The Indian pharmaceutical industry’s exports began to exceed its imports in the late 1980s. Since then, exports have grown rapidly, and the leading Indian firms have become significant exporters of generic drugs to the most advanced markets, including the U.S. As the Indian pharmaceutical industry increases its R&D spending and innovative efforts, leading firms clearly hope to export new products and processes to the U.S. and other advanced markets. Because it constitutes a (rare) example of a high tech exporting industry in a developing country, the Indian pharmaceutical industry provides an interesting context in which to explore the relationship between exports and technological upgrading. We investigate these linkages in this paper. The received literature has suggested that the exposure to advanced country technologies achieved through exports should lead to technological improvements in the exporting firms’ products and processes. Researchers have generally tried to measure these improvements by looking for changes in exporting firms’ measured total factor productivity that could be ascribed to increase in exports. The conceptual association in the literature between technological learning or upgrading through exports and increases in TFP is so strong that the phrase "learning by exporting" has come to mean an increase in TFP following an increase in exports. It is found that there is not much learning effect (from exports) observed for the overall industry. Some apparent learning effect is observed for a section of the industry, but only for firms who appear to be technologically backward within the industry.
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