Technology absorption strategies, government policies, and performance in firms from less developed countries (LDC): Evidence from India and Pakistan

In this study we develop a framework examining technology absorption strategies and performance among LDC firms. We derive hypotheses regarding the impact of two main technology absorption strategies: Learning by doing and creation of volume flexibility on performance. Learning by doing is conceptualized as firm knowledge acquired through experiences gained, while solving problems related to implementing new technologies. Creation of volume flexibility is conceptually underpinned by process innovations that allow firms to link market demand with manufacturing capacity, thereby allowing for lower inventories and faster production volume changes. Further, we model and test interactions between learning by doing and input supporting government policies on the one hand, and volume flexibility and market supporting government policies on the other hand. Hypotheses were tested on a sample of firms from India and Pakistan. Findings suggest that both learning by doing and volume flexibility enhance firm performance, while their interactions with government policies are insignificant.