Manufacturers' responses to infrastructure constraints: How firms enhanced competitiveness in Pakistan's export industries

This study examines the impact of unreliable infrastructure on industrial performance in developing countries, such as Pakistan. The research questions are: How does unreliable infrastructure--inadequate electricity; weak transport links--affect the competitiveness of large firms and small- to medium-scale enterprises (SMEs) competing in global markets? Do SMEs respond differently to the adverse impact?;Using qualitative and quantitative data from the textile-garment and sports goods industries the micro-level study provides empirical evidence that builds upon new research (Gulyani 2001), which examined large firms' responses to infrastructure constraints in India. One hundred and thirty five in-depth interviews with firms' managers, engineers; representatives of business organizations, government agencies, utilities, and port facilities provide the empirical evidence for the core argument.;The findings suggest the impact of unreliable infrastructure was revealed in direct costs firms experienced at the plant level and external diseconomies that impacted their supply chains. Some firms managed to overcome constraints by deploying novel solutions. The most effective entailed a collaborative process between firms and government, which generated direct benefits for firms and positive spillovers for the production network. Infrastructure is a key determinant of industrial performance and firms identified measures to overcome constraints to remain competitive in global markets.;The findings also reveal that in contrast to large firms, novel solutions for SMEs were predicated on supportive institutions, access to capital, flexible government regulation, and position within the supply chain. In the textile-garment industry, SMEs at the lower end of the supply chain bore a disproportionate burden of unreliable electricity and struggled to act. In contrast, SMEs in the sports goods industry leveraged local business organizations and partnered with government to provide better quality drains, roads and port facilities. This refutes policymakers' perceptions that SMEs are a homogenous group with a coterminous demand for infrastructure services. However, for the 'SME innovators' the process required significant collective action and mediation on the part of local business organizations.;This study suggests that under certain conditions neither the state nor the market alone can guarantee successful provision. In an era of continuous innovation and learning, both government and firms--- especially SMEs---have a considerable amount to gain from working together to generate inventive solutions for infrastructure provision.