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This paper aims to analyze the influence of business decision on process efficiency and production technology in the communication equipment and consumer electronics sectors of Indian hardware electronics industry after liberalisation.

The study is based on 26 sample firms, belonging to the two sectors of Indian hardware electronics industry with continuous operation from 1993 to 2004. Estimation of the contribution of production technology and process efficiency to output growth is based on stochastic production function. Influence of business decisions on production technology and process efficiency is based on indigenously developed business decision model.

Sectors, in general, fail to achieve improvement in process efficiency in comparison to progress in production technology. The business decisions factors like improve capacity utilization and operational efficiency together with decisions to adopt vertical integration to help sample firms to achieve both progress in technology and improvement in process efficiency in the sectors. However, R&D investments and technology imports are costly for both, indicating inadequate and inappropriate investments made by the sample firms. Disinclination of firms towards improving or developing their own technology is evident from their high dependence on import of technology.

This study only analyses the role and importance of business decision factors in the past. What lies ahead is to meet the challenges and improve performance to withstand the stiff competition. This study suggests for further research about how to improve on the effectiveness of business decision factors that can help Indian hardware electronics industry to survive competition.

The paper develops a business decision model which analyses the impact of business decisions on production technology and process efficiency for a sample of firms in Indian hardware electronics industry.

The purpose of this paper is to focus on contribution of technical efficiency change (TEC) and technological progress (TP) to output growth (OG) and addresses the issue of poor total factor productivity growth of electronics hardware industry during liberalization. Inter‐sector differences in productivity have been explained from the perspective of management decision making and their performances.

The analysis is primarily based on 81 electronics hardware firms with incessant operations from 1993 to 2004. The firms have been categorized into four homogenous sub‐sectors and the years into two periods.

The industry, in general, emphasized more on TP than TEC as the industry moved to a greater liberalization regime. The industry lacked the efforts to develop indigenous technology. It catered to huge domestic demand by importing technology without proper adaptation leading to poor TEC.

The limited database prevented us from exploring the impact of the entry of multi‐national companies, foreign direct investment and foreign investments on the productivity of the electronics firms. The inconsistent and missing data on tariff or duty rates for item‐wise products further limited their scope.

The differences in TEC and TP among sub‐sectors has been due to the differences in managerial decision making and management performance which are firm specific in nature.

This paper has applied a novel approach of combining two established but independent theories of estimating stochastic production function and then estimating OG as a function of IG, TEC and TP. This paper provides a valuable reference for Indian electronics hardware industry not only in reviewing their efficiency, but also focusing on enhancing their management performance.