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This study explores the influence of various learning mechanisms on the acquisition of technological capability in small industry clusters through a field study conducted in two foundry clusters in south India. It probes whether the collective efficiency through higher inter-firm linkages and cooperation with firms/agencies within a cluster as well as outside the cluster, leads to higher technological capability. Suitable proxies have been developed to measure technological capability and the learning mechanisms, thus facilitating quantitative analyses. The evidence suggests that collective efficiency, either in the form of horizontal cooperation or vertical cooperation, has a significant influence on technological capability. However, it is the factors like proximity to markets, nature of the cluster – homogeneous or heterogeneous, that appear to reinforce the kind of cooperative efforts, horizontal or vertical, that are more conducive to the acquisition of technological capability in firms. Therefore, the study has certain policy implications for small industry development in India.
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