Automotive Components Industry and Profitability Factors: Evidence from India

Abstract

Based upon the dataset drawn from Centre for Monitoring of Indian Economy (CMIE) Prowess database, World Bank and Annual Survey of Industries (ASI) for a period 2000–2015, this article tests the persistence of profitability and checks the validity of Resource-Based View (RBV) in elucidating the variations in profitability on an industry-specific setting that is, Indian automotive components industry under a Generalized Method of Moments (GMM) framework. The article finds that the persistence of profits is positive and moderate, indicating that the industry is reasonably competitive. The results further suggest that the past R&D intensity, export intensity, size, labour productivity growth, and GDP growth have a positive bearing on the current profitability, while current R&D intensity, A&M intensity, capital intensity, firm leverage and output of OEMs were found to have exercised negative effect. Since past R&D intensity is found to be positively influencing the current profitability, this article infers that RBV holds for this industry.

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“…The financial performance of the hotel industry has been subject to in-depth examination in various studies (Sami & Mohamed, 2014;Ben Aissa & Goaied, 2016;Lucha et al, 2016;Menicucci, 2018;Prakash & Nauriyal, 2021;Soni et al, 2022). Scholarly discourse has accorded significant attention to the financial performance in various industries (Spanos et al, 2004;Mahajan et al, 2018;Lesáková et al, 2019;Tadic et al, 2019;Bhayani & Butalal, 2021;Mighty & Granco, 2021;Cardil et al, 2023) investigating extensively into its theoretical groundworks and diverse empirical dimensions.…”