CREB - Center for Research in Economics and Business

Innovation and Firm Growth in the Pakistani Textile Sector: Do Young and Innovative Firms Grow Faster?

Project members:
Waqar Wadho, Lahore School of Economics
Azam Chaudhry, Lahore School of Economics
Matthew McCartney, University of Oxford

This research is funded by the Oxford GCRF Research England Fund.The ability to innovate is crucial in facilitating small firms to grow into large firms and for Pakistan to achieve rapid and sustainable productivity-led economic growth. The textile sector has long been the mainstay of Pakistan’s industrial base but in recent years it has failed to match countries like Sri Lanka and Bangladesh whose rapid textile export growth has pulled hundreds of thousands of young women into paid employment outside the household so contributing to wider social changes. There is evidence from mainly developed countries that such job creation is attributed to a very small number of newly established, fast-growing and innovative small firms.

The researchers are conducting a firm-level survey of Pakistani textile manufacturers that builds on a similar survey that the researchers conducted in 2015 to construct a unique panel dataset to test the hypothesis that innovation is conducive to employment generation and sales growth, and that this is especially the case for smaller and younger companies. The research team also plans to develop the institutional capacity of an innovation and technology centre at a leading Pakistani university and also at multiple government departments.

The firm level innovation study involves gathering primary data from 377 textiles manufacturers located in 12 different districts of the Punjab and Sindh provinces through an in person survey based questionnaire. The respondents of the survey will be the top managers of firms. This data then will be combined with the earlier survey in 2015 to generate a panel of 6 years and 377 manufacturers.

The institutional level development strategy will focus on engaging with the Punjab and Sindh bureaus of statistics to collect data and conduct training with their staff on survey design and implementation as well as providing them with a multidimensional view of innovation and development.