Barriers to Industrial Upgrading (Sialkot Soccer Ball / Surgical Instruments) Project

A growing body of research suggests that innovation and quality improvements by manufacturing firms –which together we refer to as “industrial upgrading” are key elements of the process of private-enterprise development in low-income countries. It is widely recognised that industrial upgrading is not automatic: some sectors in some countries successfully move up the ladder to more technologically sophisticated, higher value-added products, and others fail to do so. What are the barriers that the unsuccessful countries or sectors face? And what policies, if any, can reduce these barriers and promote upgrading? These are the questions that motivate our proposal. A key goal is to inform the design of industrial policies to reduce these barriers and promote sustained upgrading in Pakistan and other low-income countries.

The Sialkot soccer ball cluster is made up of a large number of manufacturers who export approximately 60 million hand-stitched soccer balls each year, accounting for about 70 percent of global production. But over the last few years, the amount of soccer balls produced in Sialkot has fallen. This project aims to better understand the technologies within the industry and determine the characteristics of the firms that are able to identify and implement new technologies.

The research team developed a cost saving technology in 2012 which has been given to a number of soccer ball manufacturers in Pakistan in order to determine the factors affecting technology adoption in firms and technology spillovers between firms. The research team has also looked at how misaligned incentives between firms and employees can affect technology adoption. As part of the extended study, the research team provided subsidised imported inputs to the Sialkot football manufacturers in order to see if these high quality inputs increase the output of high quality balls as well as increase exports. At present, the research team continues to work on refining and interpreting the results.

The second study is investigating the extent to which fixed costs of innovation are a barrier to upgrading in the surgical‐goods sector in Sialkot. The aim of the study is to induce firms in the surgical goods sector to produce new and more sophisticated medical devices for the global markets.