Innovation systems, value chains and industrial clusters in developing economies: Case of Jalandhar’s sports goods industry

Abstract

The paper explores the relationship between innovation systems (IS) and participation in value chains (VCs) to understand the challenges concerning upgrading of an industrial cluster in a developing country. It is argued that the inter-linkages of various actors, organizations and institutions at one or more levels (MLs), viz., micro level (local), meso level (national) and macro level (global) led the firms in the industrial cluster to participate in one or more VCs, i.e., local, regional and global VCs, upgrading the cluster over time, which we termed as ‘Cluster Upgrading System’ (CUS). In this context, a case of one of the oldest industrial cluster producing sports goods in Jalandhar, India is examined. The analysis is based upon the information gathered through a primary survey of 45 firms. It was found that the cluster is largely labour intensive in nature and is facing challenges of competing with both low-cost clusters and technological advanced clusters, raising fears of it slipping into a low value-added trap. We found a lack of inter-linkages amongst firms, and their relationship with training and financial institutes that hampers mutual learning for upgrading the whole cluster, indicating some necessary policy implications.