Flexible Specialisation in Small-Scale Industries

Read this article to learn about the flexible specialisation in small-scale industries!

The issue of flexible specialisation was first raised by Holm-strom (1997). He argued that the Italian experience of small industries using microelectronic machinery could be the future for India’s industries.

He studied the electronics industry in Bangalore and found that it has the potential of emerging as the ‘high road’ to flexible specialisation.

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The small industries used Computerised Numerically Controlled (CNCs) machines and Computer Aided Designs (CADs) to manufacture high precision equipment, while the labour they employed was highly skilled, like those in the large industries. Another study of Holmstrom (ibid.) elaborated the concept further and worked out its implications.

He noted that flexible specialisation happens when clusters of smaller firms co­operate in product development and marketing, which requires trust and collective provision of ‘real services’. Holmstrom found that though engineers and workers are quality conscious and there is use of innovative techniques, the entrepreneurs are often too suspicious to co-operate or share information with other firms. Had there been greater trust, the system would have been much more profitable.

Other studies show that most small industries used the ‘low road’ of flexible specialisation which comprises low technology and low- skilled and low-paid labour. In labour-surplus countries like India, the choice is always of the low road. Production in the up-market fashion industry is mainly done in sweat shops, and garments are shaped by women workers who work for long hours on extremely low wages.

Similarly, most of the cloth is produced in power looms situated in Bhiwandi in Maharashtra where workers earn around Rs 140 to Rs 160 a day, working for ten hours. Even the high- technology industry of Bangalore, which Holmstrom studied, could be taken as a form of low-road specialisation if we compare the wages and working conditions with those of the same industries in developed countries. These employees may be well-paid by Indian standards but they earn between one-fifth and one-eighth of what their counterparts in the advanced countries would earn for the same work.

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