RIEB Discussion Paper Series No.2026-31

Title

Relational Learning vs. Spatial Spillovers: Dual Pathways to GVC Participation in the Indian Automotive Industry

Abstract

This paper examines how local parts suppliers in the Indian automotive industry upgrade their participation in global value chains (GVCs) through interactions with domestically located multinational assemblers. Using firm-level data from the Directory of the Automotive Component Manufacturers Association of India (ACMA) for 1997–2016, we identify two distinct pathways to GVC participation: accumulated transaction experience and geographically mediated exposure, whose relative importance depends on the lead firm's strategy and geographic footprint. In fact, greater accumulated transaction experience with Honda two-wheeler is positively associated with suppliers' sales, exports, and GVC participation, consistent with effective relational knowledge transfer. By contrast, for Suzuki, accumulated transaction experience is not significantly associated with these outcomes in the baseline fixed-effects specifications, while geographic exposure to Suzuki's production base is positively associated with GVC participation, suggesting a geographic pathway to upgrading. Hyundai shows a similar, though less robust, pattern. These findings bridge the FDI spillover and GVC literatures by showing that supplier upgrading can occur through distinct relational and geographic pathways depending on the lead firms.

Keywords

Global value chains; Automotive industry; Parts production; Local enterprises; Foreign enterprises

JEL Classification

F23, L16, O14

Inquiries

Manabu FURUTA
Graduate School of Economics, Kobe University

Takahiro SATO
Research Institute for Economics and Business Administration, Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Keijiro OTSUKA
Research Institute for Economics and Business Administration, Kobe University, JAPAN
Asian Development Bank Institute, JAPAN