R&D Spillovers Across the Supply Chain: Evidence from the Indian Automobile Industry

This chapter analyses the impact of intra-industry R&D spillovers on firm’s own R&D effort from a supply chain perspective. Empirical studies have found inter-industry spillovers to be significant as opposed to intra-industry, as the pool of accessible knowledge is the same for a cross section of firms within an industry. However, from a supply chain perspective, though firms may be suppliers to an industry, they belong to different segments of the industry; and different tiers of the supply chain. The present study attempts to measure the horizontal spillovers within the Indian auto components industry as well as spillovers coming vertically from the original equipment manufacturers (OEM) from a flow and a stock perspective. The study finds spillovers from within the component group are a substitute for firm’s own in-house R&D, while spillovers coming from outside the component group act as complements, thus indicating the integral nature of automobile design, requiring collaborative R&D effort. Vertical spillovers vary based on vehicle category suggesting that nature of OEM-supplier collaboration differs by vehicle types. Other factors influencing own R&D effort include age, market share and location in an industrial cluster.