Trade policies, development strategies, and technological capabilities: A study of the automotive industry in India, Brazil, and South Korea

This thesis analyzes various aspects of development of the automotive industry in the context of different development strategies, industrial and trade policies pursued by India, Brazil, and South Korea since 1950. It focuses on the efficiency of the automobile firms in regulated and constrained environments created under ISI and EPI strategies of development. Favorable government industrial and trade policies are necessary but not sufficient for achieving goals and objectives set for this sector. A framework of technology adaptation, assimilation, modification and/or improvisation is used to understand technology-creating capabilities of the automotive firms in India. Brazil, and South Korea. A stage-by-stage process of learning an acquired technology under DFI, licensing, JV and/or technical collaboration is useful for identifying technological capability of a firm and its underlying dynamics of learning by doing. Hyundai's success is an example of how a government industry promotion policy through various incentives cold create a favorable environment for an independent firm to carry out its own equally ambitious strategy for learning and generating technological capability in a competitive world market.;The questions of optimal number of firms, size of a firm given the market size, and economies of scale are also analyzed. Domestic demand enlargement as well as export expansion are examined to determine the size of the market. This is important in an industry where economies of scale plays a crucial role. The Brazilian "miracle" is an example where government policies played a pivotal role in expanding the domestic market through redistributing income in favor of upper- and middle-income groups while suppressing wages, making consumer credits available at low interest rates. Sustainability of a "luxury-led" growth strategy in India is also critically examined. Given the small size of the Korean domestic market, government policy allowed Hyundai to expand its installed capacity with a view to the world market to help realize economies of scale. Proliferation of number of firms in a sheltered market leads to inefficiency.;In the last part of the thesis statistical analysis is carried out to examine the existence of economies of scale in the Indian automobile industry using firm level data. The Indian automotive industry as a whole is not technologically efficient and innovative, but even in such a highly regulated environment some of the firms show technological capabilities. To match export capabilities of South Korean or Brazilian automobile firms, the Indian firms need to produce internationally competitive products with large scale of production, increased labor productivity and appropriate technology.