Divergence and convergence

Description

The literature on economic development highlights how countries experience convergence or divergence in growth trajectories due to factors such as technological change and capital accumulation. In this paper, we extend this perspective to the micro level by examining the convergence and divergence of best practices among firms within a broadly defined industry. Multinational investment in developing economies serves as a key channel for global technology diffusion. When local firms possess a sufficient level of capabilities to compete with multinational enterprises, this interaction can facilitate technological convergence and, in turn, contribute to economic growth. Building on this framework, we review the relevant literature and empirically test select propositions through a case study of competition between a domestic firm and a multinational corporation in India’s two-wheeler industry. The empirical analysis reveals a process of convergence in operational and strategic practices between the two firms over a period of 15 years, suggesting that competitive dynamics between domestic and multinational firms can lead to the diffusion and adoption of best practices.

Publication Date

1-1-2014

Keywords

Competitive rivalry, Best practices, Divergence, Convergence, Multinational firms, Local Firms

Conference

2nd February, 2014, The Centre for Economic and Social Studies (CESS), Hyderabad

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