Measuring the Factors Affecting Annual Turnover of the Firms: A Case Study of Selected Manufacturing Industries in India

Abstract

The manufacturing sector works as an engine of growth as it creates the conducive path for socio-economic development. In the said perspective, numerous studied have empirically proved the positive contribution of manufacturing sector in social – economic development. However, limited studies could examine the factors affecting manufacturing sector in different industries in India. Thus, this study assessed the determinants of the annual turnover of the firms in the Indian manufacturing sector. For aforementioned investigation, it used financial statistics of 154 selected Indian manufacturing firms which were operating in seven different industries (i.e., automobile and auto component, chemicals and petrochemicals, construction, electronics, industrial equipment & machinery, pharmaceuticals, and textiles and apparels) from nine states of India. Log-linear regression model under the stochastic frontier production function technique was considered to examine the impact of specific factors on the annual turnover of the firms. It highlighted that annual turnover of the firms was significantly reflected with labour intensity; firm's age and size, R&D expenditure, and technology up-gradation; investment on machinery; annual salary of workers, skilled and un-skilled manpower. The findings of this study also indicate that India is required to adopt strict intellectual property rights (IPRs) policy to reduce the imitation rate of technologies for further improvement in technology transfer and commercialization. Effective education system, science & technology (S&T) and conducive research & development (R&D) ecosystem would be supportive to increase the performance of firms in the Indian manufacturing sector. It also provides the research direction to validate the empirical findings of this study.