This dissertation provides a comprehensive analysis of the structural barriers and labor market dynamics that shape industrial growth and innovation in developing economies.
By examining the complex interplay between informality, supply chain linkages, and labor flexibility, this research highlights the key challenges that constrain the productivity and competitiveness of the manufacturing sector. Through rigorous empirical analysis, the thesis offers critical insights into how policy interventions can address these constraints and foster sustainable and inclusive industrial development.
The second chapter, Stagnant Manufacturing Growth in India: The Role of the Informal Economy, explores the systemic impact of informality on the performance of formal manufacturing firms. The findings reveal that while informal enterprises provide employment and absorb labor from the agricultural sector, they do not contribute meaningfully to productivity growth. Instead, informality imposes a dual burden: it limits the expansion of formal firms by creating an uneven competitive landscape and, at the same time, fails to deliver productivity gains within the informal segment itself. Through a shift-share analysis, this chapter demonstrates that labor reallocation to the informal manufacturing sector is growth-reducing, driven primarily by structural inefficiencies and sectoral employment shifts. The study underscores the urgency of regulatory reforms and policy measures aimed at facilitating formalization and addressing the institutional barriers that sustain informality.
The third chapter, Formal-Informal Supply Chain Linkages and Firm Productivity in Sub-Saharan Africa: The Role of Human Capital, extends the discussion by focusing on the microeconomic interactions between formal and informal firms within supply chains. This chapter examines how supply chain linkages influence firm performance in Sub-Saharan Africa. The results indicate that informal firms with formal backward linkages—those sourcing inputs from formal firms—tend to have higher productivity and profitability than those relying solely on other informal enterprises. However, these benefits are significantly amplified when informal firms possess high levels of human capital, emphasizing the role of absorptive capacity in facilitating knowledge and technology transfer. The study highlights the importance of workforce development, vocational training, and institutional support in strengthening formal-informal supply chain interactions and enhancing productivity in developing economies.
The fourth chapter, The Innovation Toll of Contract Labour: Does Weaker Job Security Stifle Innovation?, critically examines the impact of labor flexibility on firm-level innovation and growth. Conventional economic theories suggest that labor flexibility enhances efficiency and adaptability; however, this chapter challenges that assumption by demonstrating that excessive reliance on contract labor can stifle innovation. The study finds that firms with high shares of contract workers exhibit lower levels of innovation and slower plant growth, despite achieving short-term profitability gains. This result aligns with evolutionary economic theories, which argue that labor flexibility disrupts the accumulation of firm-specific tacit knowledge, weakens employee engagement, and ultimately reduces firms' ability to pursue technology-driven competitive strategies. The chapter advocates for balanced labor policies that integrate workforce stability with adaptability, ensuring that firms can sustain long-term growth and innovation. Taken together, these chapters provide a comprehensive perspective on the constraints facing the manufacturing sector in developing economies. The dissertation integrates macroeconomic and firm-level analyses to offer a nuanced understanding of the challenges at play and proposes targeted policy interventions to drive industrial development.
