Exporting by Indian small and medium enterprises: role of regional technological knowledge, agglomeration and foreign direct investment

Abstract

This study analyses regional determinants of export performance of small and medium enterprises (SMEs) in India. The export determinant analysis brings out the significance of certain key physical and economic infrastructure for SMEs, particularly access to roads, ports and loan finance. Local market conditions, namely the size, growth and per capita income of the host states also favourably affect SME export activities. State's stock of technological knowledge also encourages SME exporting. While direct competition with foreign players tends to dampen exporting by SMEs, foreign shareholding participation in SMEs allows affiliated firms to achieve higher level of exports. Apart from improving the key business support infrastructure, export orientation of SMEs could be enhanced by networking them with R&D facilities and providing them easier access to information about overseas markets. Relatively smaller enterprises need greater support as they are disadvantaged by their size.

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