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Sunil Mani

This chapter analyses the case of Cipla as a market leader in India’s pharmaceutical industry, which itself is a leader in India’s manufacturing industry. Cipla meets all the three conditions of market leadership: market dominance, global reach and innovation. Cipla has had a significantly long history of development and has enjoyed success in serving both domestic and foreign markets better than many of its domestic rivals. It has been a trailblazer for pioneering low-cost, lifesaving drugs and, as a result, it is a highly respected company in India. The chapter seeks to explain the source of leadership in terms of firm-level and sector-level factors. Knowledge-intensive entrepreneurship is a key factor. The firm has a strong vision and focused corporate strategy. Cipla has also taken advantage of three sector-level factors, namely the patent regime, technology contributions from public research institutes (PRIs) and the higher-education sector. In a number of ways, the origins of Cipla’s leadership are similar to those discussed in the Tata Motors case: a key factor common to both is the knowledge-intensive entrepreneurship. Although the founding entrepreneurs wield overall control, the management of both companies is in professional hands. In both cases, the contribution of both sectoral and country-level factors have been important.

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Luiz Ricardo Cavalcante and Bruno César Araújo

The aim of this chapter is to analyse the factors that explain the industrial leadership of a Brazilian manufacturer of bus bodyworks, a niche segment within the broader automotive industry. This study suggests that specific contextual factors regarding the Brazilian market led the large automobile manufacturers to leave this market in the hands of Brazilian incumbents in the sector. In fact, the lower technological requirements and the high labour intensity of the bus bodywork segment left room for the entry and growth of emerging countries like Brazil. Within this context, Marcopolo was able to gain a leadership position through the strategies of its entrepreneurial founders and its focus on capability building. This case study provides important insights for policy-makers by showing how a nationally owned global leader was able to emerge in a relatively neglected segment in terms of explicit industrial policies.

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The Rise to Market Leadership

New Leading Firms from Emerging Countries

Edited by Franco Malerba, Sunil Mani and Pamela Adams

In recent years many new international market leaders from the BRICS countries have emerged in several manufacturing and service industries. This important study answers a number of crucial questions including, how did these companies rise up to become important players in their respective industries? What is the contribution of systemic and country specific factors? What is the role of internal firm factors in enabling these companies to become market leaders? The book presents evidence from companies in the automotive, pharmaceutical and ICT industries of China, India and Brazil.
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Bin Guo, Qiang Li and Xiaoling Chen

This chapter analyses the rise to market leadership of Geely, a privately held domestic automotive producer in China. Geely presents an interesting case of a company that was able to survive and grow in the face of market competition from joint ventures and state-owned enterprises. The chapter aims to contribute to the literature on technological catching up in two ways. The first is to examine the impacts of the context-specificity of China on domestic firms’ capability building and technological catching up. The other is to analyse the role of low-cost manufacturing capability and to explore how such a capability may be used as an initial step to support subsequent growth within the context of a large and emerging economy. The study highlights the impact of context-specificity in terms of the size and segmented nature of the domestic market on the ability of firms to learn and accumulate capabilities. This study also suggests that in technological and capital-intensive sectors, the rise of new market leaders is favoured when technological knowledge is largely embodied in machinery or other physical artefacts for production processes and when the industry structure is highly modularized and has evolved into an integrated and mature production system along the industry value chain.

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Arun Madhavan

This chapter addresses the questions of how an Indian firm in the IT services sector acquired the capabilities to succeed in a highly competitive global marketplace and which factors contributed to their success. To answer these questions, a detailed study of Hindustan Computers Limited (HCL), a leading and pioneering Indian IT firm, is presented. An evolutionary account of HCL’s experience examines how the capability-building strategies of HCL grew and evolved in response to environmental changes, which were both national and global in nature. The study suggests that continuous learning and the ability to change are essential traits for a successful IT firm. It also suggests that a key role was played by the Indian state in the emergence of the IT industry, contradicting the generally held view that the absence of state engagement enabled this sector. In fact, the study highlights the complementary roles played by the state and the private sector in the development of the sector and the success of HCL. The chapter also presents a model to explain the nature of the Indian IT industry.

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The capture of market power

Technology Displaced by Financial Innovation

William Kingston

The wealth produced by the early waves of capitalism was spread very unevenly, and produced a reaction that could have destroyed it were it not for two responses by capitalists and governments. The first of these was even further generation of wealth, and this was shared more equally as a result of the second response, democracy. Giving people a vote enabled them to put pressure on governments to tax the wealth being generated by property rights and distribute it to those who had none. However, democracy can only survive if a significant proportion of incomes is not dependent on the state. Property owners in turn responded by financing political action to capture the laws of property and turn them to their own advantage. This was first seen in respect of property in information, so that eventually laws relating to patents copyright and trademarks were effectively only drafted by those who could benefit from them. These laws underwrote globalization, characterized by a large and widening gap between rich and poor countries.

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Could anything have saved it?

Technology Displaced by Financial Innovation

William Kingston

To throw retrospective light upon the causes of the decline of capitalism, some wrong turnings are discussed. First, law should never have allowed corporations to be ‘natural persons’, separate from their owners, and consequently the vehicle for worldwide tax avoidance. Second, bankers would have to have been denied limited liability if creative energy was to be focused on technological innovation of the kind that generated the early wealth of capitalism. Third, laws to protect information needed to be redrawn so as to benefit genuine innovators instead of being supports to firms that have other types of market power. An aspect of this would be to reverse international agreement which were imposed on poorer countries. This would enable these countries to copy and so learn by doing, which is how Western countries had become rich themselves. The introduction of teams in bureaucracies whose task would be to develop better property laws as an alternative to intervention by the state, could also have helped to slow the decline of capitalism. However, the burden of evidence is that this decline is irreversible, because interest-group politics is now so entrenched.

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Epilogue: The centre could not hold

Technology Displaced by Financial Innovation

William Kingston

Joseph Schumpeter claimed that ‘there is inherent in the capitalist system a tendency towards self-destruction’. Economists were scornful of this view until the 2008 recession proved him right. The founder of modern economic thought, Adam Smith, assumed that an ‘invisible hand’ would lead individuals, in following their own interest, to serve the public good as well. A century and a half later, Edward Cannan pointed out that this would only happen if individual action was directed effectively by society’s institutions. It is clear that modern institutions are no longer operating in this way, and the reason is that they have been captured by interests that should be being disciplined by them. The purpose of the book is to show how this happened. It points out that the French and Russian revolutions only happened only after the nobility were deprived of their functions but left their privileges, and asks whether bailing out banks could be analogous.

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The fatal capture of money

Technology Displaced by Financial Innovation

William Kingston

Much the most important aspect of the capture of property laws by interests was in relation to money. Banking had always been recognized as different from other kinds of business, and so when these kinds were allowed to invest without having their whole fortunes at stake, this was denied to those who dealt in money. However, they did eventually get this privilege, which allowed them to ‘create money from nothing’ to such an extent as to cause the 1929 crash and subsequent recession. They were then put under legal discipline, but exerted their influence on politicians to have this removed, and repeated the expansion of credit that resulted in the crash of 2008. In the process, innovation in technology was so largely replaced by innovations in finance that the power of Western economies to generate real wealth was seriously harmed. Combined with the extent to which nominal wealth was concentrated in the financial sector, economic inequality of a high order was inevitable. In attempts to prevent this turning into active revolution, governments increased intervention in their economies to a degree that proved Schumpeter right in his forecast that capitalism would destroy itself and be replaced by socialism.

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How Capitalism Destroyed Itself

Technology Displaced by Financial Innovation

William Kingston

Capitalism has been sustained by inherited moral values that are now all but exhausted. A unique combination of a new belief in individualism and a long tradition of property rights had traditionally ensured that self-interested action also produced public benefit. However, these rights, including the laws underwriting economic and financial innovation and parliamentary democracy, were gradually captured and shaped by those who could benefit most from them. This fascinating book shows that the outcome is a reduced ability to generate real wealth combined with exceptional inequality, as well as a worldwide breach of the vital trust between voters and their representatives. Capitalism’s injuries are both self-inflicted and fatal.