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Publication date: 2 October 2017

Nitin Arora and Preeti Lohani

Foreign firms have certain advantages which may spillover to domestic firms in the form of improvements in total factor productivity (TFP) growth. The purpose of this paper is to…

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Abstract

Purpose

Foreign firms have certain advantages which may spillover to domestic firms in the form of improvements in total factor productivity (TFP) growth. The purpose of this paper is to empirically observe the presence of TFP spillovers of foreign direct investment (FDI) to domestic firms through analyzing source of TFP growth in Indian drugs and pharmaceutical industry.

Design/methodology/approach

This paper examines the sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry over the period 1999 to 2014. The data of 304 firms has been used for estimation of the growth rates of TFP and its sources under stochastic frontier analyses based Malmquist productivity index framework. For frontier estimation, the Wang and Ho (2010) model has been executed using translog form of production function.

Findings

The results show that there exists significant TFP spillover effect from the presence of foreign equity in drugs and pharmaceutical industry of India. The results also show that the major source of TFP fluctuations in the said industry is managerial efficiency that has been significantly affected by FDI spillover variables. In sum, the phenomenon of significant Intra-industry (horizontal) efficiency led productivity spillovers of FDI found valid in case of Indian drugs and pharmaceutical industry.

Research limitations/implications

The number of foreign firms is very less to imitate the significant impact of foreign investment on TFP growth of Indian pharmaceutical industry at aggregated level; and the Wang and Ho (2010) model is failing to capture direct impact of FDI on technological change under Malmquist framework.

Practical implications

Since, there exists dominance of domestic firms in Indian drugs and pharmaceutical industry, the planners should follow the policy which not only attract FDI but also benefit domestic firms; for example, developing modern infrastructure and institution which will further help domestic firms to absorb spillovers provided by the Multinational Corporations and also accelerate the growth and development of the economy.

Social implications

In no case, the foreign firms should dominate the market share otherwise the efficiency spillover effect will be negative and the domestic firms will be destroyed under the self-centric approach of foreign firms protected by the recent patent laws.

Originality/value

The study is a unique attempt to discuss the production structure and sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry with such a wide coverage of 304 firms over a period of 16 years under Wang and Ho (2010) model’s framework. The existing studies on TFP spillovers are using either a small sample size of firms or based upon traditional techniques of measuring spillover effects.

Details

Benchmarking: An International Journal, vol. 24 no. 7
Type: Research Article
ISSN: 1463-5771

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Article
Publication date: 19 August 2024

Varadharajan Sridhar, Bhuwnesh Lohani, Balaji Parthasarathy and Preeti Mudliar

Digital platforms that offer on-demand gig work, while providing work opportunities in the economy, have raised social and economic concerns. Though extensive research on…

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Abstract

Purpose

Digital platforms that offer on-demand gig work, while providing work opportunities in the economy, have raised social and economic concerns. Though extensive research on regulation of the gig economy exists, the effect of economic regulations on the welfare of the workers is not well understood. In this work, this paper aims to specifically study the effect of minimum wage and leisure regulations on the unemployment rate and offered wages. This paper also analyses the effect of up-skilling of the workers on unemployment and wages.

Design/methodology/approach

This paper builds an agent-based model of the labour market with heterogeneous workers and online platform firms that interact to match supply and demand. This paper also interviewed online workers in the two under-studied markets in online beauty and house maintenance services in India and included salient observations in to the model. This paper further validates the model findings with the interview observations.

Findings

Extensive simulations of the model indicate that the regulator's intervention on minimum wage and leisure reduces unemployment and offers better wages/leisure in the short term. However, these cannot be sustained unless the workers upgrade their skills, thereby improving their value to the employers. This paper also corroborates the authors’ interview observations on platforms deviating on stated worker contracts by simulating the same in the model. This paper finds that when platforms deviate on their stated incentive schemes, the unemployment rate tends to increase. This paper also finds that the emergence of online platforms in an erstwhile off-line market decreases the average unemployment rate with a moderate increase in the offered wage and leisure.

Research limitations/implications

In this work, the focus has been to determine the worker-platform dyadic relationship. However, this is affected by consumer-related attributes such as ratings and associated reputation systems to promote trust between different stakeholders. Examining such a triadic relationship between consumers, platform and workers is required to comprehensively address the challenges of online gig economy.

Social implications

Skilling and training are critical for worker mobility across tasks and jobs, especially in the gig economy. Gig workers, in general, seek to improve their skill level through self- or platform-enabled training programmes. The workers are able to generate more revenue through the new skills and hence can improve their reservation wage as well. This in turn increases average offered wages and reduces the overall unemployment in the sector. Despite attempts to classify gig workers as formal workers by labour laws across countries, there is resistance from online platforms. This is due to increased liability and responsibility that the platforms have to incur that possible increase their costs and expenses. This study shows that regulations, such as minimum leisure or minimum wage, increase the average wage or leisure in the market and increase unemployment. However, this might be a short-term phenomenon. In the long term, the gig workers benefit by enhancing their skills to not only stay employed but also bargain for better wages and leisure. The governments can play a larger role by facilitating upskilling programmes for the gig workers.

Originality/value

An extensive literature survey indicates that while most of the work on gig economy regulation emphasises the social and legal aspects, this work is unique in modeling the techno-economics of gig work. Further, while most of the economic research on gig work, focuses on consumers, this work focuses on the under-researched area of worker welfare. This paper also validates the model results with findings from the interviews with gig workers.

Details

Digital Policy, Regulation and Governance, vol. 27 no. 1
Type: Research Article
ISSN: 2398-5038

Keywords

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