Relative Efficiency in Adaptation to Pro-Competitive Environment: An Exploration of Indian Textile and Garments Enterprises

Abstract

The unorganized Textile and Garments (T&G) units in India have been facing increasingly intense competition following the withdrawal of major protective measures favoring the decentralized production units in 2000 Textile Policy along with encouragement of large-small linkages through subcontracting agreements at both pre- and post-production stages. A cluster analysis conducted for the average labour and capital productivities of different groups indicated the relative dominance of structural factors such as size - rather than the product-group-based classification of firms – in explaining the inter-group variation in productivity. A modified Heckman selection model was applied to analyze the determinants of marketing agreement and the differential impact of different firm characteristics on enterprises with and without marketing agreement. The results demonstrated that instead of relying solely on market-driven forces of productivity-enhancement, it is better to pay heed to the structural location of the enterprises indicated by the availability of institutional support, presence of female-headed enterprise and so on.

Keywords: Unorganized Textile & Garments Production in India, Average Productivity, Organizational Characteristics, Marketing Agreement, Cluster Analysis, Modified Heckman Selection Model

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