Firms, Entrepreneurship & Microfinance

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 Economicsand
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.

We propose to conduct a firm-level survey of Pakistani textile manufacturers that builds on a similar survey that the PIs 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.  We also plan to develop the institutional capacity of an innovation and technology centre at a leading Pakistani university and also at multiple government departments. 

Earlier iterations of the research have shown the limits of a purely economics based methodology.  Small firms in Pakistan often fail to adopt new technology when economic incentives indicate they should do so. This needs a more interdisciplinary perspective that OSGA can provide. Some new technologies are associated with the replacement of male for female workers or with the greater ability of management to monitor the productivity of individual workers so are objected to by workers. To study such constraints on technological change requires the engagement with disciplines such as gender studies, labour relations and political economy. (Published in World Development:; The Lahore Journal of Economics:; Research Policy: and The Lahore Journal of Economics: The discussion paper, working paper and policy brief are available here:;;