Impact of The Bargaining Power of Original Equipment Manufacturers on The Growth of Intermediate Goods Manufacturing MSMEs In India

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Subramanian Ramachandran, B.P. Chandramohan

Abstract

The bargaining power of Original Equipment Manufacturers (OEM) plays a vital role in the manufacturing ecosystem and growth of the Intermediate Goods Manufacturers (IGM) under MSME sector in India. After liberalisation and economic reforms, OEM companies started depending on domestic ancillary industries for sourcing intermediate products as part of their operations plan to gain comparative advantages offered by different MSME units in its value chain. The value chains supplying intermediate products are weak both structurally and financially which keeps them on the wrong side while bargaining, hence the impact of the monopsonistic power of the OEM is anticipated to be significant on the growth of IGMs. This study aims to investigate the manifestation of unequal bargaining power and its predicament with business competitiveness, performance and ultimately its impact on the growth of IGMs under MSME sector. This paper discusses how market structure and enterprise considerations influence bargaining power and therefore the need for monitoring monopsonistic power in play and the importance of state intervention to safeguards the interest of IGMs. In short, a comprehensive picture of the factors influencing the bargaining of OEM firms and its impact on the growth of IGMs in the value chains has been attempted through this paper.

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How to Cite
Subramanian Ramachandran, B.P. Chandramohan. (2024). Impact of The Bargaining Power of Original Equipment Manufacturers on The Growth of Intermediate Goods Manufacturing MSMEs In India. European Economic Letters (EEL), 14(4), 1491–1501. Retrieved from https://www.eelet.org.uk/index.php/journal/article/view/2281
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