreneurship where a person applies his
knowledge which he earns in one company into his own business. The small and big enterprises in
the service segment differ in the pattern of creation of jobs.
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According to the conclusion drawn from the study it was found that for the generation of jobs both
big and small size enterprises are important. The rapid increase in the employment of the small
sector in other industrialized economy makes it more important part of the economy and distinctive
approach should be adopted while making policies for this sector. As it is known that small
enterprises acquire relatively higher price towards organizational hindrance as compared to big
organizations so it is important for small units to follow governmental guidelines. The financial
procedures should also need to be eased in order to provide easy credit to small units so that they
can meet their business requirements effectively
According to the previous studies it can be seen that the job generation and the business size are
inversely related to each other. Likewise, Hohti (2000) discovers that in Finland total jobs
generation and jobs obliteration are in inverse proportion to the size of businesses. On the basis of
data Finnish manufacture business between 1980-1994, Hohti (2000) has established that the rates
of per year job flow, in terms of births and deaths, is alike to what Broesma and Gautier (1997, p.
216) come across for Dutch manufacturing businesses and by Klette and Mathiassen (1996)
identified for Norwegian manufacturing firms. Job generation and job destruction both have a high
proportion in the new enterprises. This way, the experience of Finland, equally as of Sweden and
the Netherlands, shows analogous commercial activity as discovered in North America. Similarly,
facts confirm that during some preceding years small businesses in Germany, as in other
industrialized economies, are rising as the main force of employment generation. For instance,
Haid and Weigand (1998) discover that family owned small and medium sized businesses creates
more jon opportunities as compared to the big businesses that are managed by administrators.
According to the study conducted by Weigand and Audretsch (1999) on the non science category it
was found that the number of employees in big companies who works in stock exchanges reduces
at a rate of minus 1 percent. Per annum. The SMEs also shows the reduction of 3.97% per annum
in the number of jobs. In case of non listed big companies this rate was 4.60% while for SMEs
(non listed) it was 1.26%. Hence it was observed that in Germany there is a reduction in the
number of jobs in the sectors like- big science-based businesses, big non-science based businesses,
and small non-science based businesses. Apart from this reduction in the number of jobs there is
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one sector which experienced the increase in the number of employees that sector is science based
small and medium sized businesses.
Thus from the above data it can be inferred that the entrepreneur business creates different job
opportunities in Europe and United States. On both shores of the Atlantic Ocean small and new
businesses play a pivotal role as motive force of jobs generation (European Commission, 2002). It
can also be said that the employment opportunities of any business varies according to its size and
its age.
The process of globalization is altering the pattern of vying for all activities of enterprises, making
it necessary to adopt a worldwide growth plan to affirmatively influence their long-standing
development and endurance (Karagozoglou and Lindell, 1998). The small enterprise segment
business sector has grown to be more significant as it has risen to become a leading power
influencing the development of financial systems of countries (Shridhar, 2006). In the process of
their change to a global milieu SMEs confront many intrinsic drawbacks (Chen and Huang, 2004).
SMEs often faces lack of resources and unavailability of capable workers due to their small size.
With worldwide economic integration and the fall in barricades of international trade, globalization
of SMEs is getting more and more consideration (Lu and Beamish, 2001; Knight, 2001). The
enterprises are becoming more competitive due to the rapid increase in the number of enterprise in
the global trade arena. More rivalry in the markets causes decrease in the capability of SMEs to
have power over the course of their own growth (Etemad et al., 2001). In an extreme cutthroat
situation, it becomes imperative to recognize and appreciate aspects that affect global functioning
(Kuivalainen et al., 2004). SMEs symbolize a segment of increasing significance and make a vital
contribution in the progress of developing countries particularly in the fields of jobs generation and
accelerating economic advance (Kula and Tatoglu, 2003). Initially any industry is tiny and have
limited resource base but it grows with time and always tries to transform itself from tiny to largeindustry. Competition, technical variations and legislative guidelines are some of the factors that
are important for both industrialist and policy creator.
Indian SMEs are also growing at a very good rate. The growing success of information technology
has helped Indian SMEs to grow at a faster rate in the modern era of globalization. India is
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providing very good opportunities for setting up new commercial enterprises. Administrative
measures are important to determine the extent to which India can go on to make improvements in
the information sector. Indian government is making constantly making some new agendas and
policies that need to be worked on properly so as to decide the effectiveness of the policies. It will
also help in analyzing as to how much efforts needs to be put on the Indian SMEs sector.
SME sector is one of the important sectors in the Indian economy and it has contributed a lot
towards the national wealth of the country since independence. Its contribution in the net domestic
product of the country is about 60% and that in the total employment is 92%. It is facing number of
difficulties after the economic reforms of 1992 but still manages well to provide good growth to
the country. And the SMEs are expected to perform better in the future because in big enterprises
job creation is very sluggish and flexibility of employment is shallow and waning (Papola, 2004).
Hence, SMEs can now enter in the market that was earlier meant for big enterprises only.
Furthermore schemes like elastic manufacture schemes and use of sub contracting for the division
of their manufacturing activities also helps SMEs a lot to make their operations more organized
and competent.
Measures like decrease in the degree of protection and abolition of the job safety section are part of
the labor market modifications and can make the job problem more serious in big enterprises
(Nagaraj, 2004). Further, liberalization of economy and abolishing licensing system has paved the
way of the casualisation and feminisation of labor (Mitra, 2001).
It is shown through various studies that the liberalized policies that were initiated during the
economic reforms have greatly influenced the manufacturing sector of the country. Due to the
policies of reforms manufacturing sector experienced a decline in the employment growth rate
during 1990s (Nagaraj, 2004). But, these reforms have both favorable and unfavorable effects on
the manufacturing enterprises. Several steps such as abolition of licensing system in industry andimport, elimination of limits on production capacity, tariff decline and permission for foreign
investment has helped industrial enterprises to enter into the sector which was earlier meant only
for informal sectors. Informal sector have some limitations and the economic reforms of 1990s
were also not proved much advantageous to this sector which results in the decline in its
efficiency. The use of obsolete technologies in the production process of the informal sector is one
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of the main reasons behind its declining efficiency. So in order to increase the productivity of the
informal sector more focus needs to be given to the technology and skills.
2.5 SMEs AND EXPORT GROWTH
According to Ruzzier and Lu and Beamish economic advancements and wide employment
opportunities are the main areas of interest for small and medium enterprises. Earlier most of the
theories were focused on the globalization. It is only after the publication of the article titled
Towards a theory of international business studies by McDougall and Oviatts (1994) that
importance of internationalization of SMEs or international entrepreneurship were recognized.
Later on Sharmas work in 2004 and Cerratos works in 2007 also provided deep knowledge on the
internationalization from various socio-economic environments
Johanson and Mattson in 1998 suggested the network approach to support internationalization
theory in which he explains the process of globalization through social exchange theory. Rutihinda
in 1996 and Ahokangas in 1998 introduced Resource-based Internationalization framework in
which he uses resource based view of the firm to put together strategic aspects with the
globalization processes. This research was proved to be quite important as companies are
constantly working towards the expansion in the international market because of increased
competition. Factors such as government incentives and support (like low interest loans) and
export development bodies helps SMEs to find new markets to penetrate.
Sharma and Erramilli suggests SMEs to attempt various entry routes to penetrate the foreign
market while Peng and York suggested two options for an exporting firm that are either to reach
the foreign customer directly or through a mediator. Fletcher, in 2004, defined it as the means
whereby small firms are involved in exporting, sourcing or distribution agreements with
intermediary companies who manage, on their behalf, the transaction, sale or service with overseas
companies. Peng and York emphasize further on the pivotal role of export mediators by linking
individuals and organizations that would otherwise not have been connected. Trabold views this
indirect conjugation holds platform for successful transactions and Balabanis feels they often help
their clients to identify customers, financing and distribution infrastructure providers. Mediators
plays vital role by bringing in their expertise of working in foreign countries thus reducing risks
related to international operations. Li suggests it would be a better idea to appoint export
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mediaries, having a much better knowledge of the consumer demography to look after low cost
exportation to the said country. We may cite Peng and Ilinitch who feel conducting market
research and negotiation costs would be so high that manufacturers would be more likely to
appoint the assignee before entering the unexplored market.
Peng and York further added that Export mediators would also helps in saving costs related to
customer mapping and costs incurred in monitoring the enforcements of contracts.
Notwithstanding the potential negative outcomes like loss of control over the assignee
(Blomstermo and Sharma, 2006) or additional costs transaction expenses and rent extractions
(Acs and Terjesen, 2006), the overall benefits of using the intermediary stand out. Mediators could
either be the agents or the distributors who are settled within the same country or the foreign
country (Peng and York, 2001) and could also be the local subsidiaries of existing Multinationals.
According to Dunning : Multinational Enterprises by the virtue of their operational nature
minimize costs through mass production. Kuemmerle puts forward the strategic linkages of SMEs
with larger foreign firms.
Dated SME export research, like Cavusgils and Nevins in 1981, focuses on the direct approach
by including product uniqueness as the focal point. In contrast to this, the study on the role of
external factors, such as government support for internationalization (Wilkinson, 2006),
environmental turbulence (Westhead, Wright and Ucbasaran, 2004), and the characteristics of
foreign markets and domestic markets develops and tests two theories of external environment
factors: resource dependency and institutional theory.
Sherer and Lee further works on these two theories and specified the common points of the same.
According to them both the theories were restricted to the nature of relationship between the firm
and its environmental factors, both the theories are regulated by external factors , and that
organizations are concerned with building legitimacy and acceptance vis--vis external
stakeholders, and hence conclude the two theories may prove to have greater predictive potentialwhen used together. Resource dependency theory further explains how lack of resources forces the
organization to look for new and unconventional resources. Institutional theory, Scott defines,
organizational practices that accepted and legitimized within the specific organization. Both the
theories described the impact of external factors on the organization. The difference between
resource theory and institutional theory is that where resource theory focuses on the presence of
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other factors that are directly proportional to resource accessibility institutional theory gives more
importance in imitating the behavioral norms of other factors in the organizational field.
Autio, Sapienza and Almeida later investigated upon the effect of resources on the export
activities without giving much emphasis on the availability of the resources. It can be concluded
from the resources theory that the export capacity of SMEs is very much affected by the market in
which it operates.
It is found that SMEs working in the home markets which are endeavoring through direct mode
are more successful as compared to other SMEs which are working in other environment. This is
because of favorable production costs, intellectual property rights protection, government
regulation and the presence of related and supporting industries in the home market.
A firm targeting export market is also influenced by export-entrepreneurial orientation. According
to Ibeh and Young a firm with high export-entrepreneurial shows greater innovation and higher
proactivity in initiating exportation. Analyzing the correlation between owners degree of
entrepreneurial orientation and the organizations competitive accomplishment Kazem and Van der
Heijden (2006) arrive at the juncture from where exporters are perceived to be better self-starters
than non-exporters. The study by Francis and Collins- Dodd (2000) indicates the fallacy of
conservative approach in the unstable environment and goes on to reflect that high proactive
approach proves effectual in enhanced export performance. Studies spanned over couple of years,
by Ibeh, 2004; Marino and Weaver, 2002 also concluded the strong relation of high SME
orientation, including that of the owner or manager works directly in proportion with export
performance.
According to Suarez-Ortega, the financial resources that restrict the timely accumulation of
internal resources need to be given some attention by the internal resources of the firm. Some other
barriers as suggested by Suarez-Ortega are Knowledge gap, or knowledge barriers. Furthermore
lack of adequate knowledge about the potential market and that of the availability of the
assistances in the market also leads to the deterioration in the export market.
SMEs in India are quite advantageous as it generates employment at low capital investment,
increases the availability of skilled and semi-skilled workforce and also helps in reducing the gap
between the rich and the poor. The studies done by Kazem and Ven der Heijden (2006) have
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shown the importance of SMEs in any nation as its development results in industrialization and
economic development. Despite of the fact that SME sector is very significant sector for any
economy and various studies has tried to make a linkage between the export competitiveness and
SME development in the western countries it has not received much focus by researchers in the
Indian sub-continent.
In India SMEs plays vital role in the development of the economy and provides several economic
benefits. These are: (i) Higher employee to capital investment ratio, thereby generating higher
employment with lesser investment (ii) Low time and money required for establishment (iii) Niche
focus on smaller markets; (iv) Development of a pool of skilled and semi-skilled workforce; (v)
Bridging the divide in income disparities by creating value for the lower and lower-middle class;
(vi) Facilitate innovation and entrepreneurialism at a large scale; and (vii) Ensures better utilization
of capital and low-skill manpower resources
The whole SME industry is based on three main hypotheses as per the study conducted by
UNIDO. These are: focus on overall economic upliftment of the country and not just economic
development; generation of employment opportunities so as to provide support to large scale
sectors; and support needed for the development of SMEs in order to overcome the disadvantages
that SMEs face because of its small size. SME sector in India is becoming competitive day by day
as country is liberalizing. As such SMEs dont get any financial support from the government due
to deregulation but in order to develop this sector and to make it competitive with the
multinationals government needs to develop some policy based institutional support for the SME
sector. The institutional based support that SMEs needs from the government is: advancement in
technologies and backing of their working capital needs. SMEs also require government support in
order to increase co-operation within the SMEs and to share resources that are common to SMEs
while working with other organizations. The UNIDO report also explores some of the hurdles in
the development of SME cluster. These are : due to the cultural differences there is little co-
operation between individual companies as well as larger organizations; higher spending on
developing suitable tie-ups and building partnerships; unavailability of the government support in
terms of financial incentives that is needed in order to implement common projects. Although
these challenges poses some problem for the SME industry but there are positive signs which
indicates that the SME cluster is stabilizing and is moving towards SME growth in the country.
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2.6 SUMMARY
SMEs sector is one of the fastest growing sectors of the country. It provides huge employment
opportunities and its presence is very important for the emerging countries like India. The
contribution of SME sector to the economy is increasing day by day. It is second largest
employment provider sector of the country after agriculture. The contribution of SMEs in the total
export is also significant which is one-third of the total exports of the country Apart from all these
contribution SME sector still faces some adverse treatment from the big organizations.
SME sector in India is becoming competitive day by day as country is liberalizing. As such SMEs
dont get any financial support from the government due to deregulation but in order to develop
this sector and to make it competitive with the multinationals government needs to develop some
policy based institutional support for the SME sector. SMEs today are in the transformation phase
and for the better development of the sector various administrative measures and policies need to
be studied carefully. Now is the time to plan some long term strategy for the development of the
SMEs so that it continues to contribute more to the economy in a more effective way.
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Chapter 3
RESEARCH METHODOLOGY
AIMS AND OBJECTIVES
The aim of this research is to study the contribution and responsibilities of small scale industries
towards the development of Indian economy and to understand whether their potential is
underestimated or exaggerated. The research have accomplished following objectives:
To perform a literature review to analyze the contribution and responsibility of small scale
industries towards the overall development of economy in the context of employment
generation and export promotion
To carryout a field studies to observe contribution and responsibly of small scale industries
towards the overall development of economy in the context of employment generation and
export promotion
1.3 RESEARCH QUESTIONS
What is the contribution and responsibility of small scale industries towards the
development of Indian economy in the context of employment generation?
What is the contribution and responsibility of small scale industries towards the
development of Indian economy in relation to export growth?
Whether the potential of Indian small scale industries have been underestimated or
exaggerated.
RESEARCH APPROACH
In this project report Inductive research is used, which focuses on generalizing specific form of
observation. It give a general view to the researchers. Researchers have to make an assumption if
they want to analyze any form of observation in the society and then conduct an experiment based
on survey so to check his assumptions to reach toward a certain conclusion. Other than this
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Deductive research is also used, by which deductive thought can change the ordinary theory into
new hypothesis. The researchers thought goes from general to the specific to observe facts and to
collect the data to come to a certain conclusion. His primary objective is to form a new thinking to
test the hypothesis. If the data helps this thinking then we can assume that his theory is correct.
The Inductive method with its generalized approach explains about the workings of thought in a
pure, unemotional and neutral way, rather than on pre implicit notions. It believes the fundamental
form of science starts with observing ideas which can be derived from the real happening of
senses. Thus it explains the relationship between sensory experiences and the object of those
experiences. Its conclusion helps in indentifying new areas of research which is beyond the limit of
actual experience.
Critics argue that this method is a descriptive and does not explain anything and fails in
establishing a clear generalized view. They further their point by stating that there is no such
logical inductive method which can make a universal statement from a singular set of opinion and
its a ardent task to make the infinite observations and prove them universal in all case.
To make research flawless all the major dominant factors which affect the method of raw data
collection are identified. Key themes are often left obscured and unorganized as the flaws in the
method of data collection and analysis forced by deductive data testing and making hypothesis onthat.
For data analysis in various type of quantitative approach inductive approach is used and is very
obvious. Some researchers have described their approach explicitly as inductive while many
others use the approach without giving an explicit label to it.
Thegeneral inductive approach suggests an appropriate way ofanalyzing the qualitative data for
research purposes. Analysis derived from it are in discrete from those perception derived from a
general views for data collection. Many researchers are engaged in finding a general inductive
approach for traditional and quantitative approach of data analysis.
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Silverman, D. (2002), Doing qualitative research: A practical handbook, London: Sage,Remenyi,
D, Williams, B, Money, A, Swartz, E (2000),Doing Research in Business and Management An
Introduction to Process and Method, London, Sage, Ketchen, D.J. and Bergh, D.D. (2006),
Research Methodology in Strategy and Management, JAI Press, Greenwich
RESEARCH METHOD
Qualitative research has its origin in social science and is more concerned with understanding the
approach of how people behave in regards to their knowledge, beliefs, fear and attitude etc. It trend
to find the estimated differences between various groups by calculating things. This method
provides valuable information which might have been missed by any other method and thus it
increases the area of quantitative research methods.
Focus groups
In this method the group size is kept precisely small, so that its members can freely express their
views on any topic. Before the actual implementation of thought into action a solution guide is
always prepared. This ensures that various aspects of the topic can be explained in a convenient
way. The discussion can be frequently tape-recorded for further use and analysis.
Direct observation
This method is very effective when a researcher want to understand the values and belief of the
population under study. Researcher becomes the part of the population so that they can find out the
details. The collected information in the form of data can be stored by an external observer or it
can be collected by a participant observer.
In-depth interviews
Basic purpose of interviews is to enquiry about predetermined set of questions which helps in
conducting a quantitative survey. The interviewees express their views and feeling over the
concern topic. In critical incident study interviewees are asked to give their views on real events
which are later generalized. Thus it helps in focusing more about the beliefs behavior and attitudes.
Quantitative Method:
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Its a research method which rely more on the case studies and subjective report and method like
interviews, observations and questionnaires are of less importance. Quantitative research on
other hand relies much more on interviews and case studies. It creates reliability among user. It
help researcher for the study of the population in an unbiased manner. The designing of
questionnaire helps in predetermining the hypotheses. The research part is supposed as an outer
part of actual research, aid to conduct research.
Qualitative research methodologies explore the interaction of culture situation so to come at the
desired result. On the other hand qualitative methods are used for social marketing which helps in
the depth study which includes interaction of culture situation of observations among focused
groups. Hypotheses are made on the basis of data collection and its analysis explains the trend of
market. Under this approach, the researches become more goal oriented in terms of datacollection, and results which may vary from researchers to researchers.
Quantitative methods are advantageous as it furnishes detailed information over the particular
subjects and their behavior. Only drawback of this method is the ample amount of labor intensity
and time-consuming. Thats why this method is not generally accepted by the mainstream public
health units. Researchers might find it more difficult and confusing for outside people in the
practice of social marketing.
Neuman, W. L. (2004), Social research methods: Qualitative and quantitative approaches. 6th ed,
Allyn & Bacon, Boston, MA.
Creswell, J . W. (2002). Research Design: Qualitative, Quantitative, and Mixed Methods
Approaches. Thousand Oaks, CA: Sage Publications
Patton, M. Q. (2002). Qualitative evaluation and research methods (3rd ed.). Sage Publications,
Inc., Thousand Oaks, CA.
Punch, K.F. (2003), Survey Research: The Basics, Sage Publications Ltd., London
DATA COLLECTION
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The method by which the results of our research are checked and the way it is applied in our
decision making it is very important. Researcher will have information about how the data
collection, planning, and its implementation will help in analyzing the potentiality of a method for
decision making. Material level problem can be collected through secondary method, but it is not
effective for collecting the information for the existing data.
Primary information is collected mainly by observation and is gathered mainly to help the users
whom you are addressing. There is multiple way of data collection but this method is more flexible
way to get data from its desired group of audiences.
Observation is the process through which methods and information for reference materials are
examined, or the amount of time it would take to complete a certain phase of work.
Surveys Interviewing is one of the method by which a survey is conducted. Written questionnaires
are another method which is commonly used for gathering information. There are various other
methods by which we can gather information and response from audience.
Depending upon the population size and information type we can choose different sampling
method. If the target audience is too large then by choosing a small number of people to represent
mass population is the most suitable method for it or you can also try to remove the biasness
approach by using: (i) Random sampling; (ii) Stratified sampling; and (iii) Quota sampling .
Sekaran, U. (2003), Research Methods for Business: A Skill Building Approach, John and Wiley
Inc., USA.
Robson, C. (2000)Real World Research. Blackwell Publishers, Oxford
Easterby-Smith, M. et al. (2002), Management Research An Introduction, 2nd edition, London:
Sage
Perakyla, A. (1997) Reliability and Validity in Research Based on Transcripts. In: D. Silverman,
ed., Qualitative Research: Theory, Method and Practice. London: Sage, 201-220.
Bryman, A and Bell, E (2003)Business Research Methods Oxford University Press
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Chapter 4
FINDINGS AND ANALYSIS
4.1 INTRODUCTION
This research was purposed to answer the following research questions: What is the contribution
and responsibility of small scale industries towards the development of Indian economy in the
context of employment generation; What is the contribution and responsibility of small scale
industries towards the development of Indian economy in relation to export growth; Whether the
potential of Indian small scale industries have been underestimated or exaggerated. Both primary
and secondary data were collected in order to answer these research questions. Secondary data
were in the form of literature review and primary data were in the form of data collected through
questionnaire survey. This chapter analyses the collected both secondary and primary data.
4.2 ANALYSIS OF FINDINGS
Small scale industries & economic restructuring and development
This research literature emphasized on small scale industries and it is consider very vital from the
employment generating, lessening indigence and making contribution to economic growth point of
view. In the developing economies small-size enterprises are generally considered as the dynamicsource of employment generation, which is a engine of growth. (Lunsche and Barron, 1998). In an
economy which faces complex political and economic challenges their willingness to undertake
new or risky projects is regarded as very vital. Both willingness to undertake new or risky projects
and small-size enterprises are crucial for taking economy to a higher level (Glass and Drnovsek,
2001). In such a situation small scale industries are said to be very vital and they are very crucial
for economic restructuring. Empirical data was collected in this research to establish as how the
role is played by small scale industries in economic restructuring and development of India, which
conform our hypothesis. The empirical data collected reveals that small scale industries have
played very commendable role in economic restructuring and development of India. (see table and
figure 4.1).
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Table 4.1: Small scale industries & economic restructuring and development
From the table it is evident that for the larger part of the total respondents (57% of the total 30),
small scale industries have played highly creditable role in economic restructuring and
development of India; for a considerable part of the total respondents (33%), small scale industries
have played reasonable role in economic restructuring and development of India; for the
remaining small part of the respondents (10%) small scale industries have played negligible role
in economic restructuring and development of India. Thus it can be concluded that these data have
played highly creditable role in economic restructuring and development of India.
Contribution of small scale industries in economic development
The research literature shows a positive contribution in the growth of an economy is made by small
scale industries. Their contributions can be expressed in diverse way: their is ample opportunities
for the new entrant in labor market both in urban and rural areas with the upcoming of small and
medium enterprises; they have an active role in the modernization for the whole economy.
Dependency ratio of people over small scale industries is very large. Todays big enterprises were
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earlier small and medium enterprises which have grown with time. There are three main
differences between Small scale industries and large scale enterprises. Small and medium
enterprises can be segregated on the basis of their size, such as very small enterprises, small
enterprises and medium enterprises. Inception of small and medium enterprises originates with the
industrialization of an economy (Fida, 2008). Small scale industries also influences the economy in
many other considerable ways like division of earnings, tax proceeds, opportunities of jobs, well-
organized deployment of assets and steadiness of wages and income. Empirical data was collected
to establish a relation between small scale industry contribution and their economic development
of India. Employment generation and export growth are the most creditable contribution of small
scale industries in economic development of India as reveled by the empirical data. Research
participants conclude that employment generation and export growth are the most creditable
contributions of small scale industries in economic development of India (see table and figure
4.2).
Table 4.2: Contribution of small scale industries in economic development
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The data account in this table illustrates that for the greater part of the total respondents (70% of
the total 30), employment generation (40%) and export growth (30%) are the most
commendable contributions of small scale industries in economic development of India; and for
the remaining small part respondents (30%), entrepreneurial and other innovation (17%) and
desirable sustainability (13%) are the most commendable contributions of small scale industries
in economic development of India. To conclude these data reveled that employment generation
and export growth are the most commendable contribution of small scale industries in economic
development of India.
Government policies are discriminatory for small scale industries
It is evident from the research literature that small scale industries need due consideration as it act
as distinguishing foundation of the economy. As compared with large enterprises small scale
industries face unfavorable treatment. This is due to the fact that big organizations are much
familiar with economic environment thus they can deal with and crack their difficulties. On
contrary, small scale do not have competence because of their small extent and the consequential
oddities which become hurdle in their smooth operation. Though there is no straight legal or
governmental bias for small and medium enterprises but they are victim of disparate dealings
which leads to deformed and non-competitive working atmosphere. In the light of these
propositions empirical data was collected in this research to establish as whether government
policies are discriminatory for small scale industries in India comparing large scale industries. It
reveals that government policies are discriminatory for small scale industries as compared to large
scale industries in India. As the greater part of the total research participants conclude thatgovernment policies are discriminating for small scale industries in India comparing large scale
industries (see table and figure 4.3).
Table 4.3: Government policies are discriminatoryfor small scale industries
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From the data enlisted in the table it can be easily comprehended that for the greater part of the
total respondents (73% of the total 30), they find yes that government policies are discriminating
for small scale industries in India comparing large scale industries; and for the remaining part
respondents (27%), they find no that government policies are not discriminatory for small scale
industries in India comparing large scale industries. overall, these data conclude that government
policies are discriminating for small scale industries in India comparing large scale industries.
Growth of small scale industries and problems
From the research literature it can be easily understood that small and medium enterprises are more
labor-intensive which require more workers compared to big enterprises. As a result, create more
employment opportunities and play a vital role in poverty alleviation by providing earnings. Small
scale industries brought a transition from agriculture base economy to industry-based economy by
providing basic favorable conditions for systematic operations. This leads to channelizing of
resources and accelerates the rate of growth. Small and medium enterprises create a link between
small and large businesses in the economy as it assist in attracting fruitful assets. This in turn
results in inflow of investment from other countries. However, there are as well some latent and
obvious problems which becomes a hurdle in the path of growth of small scale industries and these
are political instability, law and order situation, financial constraints, energy crisis, taxation
problems, labor issues, lack of coordination and regular information exchange mechanism among
institutions, etc (UNIDO, 2006). Empirical data collected in this research shows growth of small
scale industries in India and problems which are requires to be most effectively dealt with by the
government in the country. Growth of small scale industries in India, financial constraints and
labor issues are some of the problems which are require to be most effectively dealt with by the
government in the country. As in accordance with the larger part of the total research participants,
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for the growth of small scale industries in India financial constraints and labor issues as problems
require to be most effective dealt with by the government in the country (see table and figure 4.4).
Table 4.4: Growth of small scale industries and problems
From the given data which is described in the table for the larger part of the total respondents (63%
of the total 30), for the growth of small scale industries in India, financial constraints (33%) and
labor issues(30%) as problems require to be most effective dealt with by the government in the
country; and for the remaining part respondents (37%), for the growth of small scale industries inIndia, taxation problems (17%), law and order situation (13%) and energy crisis (7%) require
to be most effectively dealt with by the government in the country. From a holistic point of view,
the growth of small scale industries in India, financial constraints and labor issues as problems
require to be most effectively dealt with by the government in the country.
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Globalised business environment and small scale industries
As from the research literature it can be inferred that their has been a transformation in small scale
industries as a reaction to the various necessities of internationalization. In the emerging countries
the prospects of neo-localism having been greatly highlighted. Small scale industries have been arich source of employment but now it seems less important objective compared to new policies of
attracting foreign inclination, achievement of comparative productive capacities and becoming
distinguished performer in the world (Das, 2007). It is indispensable to concentrate over this issue,
which act as a limitation for small scale industries for foreign inclination and a worldwide
viewpoint for the sector. Empirical data was collected keeping in mind these propositions to
establish ashow favorable has been globalised business environment of India for the growth of
small scale industries. The empirical data collected reveals that overall globalised business
environment of India has been average favorable (not highly favorable) for the growth of small
scale industries. As in accordance with the larger part of the total research participants, globalised
business environment of India has been reasonably favorable for the growth of small scale
industries (see table and figure 4.5).
Table 4.5: Globalised business environment and small scale industries
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The data detail in this table illustrates that for the larger part of the total respondents (53% of the
total 30), globalised business environment of India has been reasonably favorable for the growth
of small scale industries; and for the remaining part respondents (47), globalised business
environment of India has been either highly favorable (30%) or not favorable (17%) for the
growth of small scale industries. So, to conclude it can be said that overall globalised business
environment of India has been average favorable (not highly favorable) for the growth of small
scale industries.
Small scale industries and employment generation
In agreement with the research literature there are two studies that determine job generationcapacity of small enterprises. In the first one cross-sectional data are used to calculate job share of
small units, while in the second one classification of the enterprises is done on the basis of size and
area. From the first study it is concluded that small units were increasing their significance because
share of big enterprise in total employment was decreasing. Second study categorized enterprises
according to their volume and location in the base year with the help of a database (Acs and
Audretsch, 2001). Taking these propositions empirical data was collected for this research to
conclude whether small scale industries have played a substantial role in employment generation in
India.Findings from theempirical data collected reveals that unquestionably small scale industries
have played role in employment generation in India. As per the greater part of the total research
participants, they find that small scale industries have played a substantial role in employment
generation in India (see table and figure 4.6).
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Table 4.6: Small scale industries and employment generation
The data detail in this table shows that for the greater part of the total respondents (60% of the total
30), they find yes that small scale industries have played a substantial role in employment
generation in India; and for the remaining part respondents (40%), they find no that small scale
industries have not played a substantial role in employment generation in India. To conclude about
the finding it can be said that indisputably small scale industries have played role in employment
generation in India.
New employment in small scale industries
For the research literature, the studies revealed the real picture as published labor data statistics had
been used by the economists at that time and most of the time their study revealed that the largest
size category were producing most of the new jobs. In this method analysis was done by counting
the number of persons employed in the same category with in a period of two year. Presumption
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for this analysis was based on the movement between different classes was insignificant. Birchs
studies on the other hand made it clear that the development of small units before becoming large
enterprises was a major reason in influencing increase in total employment. Critics of Birchs
method challenged its analysis (Davis, Haltiwanger and Schuh, 1996), an acknowledged fact is that
in small enterprises not only gross job generation but job destruction is also high, which is more
significant. Empirical data were collected keeping these propositions in mind. The main purpose of
empirical data is to establish a relation as whether increasing share of small scale industries in
Indias total employment is due to a net employment decline of large scale industries than new
employment in small scale industries.From the finding it can be concluded that there is an increase
in share of small scale industries in Indias total employment, due to a next employment decline of
large sale industries than new employment in small scale industries. As per the greater part of the
total research participants, they either strongly agree or just agree to the fact that increasing
share of small scale industries in Indias total employment is due to a net employment decline of
large scale industries than new employment in small scale industries (see table and figure 4.7).
Table 4.7: New employment in small scale industries
The data enlisted in this table describes that for the larger part of the total respondents (67% of the
total 30), they either strongly agree (40%) or agree (27%) to the fact that increasing share of
small scale industries in Indias total employment is due to a net employment decline of large scale
industries than new employment in small scale industries; and for the remaining part respondents
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(33%), they either disagree (20%) or strongly disagree (13%) to the fact. On a whole, these
data conclude that unquestionably there is an increase in share of small scale industries in Indias
total employment which is due to a next employment decline of large sale industries than new
employment in small scale industries.
Small scale industries as employment creators
As per the research literature, Hohti in the year 2000 discovered that there is an inverse proportion
to the size of businesses between jobs generation and jobs obliteration in Finland. Hohti (2000) on
the basis of Finnish manufacture business data between 1980-1994 has established that the rates of
per year job flow, in terms of births and deaths which is alike to what Broesma and Gautier (1997,
p. 215-216) come across for Dutch manufacturing businesses and by Klette and Mathiassen (1996)
identified for Norwegian manufacturing firms. It is commonly agreed that new enterprises, havethe highest rates for both job generation and job obliteration. Thus experience shown in North
America is analogous to Finland, Sweden and the Netherlands. So to prove whether small scale
industries are greatest employment creators in India and as well greatest employment destructors in
India empirical data were collected. It reveals that this is undoubtedly a fact that small scale
industries are the greatest employment creators in India and as well greatest employment
destructors in India. As per the larger part of the total research participants they find that small
scale industries are greatest employment creators in India and as well greatest employment
destructors in India (see table and figure 4.8).
Table 4.8: Small scale industries as employment creators
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The data enlisted in this table describes that for the larger part of the total respondents (63% of
total 30), they find yes that small scale industries are greatest employment creators in India and
as well greatest employment destructors in India; and for the remaining part respondents (37%),
they find no that small scale industries are not greatest employment creators in India and as well
greatest employment destructors in India. So on the whole; it can be comprehended from the data
that small scale industries are greatest employment creators in India and as well greatest
employment destructors in India.
Small scale industries lacking and training employees
As per the research literature, the advocators of internationalization and technical changes,
Audretsch (1995), Audretsch and Thurik (2001) and Acs and Audretsch (2001) have concluded
that businesses based on information technology relatively more advantageous. In those businesses
person who carries information is of more important than the company. The argument is that lack
of symmetry in knowledge and ambiguity about the prospective value of that knowledge lead to
diverse assessment by company and person. This in turn leads the person to quit from the current
company to start a company of his own business taking commercial advantage his knowledge. This
is where; entrepreneurship is getting a novel meaning as it becomes an important instrument by
which knowledge earned in one institution (for example an university or business enterprise) is
implemented for profit in a new company. The distinction amid small and big enterprises in service
segment is the creation of job by little net entry. It is observed from the data that in the big job
generation very tiny enterprises firms influences the size sharing of enterprises in both sectors.
Empirical data was collected to establish the proposition as whether small scale industries in India
lack in providing training to the employees in order to efficiently take part in knowledge based
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economic activity. It can be comprehended from the empirical data that in India small scale
industries certainly lack in providing training to the employees in order to make them efficient to
take part in knowledge based economic activity. For the larger part of the total research
participants they find that for the greater part of the total research participants either strongly
agree or just agree that small scale industries in India lack in providing training to the employees in
order to efficiently take part in knowledge-based economic activity (see table and figure 4.9).
Table 4.9: Small scale industries lacking and training employees
The data enlisted in this table shows that for the greater part of the total respondents (70% of the
total 30), they either strongly agree (37%) or agree (33%) that small scale industries in India
lack in providing training to the employees in order to efficiently take part in knowledge-based
economic activity, and for the remaining part respondents, they either disagree (20%) or
strongly disagree (10%) to this fact. To conclude it can be certainly said that small scale
industries in India lack in providing training to the employees in order to efficiently take part in
knowledge based economic activity.
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Small scale industries in India and the policies of labor market reforms
For the research literature, the new economic policy of liberalizing has made small scale industries
very vulnerable. However, it cannot be understood that for Small scale industries the path ahead is
totally lifeless. On contrary they are expected to perform better because big enterprises are very
sluggish in job creation (Papola, 2004). It is implicit that small scale industries are more cost
advantageous and can compete to achieve high rate of development. Thus given a liberalized
milieu small scale industries can penetrate huge markets which is untapped by them and were
specifically reserved for big enterprises. Small scale industries are flexible in their manufacturing
schemes and division of manufacturing activities by sub-contracting can help them to achieve an
increase growth rates. Problems for big enterprises can become serious if there is degree of
protection and abolition of the job safety section are part of the labor market modifications
(Nagaraj, 2004). Auxiliary to it, liberalization and abolishing licensing in the economy has lined
the way of the casualisation and feminization of labor (Mitra, 2001). The era of liberalization has
opened new opportunities and broadens the awareness about the informal segment. To find out
whethersmall scale industries in India wish to achieve a faster growth and add more contribution
in the economy, they should comply with the policies of labor market reforms, empirical data was
collected for the same. It shows that small scale industries in India wish to achieve a faster growth
and add more contribution in the economy, they should comply with the policies of labor market
reforms. As per the greater part of the total research participants they find that if small scale
industries in India wish to achieve a faster growth and add more contribution in the economy they
should comply with the policies of labor market reforms (see table and figure 4.10).
Table 4.10: Small scale industries in India and the policies of labor market reforms
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The data enlisted in this table illustrates that for the greater part of the total respondents (77% of
the total 30), they find yes that if small scale industries in India wish to achieve a faster growth
and add more contribution in the economy, they should comply with the policies of labor market
reforms; and for the remaining part respondents, they find no that if small scale industries in
India whish to achieve a faster growth and add more contribution in the economy, they do not need
to comply with the policies of labor market reforms. So to conclude it can be said that small scale
industries in India wish to achieve a faster growth and add more contribution in the economy, they
should comply with the policies of labor market reforms.
Small scale industries and export growth
For the research literature, according to Ruzzier et al (2006) small and medium size enterprises
have played a vital role in both economic advancement and augmenting the employment
opportunity. In the field of internationalization globalization has always been the focus area of
most scholars, particularly focusing on big enterprises, until the publication of McDougall and
Oviatts (1994) recognized the significance of the internationalization of small scale industries or
international entrepreneurship. However, contemporary works (Sharma, 2004, Cerrato, 2007)
shows the impact of location on small scale industries internationalization seeking more in-depth
research on the study of internationalization from various socio-economic environments. Empirical
data was collected in to study whether small scale industries have played a significant role in
export growth of India or not.Findings from the empirical data reveal that small scale industries
have played a significant role in export growth of India. As per the larger part of the total research
participants, they find that small scale industries have played a significant role in export growth of
India (see table and figure 4.11).
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Table 4.11: Small scale industries and export growth
The data enlisted in this table shows that the larger part of the total respondents (67% of the total
30), they find yes that small scale industries have played a significant role in export growth of
India, and for the remaining part respondents (33%), they find no that small scale industries have
not played a significant role in export growth of India. On the whole these data conclude that
small scale industries have played a significant role in export growth of India.
Export promotion agencies and government incentives for promoting small scale industries
To integrate strategic aspects with globalization process, the Resource-based Internationalization
structure (Rutihinda, 1996 and Ahokangas, 1998) which is based upon the resource-based view of
the firm is used. As the domestic market reaches the saturation level this would eventually lead
companies to seek expansion over international arena; which in turn will make competition tougher
every day and only solution for this is innovation and efficiency for companies to survive the rat-
race. Government patronage in term of favorable situations of the local market namely government
incentives and support (like low interest loans) and existing supporting institutional framework e.g.
export development bodies, which act as a big inspiration to the Small scale industries to explore
alternative markets. Empirical data collected in this research shows how supportive have been
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export promotion agencies and government incentives for promoting small scale industries led
export growth of India.Findings from theempirical data reveals that generally export promotion
agencies and government incentives are average supportive for promoting small scale industries
led export growth in India. As per the larger part of the total research participants , export
promotion agencies and government incentives are reasonably supportive , they find that small
scale industries have played a significant role in export growth of India (see table and figure
4.12).
Table 4.12: Export promotion agencies and government incentives for promoting small scale
industries
The data detail shows that for the larger part of the total respondents (53% out of the total 30),
export promotion agencies and government incentives are reasonably supportive for promoting
small scale industries led export growth of India, and for the remaining part respondents (47%),
export promotion agencies and government incentives are either highly supportive (17%) or not
supportive (30%) for promoting small scale industries led export growth in India. To conclude it
can be said that generally export promotion agencies and government incentives are average
supportive for promoting small scale industries led export growth in India.
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Export challenge of small scale industries
According to Sharma and Erramilli (2004) to penetrate in the foreign market small scale industries
may attempt various entry routes, depending upon the benefits and costs associated by various
alternatives. Peng and York (2001) suggested two options for exporting firms: Reach the foreign
customer directly or going through some mediator. For an Indirect path to trans-nationalization
direct approach was well-discussed and much addressed. Fletcher (2004), elaborated it as the
means whereby exporting, sourcing or distribution agreements are done by small scale industry
with intermediary companies who manage, on their behalf, the transaction, sale or service with
overseas companies. The pivotal role of export mediators was explained by Peng and York (2001)
which emphasize on linking individuals and organizations that would otherwise not have been
connected. Trabold(2002) views this indirect conjugation holds platform for successful
transactions and Balabanis feels they often help their clients to identify customers, financing and
distribution infrastructure providers. The mediators bring in the expertise of operating in another
country and reduce the risks related to international operations. Li (2004) favored appointment of
export intermediaries who is well acquainted with consumer demography so to look after low cost
exportation. Empirical data was collected so to establish a relation between export challenge of
small scale industries in India to be effectively dealt for enhancing their role and contribution in
export. From the data collected it can be concluded that risk operation and knowledge gap as
export challenges of small scale industries in India need to be effectively dealt for enhancing their
role and contribution in export. As per the greater part of the research participants risk of
operation and knowledge gap as export challenges of small scale