Technology sourcing and its determinants: A study of Basic Chemical industry in India

Abstract This paper analyzes inter-firm differences in technology sourcing for firms drawn from the Basic Chemical industry in India. Technology sourcing refers to the different methods of acquiring capabilities. The technological sources considered in the study are in-house R&D efforts, import of embodied technology, and arms-length purchase of designs, drawings, and formulae. The analysis of technology sourcing reveals that the older, the moderately integrated, and the firms with foreign presence are investing more rigorously on technological efforts than their counterparts. Higher profitability turns out to be important for import of technology than for in-house R&D. Though larger firms prefer combination of technological sources, medium-sized firms have higher propensity to invest on various technological activities. Further, the paper also analyzes the determinants of one of the major sources of technology, namely in-house R&D efforts. It appears that import of technology is complementing in-house R&D only for the subset of firms who are using multiple sources of technology. In line with the earlier studies that have examined this relationship very generally, for the sample as a whole there seems to be a substitutive relationship between import of technology and in-house R&D. Firm size and age also emerge significant in determining R&D intensity.