CHAPTER- IV

Networking, Technology and Management in the Industrial Spaces of Tiruppur, Kannur and Morbi

IV.l Introduction

Why some specific pattern of work organisation facilitates industrial

development in some places? What is the rationality of studying such work

organisation particularly the usefulness of such concepts in the Third World

context? In a earlier chapter we have discussed reasons behind the growth of

industries in the towns and how various regulative factors (either government or

social) helped to consolidate industrial development in these towns (Accumulation

and Regulation). In this chapter we intend to look at some internal functionings of

industrial activity in the towns, namely work organisation among firms, types of

firms, adaptability to recent innovation and technological changes and capability

of the towns to adjust themselves to changing demand and supply situations. We

are looking at the industries of the towns from the viewpoint of flexible

specialisation, which assist urban development ofTiruppur, Kannur and Morbi.

In a preceding chapter we have discussed concepts relating to flexible

specialisation. We now place the characteristics of flexible specialisation in a

heuristic model given on page 122 (Block 4.B). An attempt would be made to

locate our study towns in specific industrial district models. Here we conceive

industrial districts as a social and economic whole. We cannot associate an

artificially created industrial estate or Free Trade Zone as industrial districts. We

want to argue that the success of industrial districts is not only because of

economic and technological factors. Adaptability and innovation of local

resources (institutions and community as a whole) to cater to rapidly changing

product market and technology, is a hallmark of an ideal industrial district. We

also want to say that industrial districts develop by chance and succeed because of

sheer local entrepreneurial and community effort. All government interventions

(suitable policies and regulations) came later on. Here we do not want to deny the

importance oftraditional industrial location theories but we put more emphasis on

a local co-operative and entrepreneurial efforts in our study towns. The whole

intention of our study is whether such work organisation of the towns can be

replicable to other towns of the country. Artificially created industrial spaces

96

cannot be replicated unless there is involvement of local people and institutions.

We want replicability because these successful Indian industrial towns have

shown the way of how to generate income and employment. This is particularly

important in a country like India suffering from massive unemployment problems.

We shall take up all theoretical arguments and models of industrial

districts, but before that we intend to look at the internal functioning of the

industrial spaces of the towns based on our empirical findings.

JV.2 Work Organisation in Tiruppur, Kannur and Morbi

Tiruppur

Apart from the knitting, stitching, bleaching and dyeing, printing and

embroidery units, a host of ancillary and supportive units exist in Tiruppur. All

these units like manufacturing and printing of labels, polythene bags and other

packing materials provide the necessary forward and backward linkages in the

functioning of the knitwear industry in Tiruppur (Figure 4.1a). From the

viewpoint of final products there are three kinds of firms in Timppur. Some firms

manufacture and export; while some manufacture; but do not export. Some firms

do not manufacture the products, but get their orders and assignment done through ·

job work and finally exporting or selling to their clients. They were known as

merchant exporters. In each of the categories there were small, medium and large

entrepren~urs in Tiruppur. A very small proportion of firms in Tiruppur were

vertically integrated. That they performed all stages of their work in those units

(Jncontracting the term used by Cawthorne, 1995). In general the whole town is

based on subcontracting network. Now let us have a look at how networks among

firms in Tiruppur operate?

Figure 4.1a gives a clear indication ofhow different stages of work is done

in the Tiruppur Knitwear industry. There are extensive horizontal linkages among

the firms for job works. Cotton yams are knitted in knitting units and then sent for

bleaching and dyeing and then for curing. If designs are to be made on cloths then

cut pieces are sent for embroidery and printing work. Otherwise these are send to

stitching section. Label and ironing is the next stage. Then fabrics are packed and

ready for despatch. Generally one manufacturing firm does the cutting, stitching,

ironing and packing stages. Other intermediate stages of work are subcontracted

97

Figure: 4.1

The Organisation of Production System in Tiruppur, Kannur and Morbi

a) Tiruppur Knitwear Industry

Yarn Knitting I ------7 I Bleaching I ------7 I Dyeing 1------7 I Curing

Screen Printing and Embroidery ~~Cutting

Stitching H ·Labeling I ~ I Packing 1----7 I Despatch

b) Kannur Handloom Industry I Design

Yam Dyeing ------7 .__W_i_n_di_n_g _ _.l------7 I Weaving 1----7 I Made ups

l Despatch I ~I Packing

c) Morbi Clock Industry

Cabinet boxes making Decoration

Despatch I ~ I Packing

Assembling of Quartz

Fixing of hands, glass

out to specific job working firms according to work requirements. The merchant

exporters after procuring the work assignment get the work done in different job

working firms. Does such a pattern of work organisation (characteristic of flexible

specialisation) lead to dependency among the firms? We have the answer both

'yes' and 'no' from our study. Nine firms out oftotal 35 knitwear firms (about 26

percent) we interviewed reported that such system leads to dependency (Tabie

4.1 ). Dependency is endemic because not getting the job work done in stipulated

time affects the exporters, as they are tied to the buyers in the international market

who are particular about dead lines. Delays meant cancellation of orders and huge

losses. However, none ofthe firms reported such an experience, which is rare and

accidental. In an ideal industrial district, characterised by flexible specialisation,

such networking or subcontracting of work are very' common and is the basis for

the survival of the small firms. Every job working firms specialise in one specific

job only. Some firms (big firms) in Tiruppur are now converting themselves to

vertically integrated units in order to avoid dependencies on job working firms.

However, in a system where a large number of small units function with their

specialised activity in a mutually supportive way, it is not economically viable or

possible for them to convert themselves to vertically integrated units. This is

against the work ethics in the regime of flexible specialisation where dependency

can be converted into co-operation with good social relations (we will take up this

theme in Chapter VI).

Table: 4.1 Subcontracting among Firms and Dependency

Tiruppur Kannur Morbi

Yes 9 (25.7) -- --No 26 (74.3) 13 (86.7) --N.A. -- 2 (13.3) 15 (100.0)

Sample Size 35* (100.0) IS (100.0) 15 (100.0)

• Only knitwear firms

• Figures in brackets are in percentages.

• Sources of data: field work, 1997-98

Such a networking system allows the firms to remam small and to

specialise on only one work. Many small firms in Tiruppur work only with 15-20

99

workers. This work culture allows entrepreneurs to enter business with small

investment. We have discussed in Chapter II the advantages of small firms in

getting incentives and provisions from the government. There is another

advantage or politics to remain small. Firms with less workers do not come under

labour laws and they are not bound to provide all labour benefits to workers (we

shall come to this in Chapter V).

Kannur

The industrial space of Kannur is not as complex as Tiruppur. Earlier we

have discussed that we are not studying Kannur as an industrial town but in its

capacity to generate jobs for the population through its rich handloom sector. Like

Tiruppur we find three kinds of firms in Kannur i.e. manufacturing exporters, non­

exporting manufacturers and merchant exporters. Figure 4.1 b depicts the work

organisation of Kannur's handloom industry. All the manufacturers get the yarn

from the mills and get these dyed before weaving. The dyed yarns go in for

winding in the cones. Weaving is the next stage. Then fabrics are packed and

marketed and also exported. Despite the demand for apparel manufactures Kannur

has not yet diversified into apparel making from its handloom products. This is

largely attributed to lack of work force for this industry. In general there is not

much interest to take up a job in this industry (This will be discussed in Chapter

V). Some manufacturers are now started manufacturing (curtains, tablecloths) of

handloom cloths.

We cannot say that Kannur handloom firms are vertically disintegrated.

Most of the work is done by the single manufacturing firm - from dyeing of yarn

to weaving. _Unlike Tiruppur, Kannur has not yet branched into varied activities

and a complex network system is yet to develop. However, when there is much

work in a firm, they subcontract this additional work to co-operatives or to some

individual job workers. There are a few job work firms existing in Kannur who

organise the dyeing and provide finishing touches to weaved fabrics. Such

finishing (calendering or curing of fabric) task requires sophisticated machines,

which are not only costly but economically not viable for all firms to have. A few

job- working firms can cater the need of all manufacturers in the town- to give

finishing touches to the fabrics. Kannur manufacturers informed us that

100

dependency on job work to individual weavers or co-operatives or job-working

firms occasionally, do not effect their supply in stipulated time (Table 4. I). Out of

the total 15 firms 87 percent reported that subcontracting does not lead to

dependency. Other two firms did not remark on this issue.

Morbi

Morbi like Tiruppur is a town of hectic industrial activity. Morbi clock

manufacturing firms are vertically integrated. All parts of clocks are generally

manufactured under one roof Figure I.e shows work process in a clock­

manufacturing firm. There are different stages ofwork in the clock manufacturing

process which goes on simultaneously in a firm. At first the wooden or plastic

cabinet boxes of clocks are made followed by ornamentation and decorat;on.

Assembling of quartz is the main part of the production process. Thereafter the

hands and glass on the clock is fixed. Finally the clock goes for packing. Quality

check is done when they fix the movements (quartz). Generally most of the firms

in Morbi do not make the quartzs. They import these from advanced industrial

countries of Asia and assemble them in their factory. Most of the firms do not

have the glass cutting facilities according to the design and shape of the clocks.

Generally such small units follow only one standard size and design and get the

glass of the clocks from some job working units. Given that work in clock

industry is not very complex, one can start a business with small amount of

investment. So most ofthe firms in Morbi just make the cabinet boxes and do the

ornamentation in their units. They also put their own brand name on the cabinet

box. Given the ease of entry by entrepreneurs with small investments there is a

mushrooming of growth of clock manufacturing firms over the past few years.

However, they could not sustain the competition because of the growth of some

big firms in Morbi.

Big clock manufacturing firms are highly specialised in every stage of

clock production. They even manufacture the quartz and a few have now started

diversifying into electronic goods products, viz: telephone and calculators.

We know that the production process is more complex in Tiruppur than

Kannur and Morbi. In Tiruppur there are very few vertically integrated firms as

101

such they do not need networking and need not subcontract their work. Vertical

integration strategy makes firms independent at the cost of huge investment. Most

of the entrepreneurs cannot afford this. Moreover, this is against the work ethics

of small firm and the concept of flexible specialisation. It will not be appropriate

to think that firms are quite dependent on the production cycle in the industry to

have an identity of their own. Flexible specialisation (industrial district in broader

term) itself has an identity which is based on .a particular type of production cycle

(subcontracting networks). All small firms are part of this flexible specialisation

regime. Production cycles under the regime of flexible specialisation or in the

small firms variants of industrial district will collapse if one wants to introduce the

unethical work culture based on dependency (a consequent shift to vertical

integration, which is not a characteristic of flexible specialisation). However,

some firms particularly in Kannur and Morbi have an identity of their own. These

medium-sized firms are vertically integrated and may have independent

production cycle than that of the town. Yet they get effected by locating

themselves within the agglomeration (benefits of clustering). From the Tiruppur

experience we can say that it is sole discretion of entrepreneurs at which part of

production process they want to open their firms to enter the industry. They may

start a fabric manufacturing units or they may· set up a dyeing or embroidery unit.

This all depends on their finance, personal interest and a prospect of profit in each

segment of the industry. Finance is the sole determinant on how large the unit

(firm) will be. If one starts the fabric manufacturing unit one has to bear more pain

than one who starts job working units i.e. dyeing or embroidery units (unless he

exports through merchant exporters). Apart form organising production he has to

look for the market for his products. Others need to do the simple job work. All

kinds of firms whether manufacturing or job working firms can earn a cycle of

sustainable profit, depending on the quality of work they produce. They can earn

profit by quoting low price and may compromise on the quality of the product.

Profit gain through quality product determines whether they follow 'high road'

path of development or simply submit to the pressure from the customers and

accept the cut backs (This point will be discussed in detail in chapter V).

Manufacturing firms who take the order and set the production process bear more

risk. So they deserve more profit. This solely depends upon whether they are in an

advantageous position to subcontract the work to the job workers and finally the

I 02

quality of the product they produce. On the other hand profit cycle of the job­

working firm depends on the reputation they gained through their quality of work.

Good reputation means more work and thereby profit and can even charge a high

rate on job work. Bad reputation means they have to depend on the firms for job

works. They will be not in an advantageous position to do the bargain. Good

personal relations also bring more contacts and assignments. This situation largely

prevails in present Tiruppur.

Since many job working firms are mushrooming in Tiruppur there is a

severe competitions to get the contracts. In the absence of personal contact, all

these firms have to accept the cutbacks. Can institutional role assure them some

minimum sustainable profit? Here through institutional role there are some

possibilities to separate the profit cycle from the production _cycle. Then the

question arises whether assured minimum profit will make the firm compromise

on the quality. Here again in the profit cycle, the importance of quality work and

bargaining (from both sides) play the major role, along with personal relations. If

all firms are quality conscious then 'high road' will lead to more profit.

Compromising on quality through price cuts to make extra profit shall lead to a

disaster i~ the accumulation regime. There will be leakages to this accumulation

regime, which will eventually dry up.

IV.3 Technological Development in Tiruppur, Kannur and Morbi

Technology has an important role to play in the development of an

industrial space. Do firms in the industrial space have the capacity to innovate,

adapt to the recent technological changes? Or do they simply imitate outdated

technology? Let us have a look at the technological development in our study

towns.

Tiruppur

Before Independence, there was the importation of second hand knitting

machines in Tiruppur. After Independence one saw the introduction of Ludhiana

made circular knitting machines. After the export boom in the late eighties, one

saw the use of highly efficient imported knitting machines. lt is not only the

export boom that opened the path for imported machines in Tiruppur, rather the

101

liberalisation policies of the government had a major role to play as well. Import

duty reductions made the task easy for Tiruppur exporters to get access to

machines from abroad. We have discussed how government regulations effected

Tiruppur's knitwear industry in Chapter 111.

Stitching and sewing operations were done with the latest machines in

almost all the firms of Tiruppur. Firms were using imported flatlock and overlock

machines (partiaularly from Japan) in all factories we visited. Yet we found

Singer tailors (who give finishing touch to a garment piece like collar, buttons and

pockets: They work on Singer brand of sewing machines and so popularly known

as) use Indian made sewing machines. The introduction of flatlock and overlock

machines made the stitching work much faster, even though these were expensive.

So there is a sense to import these kinds of machines. However, the finishing

touch of a cloth piece requires careful efficient hand and so does not need faster

machines. Now the designing of cloths are done in CAD (Computer Aided design)

system and some entrepreneurs have ventured into it (Table 4.2). Generally all the

outdated old machines go to the lower end of the market which are purchased by

some small firms who produces for the local market.

The stages of work like bleaching and dyeing of fabrics require highly

skilled manual work, not automation. Dyeing of cloth means they have to get the

colour on the cloth as required or ordered by the buyers in their sample. Dyeing

units use local made machines (winches) for the dyeing purposes.

Such a comparative cost and efficiency contradicts itself in one stage of

the work in Tiruppur, i.e. embroidery and screen printing on cloths. Both of these

works can be done manually and also by very sophisticated machines. Till recent

times all design work on cloth was done by manual embroidery and printing.

Currently some of the entrepreneurs have ventured into highly sophisticated

embroidery and printing machines. One Rottery printing machine cost around

rupees 75 lakhs and can print about 2500 pieces daily. These machines can print

up to eight colour combination and with an given accuracy. In a manual printing

process one 8 feet by 40 feet table cost about rupees 1.5 lakh and can print about

250 pieces a day. They can also print different colour combinations. So one screen

printer, (Sugumar) informed that for a small entrepreneur like him it is not

convenient to go for highly sophisticated machines. Production has just not

increased proportionate to the cost of machines. So for small entrepreneurs like

him it is convenient to do business through labour intensive manual process.

Many printing units in Tiruppur can cater to the demand through manual process

and there is not much need for mass production machines. Quality is assumed to

remain the same for both manual and automatic process, rather manual printing

looks better. But for accuracy one has to be careful in manual printing process and

the job is quite tedious.

Likewise one Baradin or Happy brand of embroidery machine with 24

heads costs around rupees 27 lakhs. These automatic machines operates on

computer commands and are much faster (about 10 times then manual work).

Moreover 24 heads means they do work of24 people simultaneously. So these are

highly capital intensive machines. Embroidery work is also done in manual

stitching machines and by hands.

Table: 4.2

Impact of Technological Changes on Firms

Tiruppur Kannur Morbi

Yes No Yes No Yes No

Effected by recent 54 3 1 14 14 1 technological c~anges (94.7) (5.3) (6.7) (93.3) (93.3) (6.7)

Have own research facilities 4 53 2 13 4 11 (7.0) (93.0) (13.3) (86.7} (26.7) (73.3)

Table: 4.3

Production Strategy of the Firms

Tiruppur Kannur Morbi

i) Capitallntensive 4 (7.0) 1 (6.7) --

ii) Labour Intensive 52 (91.2) 14 (93.3) 12 (80.0)

iii) Both Labour and Capital 1 (1.8) -- 3 (20.0) Intensive

Sample Size 57 (100.0) 15 ( 1 00.0) 15 (100.0)

• Figures in brackets are in percentages.

• Sources of data: field work, 1997-98

105

Is Tiruppur moving towa:·ds capital- intensive work culture. We cannot say

'yes'. The whole knitwear industry is labour intensive. Of course latest technology

allows for faster work and provides accuracy. However stitching, dyeing, quality

checking, ironing, packing, etc. will always remain labour intensive. Due to a

shortage of labour and to avoid labour problems some entrepreneurs have the

tendency to shift to capital intensive work organisation. In our sample only 4 firms

(7 percent) reported that they follow capitfil intensive production strategy (Table

4.3). Only one firm reported that their strategy is both capital and labour intensive.

Majority of the Tiruppur firms (54 firms or 95 percent) reported that they were

effected by recent technological change and would want to modernise their

factories (Table 4.2). Altogether 7 percent of the firms reported that they have

their own CAD facilities (Table 4.2).

Following the liberalisation policies of the government the dealers of

multinational companies supplying machines to knitwear industry have

mushroomed in Tiruppur. One can find all kind of world class machines with

reputed brand and their dealers and representatives in Tiruppur. Most of these

companies provide service engineers to the machines and also guide the workers

about the operations. The workers in gener!ll are quite adaptable in that they do

not fmd much difficulty in getting used to sophisticated machines even if they

start from rudimentary machines, given that basic principal of working with

machines is the same.

So, now Tiruppur with all the latest international technology looks like a

true industrial district. To stake claim as an industrial district there are two criteria

which needs to be fulfilled: the infrastructure of the town and the conditions of

labour. Having discussed about infrastructure in Chapter III we shall look at the

labour dimensions in the next Chapter.

Kannur

The weavmg of fabrics in Kannur is mostly done through handloom.

Technology is not of any relevance here. Not much have changed in handloom

technology in the past years. The Basel Mission industries changed the traditional

shuttle pitlooms to frame .loom, which is known as 'Malabar frame loom'. Even

106

though in the country many handiooms have been converted into powerloom,

particularly in Andhra Pradesh and Tamil Nadu, Kannur's conversion to

powerloom is not significant. Few firms and cooperatives have powerlooms which

were occasionally used, just to cope with heavy demand._ Since powerlooms can

displace many weavers out of job government has given directives not to use

powerlooms. Moreover many designs on cloths can be made accurately only on

handlooms. To provide finishing touches to the products, particularly-to level and

fold the fabrics there is need of hi-tech calendering and curing machines. Kannur

firms are not affected by technological changes and follow a purely traditional

method. However, 2 firms (13 percent) reported that they have ventured into CAD

technology to make innovative design of the cloth (Table 4.2). Even the weaver

service centre at Kannur provides service of CAD to firms and cooperatives.

· Unlike Tiruppur, firms of Kannur do not even use machines for dyeing purposes.

All yarn were hand dyed in the firms under the supervision of the dyeing master.

The production strategy in Kannur is labour intensive. Out of total 15 firms we

interviewed 14 firms (93 percent) reported that they follow labour intensive

strategy (Table 4.3).

Morbi

The carpenter caste of Morbi (the Suttar community) is an expert in the

making of wooden cabinet boxes. The making of wooden cabinet boxes for clocks

require more effort and are expensive. That is why most of the firms now make

moulded plastic cabinet boxes. The die where the design of cabinet box is shaped

and the moulding machines are not very sophisticated. They are made locally in

Rajkot or in Ahmedabad or Bombay. This simple machine serves the purpose. The

main part in the clock is the coordinated movement, which requires expert hands

to assemble and to fit into the clock. Very few firms actually manufacture clock

quartz in Morbi with imported ingredients from industrially developed Asian

country. Morbi is trying to keep pace with the technological development in the

industry. From the era of transistor clocks to the striking and non-striking clocks

and 30 days winding clocks, it has entered into the era of quartz clocks. However

adjustment with the recent technological development is incremental and not

radicaL

107

Morbi firms are effected by recent technological changes in the advanced

industrial countries. Since the Morbi clock industry is based on copying of

technology they are highly affected by the changes which can make their products

outdated. Very few firms (only 4 in total in Morbi) have som~ kind of research

facilities even in a rudimentary form on clocks. The functioning of other firms is

totally based on copying the products. Most of the Morbi entrepreneurs ( 14 or 93

percent) say that they ar~ affected by technological changes to upgrade their

products (Table 4.2). Morbi clock industry is labour intensive. Out of the 15 firms

we interviewed 12 firms (80 percent) told us that they follow labour- intensive

strategy. However, 3 firms (20 percent) reported that they follow both labour and

capital- intensive strategy (Table 4.3).

Industrial districts must encourage innovation. They either keep pace with

the recent technological innovation (must have knowledge, and capability to adopt

to new innovation) or must have indigenous innovative capability to produce cost­

effective high quality products. There is not much scope of technological

innovation in Kannur's handloom industry. Since powerloom tend to displace

workers from job, it is a policy Indian government to discourage production of

cloth in powerloom. Tiruppur is keeping pace with changing technology in

knitwear industry of the world. Majority of the entrepreneurs showed their

concerns for shifting to new machines. In Morbi's clock industry technological

progress is slow as compared to the contemporary world. Technological

innovation and adaptability to recent technological changes depend on

entrepreneur's ability and interest to keep an eye on the changing world.

Moreover, government policies and regulations are also causative factors

(discussed in Chapter III). Sustainability and maturity of an industrial space will

depend not only on technological innovations and adaptation to recent

technological changes but also on the re-skilling and re-training of the workers.

We shall pick up this point again in the concluding Chapter.

JV.4.Jnputs to industrie.\' of Tiruppur, Kannur and Morbi

From where our towns get inputs to their industries? Are these locally

available or are they to be imported. Let us have a look at the spatial dimension of

inputs to the industries.

lOX

Tiruppur

Earlier Tiruppur was the core of cotton market of that region. In Chapter

111, we have discussed about its transformation. What are the requirements of raw

materials in knitwear industry and from where did these come? Table 4.4 shows

the flow of inputs both raw materials and assets from diverse spatial dimensions.

The main ingredient, cotton comes from mills in the district itself or from the

nearby districts. Whereas other raw materials requirements i.e. different

chemicals, like bleaching powder, caustic soda, dyes and different colours for the

printing of fabrics came from nearby districts or States. The remaining inputs like

threads, labels and packing materials were available locally or come from nearby

districts or States. So we can say that input linkages of Tiruppur is mostly local or

regional. Bangalore (in another State) is not far from Tiruppur, from where it gets

most of the requirements of chemicals. Moreover all suppliers of inputs have their

own dealers in Tiruppur from where firms of Tiruppur get their raw materials

requirement. So there is no need to take the burden of bringing in the inputs to

their firms. All raw materials are supplied by the dealers and suppliers at the firms

doorsteps.

In the era of highly sophisticated international machinery, inputs like

machinery and accessories, particularly for sewing and stitching are clearly in

vogue. Earlier Ludhiana (Punjab) knitting machines were used in Tiruppur. Now

the firms are using Japan and German- made knitting machines. All dyeing

winches as also curing and calendering machines are local by made. Imported

calendering machines are being used in Tiruppur. For embroidery and printing

work Japan- made machines have entered Tiruppur. Japan-made high speed

overlock and flatlock machines for garment making are now a common scene in

Tiruppur. All multinational suppliers have their own dealers in Tiruppur. So

regarding input linkages, particularly for machinery we can say that Tiruppur now

has become international (Table 4.4).

The design and colour followed by the firms of Tiruppur on· fabrics either

inhouse ideas or as specified by the international buyers. From the internal market

generally there is no specification about design and colour. Manpower for

Tiruppur knitwear industry is locally available. Many workers come from nearby

109

villages and distri.cts, including the skilled and technical one. Some workers even

come from nearby states ofKarnataka and Kerala.

Out of total 57 firms interviewed 12 firms (21 percent) reported that the

machinery they use in their firms is either local made or made inside the State.

Three firms (5 percent) reported they use local, State or National made machinery.

Another three firms reported the machinery they use are either State or National

made. Six firms (II percent) reported that they used State, National or

International made machinery. Majority of the firms (32 firms or 56 percent)

reported that the machinery they use either were made outside the State or outside

the Nation. One firm reported that they use exclusively International machinery

imported from outside India (Table 4.5).

We asked the entrepreneurs of Tiruppur whether they were affected by

rises in the price of Yarn and other raw materials. Nineteen entrepreneurs (33

percent) said they were affected, while 38 firms (67 percent) told that they were

not affected by the crisis (Table 4.6)

Kannur

Kannur handloom industry acquired the raw material yarn from local mills

or mills from Coimbatore. All of the chemicals required for dyeing of yarn came

from Bangalore or Bombay. Kannur firms get these through dealers at their

doorsteps. Packing materials also come from Bangalore or to some extent these

are locally available. Other assets like frame of handlooms are made of local

wood. Accessories like scissors and calendering and curing machines come from

other States. So, we can say that inputs to Kannur handloom industry has no

International linkages. (Table 4.4). Like Tiruppur, in Kannur handloom industry

ideas on design and colour on fabrics are either inhouse or as specified by the

International buyers. In Kannur handloom industry, worker are mainly local.

There are some workers who migrated from nearby districts or States of Tamil

Nadu and Karnataka. All Kannur firms reported that they use local, State or

National made machinery (Table 4.5). More than half of the Kannur firms we

interviewed (8 or 53 percent) reported that they are affected by the rise of raw

material (Yarn) prices (Table 4.6).

110

Table: 4.4

Inputs to Industries (Spatial Dimension)

Tiruppur Intra-district Inter-district Inter-state International Inputs (Raw matt>rials)

Cotton Yarns II ..

Chemicals (bleaching powders. caustic II .. soda. dyes etc.)

Threads tJ h

Label It t: 11

Packing Materials u # #

Input~ (Asst-ts)

Knitting Machines # #

Dyeing Machines It ~

Calendering Machines ti # II

Embroidery Machines #

Printing Machin,·, II

Tailoring Machines (Singer. Overlock. # #

Flatlock)

Accessories (iron. scissors etc.) ~ tJ

Design # #

Labour # # #

Kannur Intra-district Inter-district Inter-state International

Inputs (Ra'l\· materials)

Cotton Yarn ti " Chemicals (Dyes) "

~

Packing materials t; ri #

Inputs (Assets)s

Handlooms # II

Powcrlooms # #

Calendering machines # #

Accessories, Scissors etc .. II #

Design # #

Labour # # #

Morbi Intra-district lntl'r-district lntl'r-statl' lntl'mational

Inputs (Raw materials)

Plastic Granules ri :: #

Glass # II #

Packing materials # # #

Quartz. movements and electronics # # items

Inputs (Assl'ts)

Moulding Machines t: " #

Die and Cutting .. " Jl

~1achin&:ril.!$ and :\cccssoril!s

Design u

La hour .. ..

Ill

Table:4.5

Machines and Accessories used by the Firms (All Firms)

Tiruppur Kannur Morbi

Local and State Made 12 (21.1) -- --

Local, State and National Made 3 (5.3) 15 (100.0) 9 (60.0)

State and National Made 3 (5.3) -- --State, National and International 6 (10.5) -- 6 (40.0) Made

National and International Made 32 (56.1) -- --

International Made I (1. 7) -- --Sample Size 57(100.0) 15 (100.0) 15 (100.0)

• Figures in brackets are in percentages.

• Sources of data: field work, 1997-98

Table: 4.6

Firms Affected by Rise in Raw Material Prices (All Firms)

Tiruppur Kannur Morbi

Yes 19(33.3) 8 (53.3) 9 (60.0)

No 38 (66.7) 7 (46.7) 6 (40.0)

Sample Size 57 (100.0) 15 (100.0) 15 (100.0)

• Figures in brackets are in percentages. • Sources of data, field work, 1997-98

Morbi

The main electronics parts required for the clock industry in Morbi were

imported mostly from some advanced industrial countries of Asia. Some came

from Bangalore and Bombay as well. Other requirements like plastic granules to

make the clock cabinet boxes, glass, packing materials came from Rajkot (the

district head quarter) as well as from Ahmedabad (the State capital) and some

from other States of the country. All of the machinery came from within the

country only (Table 4.4). Earlier we have discussed that except for cheap labour in

Morbi nothing else is available. In Morbi neither raw materials nor machinery is

112

I

locally available for the clock industry. Morbi clock industry is flourishing

because of enthusiasm of the entrepreneurs and coupled with cheap labour. In

Morbi clock industry ideas of design are inhouse. Workers are generally from the

town or nearly villages ofthe district. In Morbi 9 firms (60 percent) reported that

the machinery they used were either local, State or national made. Rest of the

firms reported that the machinery they used were national or international make

(Table 4.5).

In Morbi, 9 firms (60 percent) reported that they were affected by the rise

of prices of raw material required for the clock industry (Table 4.6). Generally

petty and small manufactures are easily affected by high raw material prices

whose market share of products is low. For large manufactures raw material

consists of a relatively small proportion of their total investment.

/V.J Marketsfor the Output from the Towns and their Management

One of the criteria for our selection of these towns were their linkages to

international markets. Let us have a look at the market of their outputs from these

towns.

Tiruppur

Tiruppur started to cater directly to export market only in as far back as

1980s. Earlier 'they used to produce for the local or national market and used to

export through some merchant exporters in Bombay. Now two-thirds of the

Tiruppur Knitwear firms directly cater to international market. In our sample we

found 32 firms out of 35 knitwear firms interviewed (91 percent) produced for

non-local market. Products of 29 firms (83 percent) go to the international market

(Table 4.7). Quality of these products varies for both the local and export markets.

Many tiny firms in Tiruppur produce cheap and low quality products for the local

markets, for the economically poorer section of the society. Most firms of

Tiruppur have their own brand names. Moreover, some merchant exporters of

Bombay put their famous brand name on Tiruppur products and sell in upper layer

of the national and international markets. The geographical areas of the market for

In

these firms vary depending upon their capacity and opportunity to sell to specific

markets niches.

Table 4.7 depicts the different spatial area of the market of the firms .. Most

of the Tiruppur products go to the markets in the countries of North America,

Europe, Australia and NewZeland.

Table: 4.7

Geographical Area of the Market of the Firms

Tiruppur Kannur Morbi

Local -- 1. (6.6)

Local and State 1 (6.6) --Local, State and National 3 (8.5) 2 (13.4) 7 (46.7)

Local, State, National and International -- 2(13.4) 7 (46.7)

Local and International . -- I (6.6) --State and National 3 (8.5) -- --State, National and International 3 (8.5) -- --National 1 (6.6) --National and International 9 (25.7) 4 (26.7) --International 17 (48.6) 4 (26.7) --Sample Size 35* (100.0) 15{100.0) 15 (100.0)

*Only knitwear firms.

• Figures in brackets are in percentages.

• Sources of data: field work, 1997-98

The firms have to be particularly careful for the consignments ordered by

the international buyers. If they compromise on quality and design, any minor

fault meant rejection of the entire order. So all products go through a stringent

quality check. Many entrepreneurs of the town travel round the globe to explore

the market. They carry their own sample and design of their products. The state

of the technology is becoming popular, whereby Computer Aided Design (CAD)

facilities were being used by exporters. Most of the Tiruppur firms depend on

agents to get an access to international markets. However, those who are in

business for a longer duration have the capacity to sell directly to an international

market. Our sample shows 26 knitwear exporters (about 74 percent) from

Tiruppur go tor business visit and 25 exporters (about 71 percent) depend on

agents to sell their products (Table 4.8). Dependency on agents and business visits

Il-l

are not mutually exclusive business strategy of the firms. Some firms even after

undertaking business visits have to depend on agents to get started, other firms do

business in international market without relying on agents. Repeated business

transactions help the firms not to rely on agent. Moreover good reputation of

Tiruppur products bring new buyers to Tiruppur to place orders. Sridhar (Manager

of a firm, Roboust) advocates that buyer should come to the town to see the

quality and design and place the order, instead of entrepreneurs going round the

world for a market. If buyers do not come they cannot be assured of the quality.

Business promotion visits is just wastage of time and money, remarked Sridhar.

Now Tiruppur products have gained very good reputation so that buyers are

coming to the town.

Export firms have to go through many complications like forwarding,

shipping, customs etc., to market their products abroad. Such things can be

managed by some exporters who are in this business for longer time, but

newcomers need the help and services of others. Thus, many business services

firms like quota consultant, tax consultants, forwarding and shipping agents have

come into existence in Tiruppur. From our sample of 35 knitwear export firms 15

firms (43 percent) reported that they depend on such services (Table 4.8):

Table: 4.8

Mar.keting Strategy and Dependency of Firms

Tiruppur Kannur Morbi

Yes No Yes No Yes No

Undertakes Business Visits 26 9 10 5 3 12 (74.3) (25.7) (66.7) (33.3) (20.0) (18.0)

Depends on Business 15 20 2 13 6 9 Services (42.9) (57.1) (13.3) (86.7) (40.0) (60.0)

Depends on Agents 25 10 8 7 12 3 (71.4) (28.6) (53.3) (46.7) (80.0) (20.0)

• Figures in brackets are in percentages • Sources of data: field work, 1997-98 • Tiruppur sample consists of only Knitwear firms

115

What assists these firms to raise the demand and explore the market for

their products? Is it quality or price or both? Tiruppur exporters informed us that

at the upper end of the market, buyers are quality conscious and they pay for it.

However, because of the intense competition to explore and get the market some

firms stick to an under pricing strategy. For most of the Tiruppur firms ( 45 or 79

percent) to provide quality is the prime strategy. If we consider only knitwear

firms among them 32 firms out of 35 (91 percent) were extremely quality

conscious (Table 4.9). Due to intense comp.etition, most of the job-working firm

resort to low - price quotation strategy.

Table: 4.9

Criteria for Raising the Demand and Exploration of the Market

Tiruppur Kannur Morbi

All firms Knitwear firms

Quality 45 (79.0) 32 (91.4) I5(100.0) 8 (53.4)

Price II (19.3) 3 (8.6) -- 5 (33.3)

Both Price and Quality I (I. 7) -- -- 2 (13.3)

Sample Size 57 (100.0) 35 (100.0) 15 (100.0) 15 (100.0)

• Figures in brackets are in percentages • Sources of data: field work, 1997-98

When the buyers place the order, they g1ve the quality and design

specimen to the firms. Earlier firms used to prepare designs and show to the

buyers. But in the present consumer market particularly in the international

market, taste changes so frequently that firms cannot cope with them. The designs

prepared by the firms may not meet the requirement and choice of the buyers. So

now-a-days the firms prepare design and quality according to its buyer's choice.

Out of the 3 5 knitwear firm we interviewed 8 firms (about 23. percent) reported

that themselves decide the quality and design of the fabrics whereas 26 firms

(about 74 percent) reported that it is buyer who decides the quality and the design

for their products (Table 4.1 0).

116

Table: 4.10

Determination of Quality and Designs

Tiruppur Kannur Morbi

Firms 8 (22.9) I (6.7) 15(100.0)

Buyers 26 (74.3) 8 (53.3) --

Both Firms and Buyers I (2.8) 6 (40.0) --Sample Size 35* (100.0) 15 (100.0) 15 (100.0)

*Only knitwear firms • Figures in brackets are in percentages • Sources of data: field work, 1997-98

The firms of Tiruppur go through business cycles because of changes in

demand that comes from the shift in the market. Since, Tiruppur produces only

cotton garments they cannot cater to the needs of clothing for the winter months,

therefore there is always a seasonal demand change in Tiruppur market. Almost

half of the knitwear firms (17 or 49 percent) reported that they face the changes of

demand from the International market. Altogether 9 firms· (about 26 percent)

reported that changes in demand comes from both National and International

markets. Three firms (about 9 percent) ·reported that changes in demand comes

from State, National and International markets (Table 4.11 ).

Table: 4.11

Changes of Demand comes from

Tiruppur Kannur Morbi

No changes -- -- 2 (13.3)

Local -- 1 (6.7) --Local, State and National 2 (5.7) -- --State -- 2 (13.3) --State and National 3 (8.6) I (6.7) --State. National and International 3 (8.6) -- 2 (13.3)

National I (2.8) -- 4 (26. 7)

National and International 9 (25.7) 5 (33.3) 7 (46.7)

International 17(48.6) 6 (40.0) --Sample Size 35(100.0) 15(100.0)

117

Kannur

Malabar handloom is getting appreciation from all over the world from the

period much before the Independence (information of Kerala State Handloom

Development Corporation). Handloom manufacturing establishments are

receiving regular bulk orders from international markets. Out of our sample of 15

firms 4 firms (27 percent) produce exclusively for the International market.

Products of 12 firms (80 percent) from our sample goes into the International

market as well as for the domestic market (Table 4.7). Quality, of course like

Tiruppur, varies from local market to international market. Firms have to be

extremely careful for maintaining quality and design as specified by the buyers.

The buyers provide the colour specimen of the cloth, and up to 5 percent

variations by the firms is generally allowed for in the market. Colour matching

according to the buyers specimen is a tedious job for the dyeing master. Generally

in case of Kannur handloom, the quality and design is not determined by firm

alone. In most cases these are determined by the buyers. In our sample of Kannur

firms, more than half of the firms (8 or about 53 percent) reported. that their buyer

decides the quality and design and give them a sample and accordingly the firms

carry out the production (Table 4.1 0). However, 6 firms ( 40 percent) reported that

they also produce the design and show them to the buyers and buyer in most cases

choose from their specimen (Table 4.10).-

Most of the Kannur entrepreneurs travel abroad for business visits.

Altogether 10 out of 15 (67 percent) entrepreneurs with whom we had interaction

told us that they go for business visits outside the country to establish contacts and

explore the market (Table 4.8). While more than half of the firms (8 or 53 percent)

reported that they rely on agents to market their products, a very small proportion

(2 or 13 percent) of firms rely on business services of other service firms. There is

comparatively low dependence on agents and on business services by Kannur

firms than that observed for the Tiruppur firms. This can be explained by the fact

that it is only in recent years that Tiruppur firms have started their business.

However, most of the Kannur firms are continuing their business from pre-

IIR

Independence period. As a result of the direct contact with the buyers, dependence

on service and business firms have not developed in Kannur. Most of the Kannur

firms are in the business for longer duration therefore more familiar with the

business operations.

The strategy Kannur firms follow to raise the demand for their products is

not through compromise on price. Rather it is through maintaining and raising the

standard and quality of their products. All firms of Kannur reported that they rely

on quality to' get access to the market (Table 4.9). Generally changes in demand

for the products of Kannur handlooms come from International market (Table

4.11 ). Changes in the demand for handloom came from international market

because handloom items are more expensive than mill items and cater for the

quality conscious buyers. Moreover the buyers at international market can afford

to pay more and do not bother about prices and want good quality products.

Altogether 6 firms (40 percent) reported that changes of demand exclusively came

from the international market, whereas 5 firms (about 33 percent) mentioned that

changes of demand came both from the national as well as from the international

markets. For rest, changes of demand came from local or national markets.

Morbi

Except for the design and outer layer of the clocks, quality remains same

whether clocks go for international or for the domestic market. It is not the quality

that alone helps the firms to raise the demand and explore the market. Rather it is

price cuts or lower competitive biding which helps the firms to explore the

market. From our sample of Morbi clock manufacturing firms, 8 firms (54

percent) reported that they stick to design and 5 firms (33 percent) reported that

they follow the price cut strategy to get the market. Two firms (13 percent)

reported that they follow both price cut and design to get the market {Table 4.9).

Morbi clock manufacturing firms do not produce exclusively for one specific

market- domestic or international. It depends largely on where firms have been

able to break into the market. Altogether 7 firms (47 percent) from our sample had

reported that their products go to International market, along with the domestic

119

market. Rest of the firms reported that they sell into the domestic market (Table

4.7). Generally design of the clock is decided by the firms only (Table 4.10).

Most of the Morbi firms ( 12 or 80 percent) depend on agents to market

their products. Only 3 firms (20 percent) reported that they go for business visits

abroad to explore the market. Six firms ( 40 percent) of the total sample reported

that they depend on business services of other service firms to market their

products (Table 4.8). Some big firms of Morbi have their own dealers spread out

all over the country. After depositing a certain amount of money they take the

dealership to market the products. To co-ordinate with them the firms have their

own area or regional sales manager. Such marketing strategy is not possible to

follow for small firms of Morbi. There are many merchant exporters in Rajkot,

who after getting orders from the international market get the-clock manufactured

in different Morbi firms and puts their own brand names. They supervise the work

at the firms through their own representatives. Morbi clocks are generally

exported to the markets in the Third World countries. Earlier we had discussed

that Murbi clocks are technologically not to the mark of advanced industrial

countries of the world and so cannot compete with lhem in quality. Morbi clocks

are cheap in price and exported to the low-income countries -of the world. One

thing is common .in the context of the three towns in that they have been able to

create many more jobs and have been able to link themselves to the global market.

Export market is the driving force for all of them. Work organisations in the towns

are different and product ranges are not uniformly diversified in all the towns.

Likewise technological advancement does not occur at the same pace. However,

there is an overriding concern for quality control among them. We shall take up

the issues like wages of workforce and their working conditions in the Vth

Chapter.

Can we put our towns in specific industrial district model? We intend to

extend this discussion in the light and types of industrial district models as

forwarded by Brusco (1990) and Asheim (1994). Before that we need to discuss

what an industrial district stands for and the factors determining the dynamics of

an industrial district.

120

JV.6 TtJwards an Industrial District MtJde/

IV. 6. a Meaning of Industrial Di.'itrict

An industrial district is a productive system characterised by a large

number of firms which are involved at various stages of production of a

homogenous product. A significant feature is that a very high proportion of these

firms are small or very small (Pyke and Sengenberger, 1990). In other definitions

of industrial districts the importance of small firm is clearly indicated. An

industrial district is essentially a territorial system of small firms. More precisely

it could be defined as a network of small firms within a geographically defined

production system (Goodman, 1989). According to Brusco (1986) what is relevant

is no longer the characteristics of one small firm but the characteristics of the

industrial district, of which the small firm is a part. Industrial district "is a socio­

economic entity, which is characterised by the active coexistance of an open

community and segmented and specialised population of firms (each of the many

firms which constitute the population).

The population of firms is specialised in-the sense that there is a principal

industry, which dominates the economy of the district. Segmentation here means

thaulifferent phases of the principal industry are divided among the firms, each of

which specialises in one industry, in one or a few places (Becattini, 1990). What is

the rationality and usefulness of the concept of industrial district, particularly for a

developing country? When Marshall ( 1892) used the term, he noticed (in

England), that a number of industries which had been grouped together benefited

from the economies of scale, usually associated with large firms (agglomeration

economies).

Flexible specialisation which carries many concept and characteristics of

industrial districts (Blocks 4.A and B) have been getting special attention in the

developing countries. Van Dijk (1994) mentioned some characteristics that were

not empirically supported in an industrial district (Block 4.A). However, our study

on industrial spaces of the three towns largely reveal. these characteristics

(flexible specialisation). There were wide spread entrepreneurial spirit and ability,

a local consensus and common values and a supportive government. Here

121

entrepreneurial community also work together to resolve clashes of interests. We

shall come to this in Vlth Chapter. Under the domain of flexible specialisation

there are large and small variants of firms who enter the production process with

subcontracting relations. They work collectively with profit motive and for

survival in a dynamic market. All tlrms need to be highly innovative, respond

quickly to changing demand and supply situations in the market and this is the

basis for their survival in the market. They have a band of skilled manpower and

enthusiastic entrepreneur. Though competitive, all firms among themselves have

established trusting relationships in all transactions. All relationships among the

firms are well guarded by local, social institutions in the town or industrial space.

Block: 4.A

General Characteristics of Industrial District

1. Inter-firm relations.

2. Co-operation blended with competition.

3. Importance of local value system.

4. Flexibility in production methods, labour input and product.

5. Innovative capacity.

6. A lar_ge number of small firms.

7. Geographical proximity.

8. Sectoral Specialisation.

9. The provision oflocal pool of skill.

Other characteristics not empirically supported.

10. Willingness to work together to resolve clashes of interest.

11. Wide spread entrepreneurial spirit and ability.

12. Active municipal and local governments.

13. A local consensus and common values.

I 4. The promotion of a social compromise.

Source: Adopted from Van Dijk (1994).

122

Block: 4.B

General Characteristics of Flexible Specialisation

1. Large or small-scale variants of firms with subcontracting relations.

2. Profit and survival in a dynamic market.

3. Collective efficiency.

4. A strategy of continuous innovation, responding quickly to market requirements.

5. Innovative mentality.

6. Multi-purpose technology.

7. Cluster and networks.

8. Skilled manpower.

9. Trust and good relations among firms.

10. Role oflocal, social institutions.

• Source- Adopted from Van Dijk (1994).

How can we relate ·characteristics of flexible specialisation to industrial

districts? Whether the advantages of the Marshall's industrial district can be

positively encouraged by local interest groups and simultaneously and

systematically supported by government. This is our concern. Schmitz (1992) says

that there is no cl~ar definition of flexible specialisation and hence much of the

debate suffers from definitional confusion. However, there are some

characteristics that everybody will agree. The stress on small enterprises in both

industrial districts as well as on flexible specialisation concept is an eye-opener

for the functioning of an industrial space. Indeed flexible specialisation concept

itself comes under the domain of industrial district concept.

IV. 6. b Dynamics of an Industrial District

There are some factors that determine the dynamics of an industrial

district. All factors can be placed (following Asheim, 1994) into three dimensions.

A local co-operative environment; internal resources and competence of small

firms with respect to technological changes and social and government

intervention in the industrial space. Let us look at these dimensions in details.

123

(i) The Entrepreneurs and Working Ga.'\.\'

Entrepreneurs are the dynamic force in the development of an industrial

space. They create innovative ideas and implement them. For this they put in their

efforts and are willing to take risks. In the three towns of our study, we have seen

that it is the effort of all entrepreneurs that made the towns successful. In Kannur

and Morbi the efforts of the entrepreneurs were individualistic, while in Tiruppur

efforts were individualistic as well as collaborative (see Chapter Ill for a detailed

discussion). Entrepreneurs needed to have flexibility. It is their ability to shift

promptly from one process to another and one product configuration to another

and to adjust quantities output rapidly up and down over short run which make

them successful. Not only the competent entrepreneurs, the firms in the industrial

space also require an innovative and dynamic labour force; where education and

wage level were the two important variables for the labour force. These two

factors are highly responsible for motivation and efficiency of the workers (we

shall take up these points in the next Chapter). Depending on the competence of

entrepreneurs and working class, their capability to adopt to technological changes

(we assume that local industrial space are not equipped with such research

facilities that they will develop an internationally acceptable technology)

determines whether an industrial space is -involved with high or low internal

resources.

We believe that the geographical proximity of material inputs is not a

determining factor whetlier an area is resourceful or not. Firms or industry in an

area with low internal resources (entrepreneurs and workers whose competence

are low) can adopt, develop or imitate mainly incremental innovation (Asheim,

1994). We have discussed in Chapter III that Morbi which imitates the clock

technology of advanced industrial countries are technologically many years

behind. To be able to adopt radical innovations, firms must have professional and

trained manpower. Here we want to differentiate adaptability and imitation to

technology in an industrial space. If the local manpower immediately adjust

themselves to the technological revolution that is current in other parts of the

globe, then we call it adaptability of the internal resources (manpower) of the

town or local industrial space. If the local manpower follows the stage of

technological revolution that swept the other industrial spaces many years before,

we then call it imitation. We can comment that Tiruppur is adapting recent

technological changes while Morbi is imitating them.

12-l

(ii) Local Co-opercztive Em,inmment-Col/ectil'e Efficiency

How the entrepreneurs in the towns work? Is their work effort

individualistic or collaborative? We have seen that in Kannur and Morbi their

effort is largely individualistic whereas in Tiruppur their effort is largely

collaborative (discussed in Chapter III and VI). Since Tiruppur firms are vertically

disintegrated there is more scope for cooperation among the entrepreneurs. In a

vertically disintegrated production system (eg. Tiruppur Knitwear firms) all firms

get mutual benefit from their interaction with other firms. Such co-operation leads

to efficiency (collective) in the industrial space. We have come across a

cooperative environment of Tiruppur. Here some light on the concept of

'collective efficiency' might be relevant. The concept was forwarded by Schmitz

( 1989), and has much relevance in the literature of flexible specialisation.

Whereas the concepts of agglomeration economies and collective efficiency looks

similar, but in fact both the empirical outlook and the theoretical anchorage of the

two concepts are different (Pederson, 1994). While agglomeration economies

reflect external economies passively obtained by entrepreneurs located dose to

each other, collective efficiency warrant advantages which enterprises may

achieve through active collaboration. Collective efficiency sees individual

enterprises as part of an interrelated production system. Collective efficiency

based on interdependency and mutual adaptation among entrepreneurs focus both

within and outside the cluster. Thus, such a collective efficiency achieved through

clustering and the distribution of the benefits depend on the structure of the cluster

and its link with the rest of the economy (input and output of the cluster).

Growth of small enterprise cluster and the exploitation of collective

efficiency in these clusters require a growing market (Pederson, 1994) Market

may come from three sources; one - a growth in the local market caused by

increasing money incomes, two - small enterprises may increase their share of the

total market in competition with the large sector. For this they have to increase

their efficiency through horizontal specialisation, and three - expansion into the

125

export market. Successful industrial cluster tends to expand on all three grounds.

We can say all three towns of our study are classic cases on how they have access

to the market in all three grounds. However, we can see active collaboration

(horizontal linkages) among firms in Tiruppur, which is not so in the case of other

two towns. The firms in the clusters of Morbi and Kannur gain being together,

which an individual firm rarely would have achieved. However, collective

efficiency among small enterprises may also be achieved without active

collaboration (Pederson, 1994 ). By co-locating the enterprises, they reduce the

customers' cost of reaching and searching the market (name of the product from

the town carries weight). Therefore, they are able to attract more customers than

they could individually.- Not only that, all suppliers come to the town and supply

everything at firms doorsteps.

(iii) Support from the Government

Industrial -spaces start functioning with the effort of entrepreneur. When

all entrepreneurs in the town or district join hand it sets the pace for intense

industrial activity. ·Evolution and development of an industrial district would be

largely aided by the pmvision of an appropriate policy envjronment, by a

supportive government, both at the local and state level. An enabling env~ronment,

development of infrastructure and policies and regulations help the entrepreneurs

to develop business (Chapter III, we have discussed in details about the

government policies for industrial development). We have discussed (in Chapter

III) that the towns of Tiruppur, Kannur and Morbi have developed (consolidated

their position) without much or any government interventions, rather only through

sheer determination and work ethic and culture of local people or in other word

social capital. However, there is the need of government regulations and

interventions (infrastructures and real services, tax policy, customs and import

duties) when new market and technologies develop in the industrial spaces. The

role of the State is often portrayed as one of the culprit in the demise of

community (Evans, 1996). However, some (Putman, 1993 a) argues for synergy

126

based on the formation of "Social Capital" coproductional efforts (Evans, 1996).

The idea of 'synergy' implies that civic arrangements strengthen state institutions

and effective state institutions create an environment in which civic arrangement

is more likely to thrive. The actions of public agencies facilitate forging norms of

trust and networks of civic engagement among ordinary citizens and many of

these norms and networks support developmental ends.

Healthy synergestic relationship depends on complementarity. Possibilities

for civic action are enhanced by the provision of public goods, but easily

threatened if public agencies become more intimately involved in community

affairs. A more radical view of synergy focuses on embeddedness. It questions

the assumption of distinct public and private spheres and sees trust and productive

informal networks not only as a property of civil society but as spanning the

public-private divide (Evan, 1996). The concept of embeddedness shall be

discussed in detail in the Vlth Chapter.

Evans ( 1996) argues that complementarity creates objective grounds on

which cooperation between government and citizens can be. built. Embeddedness

generates the nonnative and interactional basis f{)r realising the potential joint

gains. Through the possibility of state-society synergy active governments and

mobilized associations can enhance each others developmental efforts. Can

synergy be constructed in the short run or does it require historically deep

institutions and normative foundations? Endowment of social capital is crucial to

synergy. Social capital accumulated over longer periods of time is crucial in

creating a virtuous circle. Civic engagements nurtured good government and

government in tum fostered civic engagement (Putman, 1993b). However, some

case studies show that prior endowment of social capital are not the key

constraining factors (Lam, 1996; Heller, 1996; Ostrom, 1996; Fox, 1996)

Creative action by governmental organisations can foster social capital.

Linking mobilized citizen to public agencies can enhance the efficiency of the

127

government. Norms of trust built up from intimate interactions are not restricted

to relations within civil society. People working in public agencies are also

closely embedded in the communities they work with. This creates social capital

that spans the public-private debate. An example of Tiruppur town highly reflects

the public agencies and mobilized associational synergy (We had discussed this in

more detail from our empirical experience in Tiruppur). Tiruppur's Gounder caste

group provided the social capital leading to its widespread success. '

Brusco (1990) distinguishes industrial district without government

intervention which he calls 'industrial district Mark 1', and industrial district with

considerable government intervention, which he calls 'industrial district Mark II'.

Increased demand for catering to the market, calls for frequent changes in quality,

design and the introduction of new technologies necessitates . expert services

(relating to design, quality and technology upgradation) from outside. In fact in

industrial districts where small firms dominates, their capacity to introduce new.

technologies may be inhibited towards collecting information about accessibility,

market and finance. Such real services (provided in Third Italy) may be provided .

by the trade and business associations in the towns or by the government.

Government itself plays a role in making market and technologies more easily

accessible through favourable policies like reduction in import and custom duties,

sales tax etc.). In the towns of Tiruppur, Kannur and Morbi government's role is

quite prominent through such policies and real services. However, Tiruppur has an

added advantage of an active association of the firms.

IV.6.c Towards an Industrial District Model

Depending on the three dimensions we have discussed i.e. internal

resources and competence of the firms, local cooperative environment and social

and government intervention we can fit our towns into industrial district models.

12R

The model has been adopted from Ashei m ( 1994) with modification to

suit Indian conditions. The model which we call industrial district model of

technological capability building has three dimension which are discussed in the

preceeding section of the current chapter. All three dimensions have their negative

counterpart i.e. low internal manpower resources, local non-cooperative

environment and government non-intervention. The more positive the effect of all

three dimensions the more the capacity of an industrial, space to progress. High

internal manpower resources and competence, a local cooperative environment

and favourable government interventions (synergetic relations. Evans 1996), all

make an industrial space more generous and successful. Here we place more

emphasis on local cooperative environment (from our experience on the three

towns Kannur, Morbi & Tiruppur) and add another dimension non-cooperative

environment to Asheim's (1994) model (Figure 4.2). We have discussed about all

the three dimensions of the three towns in Chapter III and in the current Chapter.

All these towns have a pool of highly determined hardworking entrepreneurs and

effective industrious workers. The Governments have been taking interest for the

development of these-towns with new facilities and incentives. However, we have

seen that the cooperative environment at work,_ is more vi·sible in Tiruppur than in

Kannur and Morbi. The model presented here, as probable potential for

technological capacity building depends on three .dimensions·. We have some

limitation about Kannur's handloom industry as there is not much scope of

technological advancement. We have_ applied some subject~vity, and given

weightage to the three dimensions, with which we have developed the model. It is

our personal discretion (from our empirical experiences) which dimension gets

more weightage in building the industrial district model.

In the model we have given more weightage to (3) cooperative

environment. This is because we have seen how 'mobilized association' of

Grounders transformed Tiruppur as an industrial district. Internal human resources

and competence gets the next weightage (2). This has been the driving force in all

the three towns. Government intervention gets the least weight age (I), because in

the industrial spaces of the three towns, government's role comes later, once the

12')

Figure 4.2: Industrial Di~trict Models with respect to technological capability building

Low Internal Resources and Competence

High internal Resources and Competence

Low Internal Resources and Competence

High internal Resources and Competence

Co-operative Environment

-(3) A. Local production system with good potential for technological capability building

(5) c. Local production system with high potential for technological capability building

(4) E. Local production system with good potential for technological capability buildng

(6) G. Local production system with excellent potential for technological capability building TIRUPPUR

Non-Co-operative Environment

(0) B. Local production system with no potential for technological capability building (2) D.

j Local production system with !wme potential for technological capability building (1) F. Local production system with some potential for

I technological capability building (3) H. Local production system with good potential for technological capability building KANNUR MORBI

• Weightage score ofthree factors in numericals are in bracket.

Government Non­Intervention (Mark I, Brusco)

Government Intervention (Mark II, Brusco)

• 0 Weightage- no potential: 1-2 some potential: 3-4 good potential, 5-high potential and 6-excellent potential for development.

• Adopted from Asheim ( 1994) with modification and rearrangement.

entrepreneurs took the initiative. That is to say, without governmental help they

can become successful, and the infrastructure and facilities for real services could

be established by co-operation and 'mobilized association' (Bayly, 1992, discussed

in Chapter III) as Tiruppur Exporter Association did and continue to do it for

Tiruppur. So in a generalised local industrial space the potential for technological

development will vary depending upon the presence of the three dimensions. After

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giving the subjective weightage we can classify the potential for technological

capability building on a graded scale good, high and excellent potential in the

industrial spaces. These classifications are indicated in the boxes of the Figure 4.2.

We can thus put our study towns. according to the potential for

technological capability building. After analysing all the criterias we have placed

Tiruppur in block G which shows excellant potential for technological capability

building. Kannur and Morbi have been placed in the same block H which shows

good potential for technological capability building. In a generalised case, any

industrial town (lo~al production system), whether it is in artisian stage or in an

advanced stage, can be placed in this model, depending on the three dimensions as

discussed.

Is it necessary that we need to place our towns in specific industrial district

scheme provided by others? Do our towns appear to be totally different? Looking

into the criteria that led to the successful growth of our towns, i.e. competent

entrepreneurs and workers, a co-operative environment and government supports

our model largely reflects the ideas of Asheim (1994) and Brusco (1986). Our

towns also support some characteristics which were not empirically supported by

an industrial district model (Block 4.A). There are other industrial districts model

based on network linkages of input and output (Park, 1995) and the 'Marshallian'

industrial district model. 'Marshallian' district indicates extensive local suppliers

and local consumers linkages. Park (1995) mentioned that 'Marshallian' industrial

district model is not a common type in developing countries because of

insufficient development of local networks and embeddedness. This is not true in

our town context. Our towns have not only developed a extensive total networks

and embeddedness (see chapter VI) but also developed international linkages.

Hub and Spoke type of industrial districts have two variants (Park, 1993). One

has extensive local supplier linkages and non-local customers linkages, while.

other has extensive non-local supplier linkages and local consumers linkages. Our

towns may or may not fit into such scheme. However, it is not necessary that they

fit into any scheme provided by others. No doubt our towns have non-local

linkages and embeddedness. Looking at our towns based on empirical

experiences, the three criteria we had discussed can play a major role in the

1_1)

successful emergence of industrial districts in any part of the world. So, our model

is more universally acceptable.

Here we have not adjusted for the criteria of wage and educational level of

workers, which were the determining factors for innovation and efficiency. If we

consider these criteria as well, the position of our study towns in the specific

model may change. We shall discuss about wage and institutional intervention in

the next chapter on labour market of the three towns. The emergent changes

arising in our conception about the towns shall be discussed in the concluding

Chapter. At present we can say that the industrial space of Tiruppur has an

excellent potential for development in regards to technological capacity building.

The potential for Kannur and Morbi are good. So Tiruppur is an industrial district

with excellent potential and Kannur and Morbi are industrial district with good

potential.

IV. 7 Conclusion

ln conclusion we can say that (following the ideas of Pyke et. al 1990)

industrial districts should be conceived of as a social and economic whole. We

cannot associate an industrial estate or Free Trade Zone's (FTZs) as industrial

districts. We need intensive interrelations between social, political and economic

spheres. The success of industrial district is not just because of economic and

technological factors. Adaptability and innovation of local resources (institutions

and community as a whole) to cater to rapidly changing product' demand and

technology is a hallmark of an ideal industrial district. In this ideal case,

organisation and leadership comes from small firms where businesses are linked

with division of specialised works among the small firms. (Third Italy is a good

example of this, we can put Tiruppur also in this category).

Did industrial districts develop by chance or by the role of government

(Porter, 1990)? Apart from factors like demand in market of their products and

capacity to explore market niches and local human resources, - did chance and

related factors work in the development of industrial activity in our study towns?

We know that there was no role of government in the development of industrial

activity in the towns. Chance and prevailing local conditions had helped these

towns to start industrial activity. In Chapter Ill we have discussed how industrial

activity had developed in the towns. In Tiruppur it was labour problems, which

the industrialist Chettiar caste, was facing and sold their property to hard working

Grounder caste. They too were facing profitability crisis in agriculture. It was

Grounder community's hard work and their capacity to organise work as social

capital in a collective environment which turned out to be the crucial factor in the

growth of industrial activity in Tiruppur. In Kannur it was the social factor~

conversion of local people to Chiristianity by the European Basel Mission being

denied any local social and economic help by the Hindu society. Basel mission

organised some source of livelihood for these 'social outcastes' by motivating

them to take up work in handloom manufacturing and helped them to get the

market for their products. Slowly Kannur handloom products got admiration from

outside and many other local people also started the business. In Morbi it was the

visit of the King with his loyal men to England, who brought some clocks from

England and they developed confidence that such things can be made in Morbi.

This was the beginning of clock industry in Morbi. But we must say that it was the

enterprising nature of the local people, who made these towns successful.

In our study all propositions were related to the industrial .spaces of the

towns where all entrepreneurial firms were actors along with the working class. It

is the entrepreneurs who make the decisions and take the risk in the production

process. However, on macro economic perspective (labour market and labour

relations) all entrepreneurs generally take collective decisions in the industrial

space (role of institutions, discussed In Chapter V). In a flexible specialisation

regime all firms take individual decisions, but with an orientation to respect and

trust others decisions (embeddedness and collective efficiency). They work with a

common motive of profit making. To get a favourable assistance from the

government and to market their products they form associations (Chapter III)

Workers on the other hand in order to get better benefits from their entrepreneurs

form associations. It is through associations and institution that demands can be

met easily. All actors together constitute the industrial district. Largely, it is the

entrepreneurial effort, industriousness and etlicient workers, favourable

government policies and regulations all with in a synergetic environment which

allows for the industrial district to be successful.

133

We deviate our discussion from traditional industrial location theories and

give more importance to sheer local entrepreneurial effort and a local co-operative

environment. Apart from the enthusiasm of local people there were some

cognitive reasons for the grmvth of industries in our study towns. We. have

discussed them from an historical perspective in Chapter Ill. At the same time we

do not want to depart from the traditional location theories. We are putting more

emphasis to local co-operative entrepreneurial effort and the formation of a

critical social capital. We have seen that many industrial towns and export

processing zones (EPZs) in India have not succeed at the same rate like some

towns, i.e. Tiruppur, Morbi, Firozabad, Moradabad, Ludhiana. Something IS

m1ssmg m them given that other criteria remaining the same. We call it

enthusiasm of local people, entrepreneurs as we11 as of workers. Traditional

location criteria which helped the growth of industries in the towns, do exist and

we do not deny them. Morbi and Tiruppur have cheap labour. Tiruppur is in the

cotton producing zone and Kannur is not far from Tiruppur. Moist climate of

Kannur also helped in the growth of hand looms. However, in Morbi there were no

raw materials or traditional skills that explain the growth of clock industry. We do

not have a textbook model for the location of clock industry in Morbi. We cannot

say also that by forceful government policy this industry was established in

Morbi. Chance factor initia11y (we have discussed this) and latter entrepreneurial

effort played the role in clock industry location in Morbi. In the towns initially

capital was raised by private individual and in Tiruppur to some extent on co­

operative basis (Nidhi, discussed in Chapter III). When export from the towns

started many banks (government as we11 as private) have flourished in these

towns. Government has also come forward with favourable policies for the

industries in towns (Chapter III). There were the causative factors in the towns

behind sheer enthusiasm of the local people.

Industrial district 1s a powerful model for endogenous economtc

development of a region. The success story of our towns set the example for

suitable regional development policy. Development of industries in the towns of

Tiruppur. Kannur and Morbi, helped in the rapid urban growth from a tiny hamlet

or towns to 'boom' towns. Industrial growth has always been linked with urban

growth and development. So an industrial district model (characterised by flexible

specialisation) can disintegrate with extreme urban primacy. We shall come to this

point in the concluding chapter.

Are our towns replicable? Following Swaminathan and Jeyaranjan (1994),

we can say both, Yes or Not No, because an artificially created cluster cannot by

definition succeed. Individual units may prosper but not the cluster as a whole.

Yes! Because once a cluster has developed on its own through individual

initiatives, there exists the potential and the possibility through .appropriate

institutions to make the cluster dynamic.

In this Chapter we come to the conclusion that our towns have a potential

to prosper as mature industrial districts. We cannot call an industrial district

successful, unless we look at the condition of workers in the districts. Before

coming to a coherent conclusion on our towns, we need to look at the conditions

of the working class. Are they skilled, confident, innovative and adequately paid?

In the next Chapter we shall look at these issues.

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