Journal of Economic Geography 14 (2014) pp. 11171140 doi:10.

1093/jeg/lbt022
Advance Access Published on 13 July 2013

Strategic decoupling, recoupling and global

production networks: Indias
pharmaceutical industry
Rory Hornery
Graduate School of Geography, Clark University, 950 Main Street, Worcester, MA 01610-1477, USA
y
Corresponding author: Rory Horner. email 5rhorner@clarku.edu4

Abstract
Contemporary debates on economic globalization have emphasized the development
opportunities for the Global South through local firms becoming integrated into the
global commodity chains (GCCs), value chains (GVCs) and production networks (GPNs)
governed by leading multinational corporations. With increasing attention to the
negative sides of integration, an emergent issue is the role of disengagement from,
and operation outside of, the GPNs of lead firms. Through the case of the Indian
pharmaceutical industry, where a selective and short-term strategic decoupling and
subsequent recoupling has played a crucial role in the development of what is now the
largest such industry in the Global South, this article explores how decoupling from
GPNs may lead to positive development outcomes. The experience of India and the
pharmaceutical industry shows that a sequence of decoupling and recoupling can be
an alternative to strategic coupling as a route to economic development.

Keywords: Global production networks, decoupling, India, pharmaceuticals

JEL classifications: O14, O17, O20
Date submitted: 30 November 2012 Date accepted: 6 June 2013

1. Introduction
Since the late 1980s, global integration has been widely regarded as a necessary
component of economic development strategy (Rodrik, 2000). The global commodity
chain (GCC), global value chain (GVC) and global production network (GPN)
frameworks have all emphasized the significance of global integration for the economic
development of firms and regions (Gereffi, 1999, 2001; Henderson et al., 2002; Coe
et al., 2004; Gereffi et al., 2005). The GPN approach has developed the concept of
strategic coupling to denote a process by which regions can achieve globalized
development through integration into the production networks governed by leading
multinational corporations (MNCs) (Coe et al., 2004). Yet many places, especially in
the Global South, have struggled to achieve strategic coupling and have faced
drawbacks to integration into GPNs (Coe and Hess, 2010; MacKinnon, 2012). For
some of these territories, an alternative approach may be to decouple as a prelude
to recoupling or to taking a different approach to integration. Although decoupling
from GPNs has been given some conceptual consideration, (Coe and Hess, 2010;

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Phillips, 2011; MacKinnon, 2012), its dynamics and its impact on economic develop-
ment remain to be more fully explored. Can some form of strategic decoupling be used
as an effective component of economic development strategy to overcome adverse
forms of incorporation in GPNs?
Taking the case of Indias pharmaceutical industry, this article develops a concept of
strategic decoupling and considers some of its potential implications for the Global
South. With the third largest such industry in the world in volume terms, India has
become a center of production and research for foreign pharmaceutical MNCs
(Chaudhuri, 2011; Haakonsson et al., 2013) as well as a source region for emerging
Indian-owned pharmaceutical MNCs (Chittoor and Ray, 2007; Athreye and Godley,
2009; Kedron and Bagchi-Sen, 2012). In addition to its economic development
importance, the industry has significance for public health through its crucial role in
providing more affordable medicines to consumers across the Global South (Waning
et al., 2010). The Indian pharmaceutical industry demonstrates how a strategic
decoupling from particular GPNs may, at times, serve as an alternative path to
development.
The role of GPNs in development is also crucial for a closer trading zone between
development and economic geography (Murphy, 2008; Vira and James, 2011). Moving
GPN research beyond lead firms and economies can help construct a more global
economic geography (Economic Geography, 2011). If regions and nations only become
the subject of analysis once they are engaged in strategic coupling with global lead
firms, various other forms of integration into the global economy and their
consequences for development may be overlooked. Considered here are the potential
for integration into SouthSouth production networks and the role of non-participation
in lead firm GPNs as regional and national development strategies.
Following a brief review of the GCC and GPN approaches to the integration of
developing firms and regions in the global economy, the concept of strategic decoupling
is introduced. I then describe phases of coupling, strategic decoupling and recoupling
in the development of Indias pharmaceutical industry over three different periods,
19471970, 19701991 and 19912005, respectively. The article concludes by briefly
considering the continuing scope for strategic decoupling at the present time.

2. Global integration, GCCs and GPNs

Various theories of economic globalization have sought to explain how global market
integration might be translated into positive development outcomes in the Global
South. Perhaps most significantly, the GCC (Gereffi, 1999, 2001) and GVC literatures
(Gereffi et al., 2005) have offered frameworks to understand the path of export-oriented
success in a new era of globalization. Their collective perspective is that participating in
the commodity chains of global lead firms puts firms and economies on dynamic
learning curves leading to development via upgrading and increased value capture
(Gereffi, 1999, 39). A central principle is that development requires linking up with
the most significant lead firms in the industry (Gereffi, 2001, 1622). The analysis of
East Asian economies showed how firms in industries such as apparel, footwear
and toys upgraded from input assembly to original equipment manufacture and
to original brand name manufacture (Gereffi, 1999, 2001; Bair and Gereffi, 2003). As
many countries across the Global South shifted away from import-substitution and
state-led industrialization, the GCC framework became part of policy debates about

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 Strategic decoupling, recoupling and GPNs . 1119

appropriate ways for developing countries to benefit from an export-oriented strategy

(Bair, 2005, 162).
Building on GCC and GVC literature, the GPN approach involves a relational
understanding of the interaction between global firms and economies, with a more
explicit focus on the processes of territorial development (Henderson et al., 2002; Coe
et al., 2004; Coe, 2012). In this perspective, globalized economic development arises
when particular territories are effectively incorporated into GPNs, comprised of
relationships involving both firm and non-firm actors, including labor unions, state and
civil society organizations, that shape the transnational production of goods and
services (Henderson et al., 2002; Coe et al., 2004; Yeung, 2009, 2014). Drawing on
mostly East Asian examples, Coe et al. (2004) have argued that development is a result
of strategic coupling, a process whereby the territorial assets, or initial capabilities, of
a region or nation complement the needs of trans-local actors.
A beneficial coupling drives the territorial development processes of value creation,
enhancement and capture (Coe et al. 2004). Value creation refers to those production
and service activities creating economic rents based on labor activity, access to
particular technologies, relational or inter-organizational linkages, trade policies and
branding. Value enhancement involves upgrading the value-added activities in a region.
Its various forms include product upgrading (entering more sophisticated product
lines), process upgrading or improved efficiency and functional upgrading (new
activities with greater skill content) (Humphrey and Schmitz, 2002). Value capture is the
degree to which the value created goes to the benefit of the host territory. These
processes are each mediated by regional or national institutions with policies and
activities targeting particular value-added activities to promote the development of
specific territorial assets. In cases of strategic coupling, the relationship between
regional or national institutions and global lead firms is characterized by relatively
symmetrical power relations producing greater value capture.
However, many economies face significant barriers to greater value creation,
enhancement and capture and struggle to generate beneficial development outcomes
through global market integration and strategic coupling. Early integration into
GPNs can lead to the crowding out of domestic firms (Amsden, 2001; Chang, 2004),
curbing the potential introduction of new industries to the developing world
(Amsden, 2009). Many places are locked into quasi-hierarchical relationships with
global lead firms that curb value enhancement. In the Sinos Valley shoe cluster in
Brazil, for example, integration into global buyers commodity chains resulted in
product and process upgrading but did not lead to functional upgrading (Humphrey
and Schmitz, 2002). Firms who upgrade and capture greater economic value in a
GPN may be open to greater competition and business risks, undermining their long-
term economic viability (Barrientos et al., 2011). When facing asymmetric power
relations, territories may even develop new forms of transnational dependency,
exclusion and uneven distributions of economic benefits. For example, the US
market has significantly influenced the fortunes of the Mexican apparel industry,
with inclusion in full-package supply being limited to a few large and well-connected
companies who have secured a disproportionate share of the benefits (Bair and
Gereffi, 2003). Incorporation may also lead to the marginalization of workers
(Phillips, 2011) and the downgrading of the goods and services produced (Gibbon
and Ponte, 2005; Ponte and Ewert, 2009). Integration into GCCs and GPNs can
consequently be a source of friction, both between local and non-local actors and

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within an economy, over such issues as uneven value capture, labor exploitation and
social conflict (Coe and Hess, 2010).
A focus on the role of global lead firms can also be criticized for a possible inclusionary
bias by only tracing actors and regions when they are participating in prominent GPNs
(Bair and Werner, 2011). Such an emphasis overlooks those development processes
arising in and through alternative forms of market internationalization and in places
where lead firms are absent (Murphy and Schindler, 2011). Moreover, little attention has
been placed on the role of the domestic market in GPNs (Yang, 2014). In some cases, a
considerable degree of prior economic development may be necessary to enable firms
to successfully export within the production networks of global lead firms. In East Asia,
state promotion policies have played an important role in the development of
technological capabilities prior to coupling with global lead firms (Yeung, 2009, 340).
An emphasis on lead firms as facilitators of upgrading and greater value capture in the
GCC and GPN literatures can produce an unintended effective affinity with the
neoliberal approach to development. For the most part, the role of the state in developing
initial capabilities for successful integration (Bair, 2005, 174), including policies
selectively restricting engagement with GPNs, remains under-explored.

3. Decoupling and GPNs

The limited attention to decoupling in the GPN literature has encompassed a variety of
terminologies. Citing divestment, the exit of foreign firms and loss of foreign markets as
examples, Coe and Hess (2010) use ruptures to refer to a significant reduction in the
level or existence of connection between regions and firms. Bair and Werner (2011) refer
to disarticulations to describe the contraction of the apparel industry in La Laguna,
Mexico. MacKinnon (2012) has discussed how decoupling is also likely to vary
according to the type of coupling (Table 1). For him, decoupling is unlikely where
coupling between territories and lead firms has occurred organically, as for example in
economic hotspots and source regions of global firms such as in Silicon Valley. In
contrast, decoupling is a more likely outcome after structural coupling in those places
where power relations are highly uneven between territories and global firms, for
example in old industrial regions in Western Europe and North America. In cases of
strategic coupling, decoupling is unlikely in the short term but may eventually occur as
the regional characteristics and firms evolve.

Table 1. Types and dimensions of coupling

Type of Dimensions of coupling Likelihood

coupling of
Role of regional Type Regional Status of MNC Power relations decoupling
institutions of assets affiliates within between global
region parent company firms and region

Strategic Explicit, policy-led Host Distinctive Some autonomy Symmetrical Medium

Organic Implicit Source Distinctive Autonomous Symmetrical Low
Structural Explicit, but limited Host Generic Dependent Asymmetric High

Source: Authors compilation, based on Coe et al. (2004) and MacKinnon (2012).

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In the same way as coupling can be seen as involving intervention and action on
the part of both territorial institutions and firms (Yeung, 2009), decoupling is
conceptualized here as a reduction or break in the prevailing form of linkage between
a particular GPN(s) and a territory, an outcome that may be the result of either a
firm-based decision or the initiative of territorial, including state, institutions. In
addition to sudden breaks or ruptures, decoupling can be a gradual shift. It is most
likely following earlier structural coupling that has produced a highly asymmetric
relationship between global firms and territories, with consequent lack of compatibility
between the strategic needs of firms and the regional and national development goals
of their host territories.
Decoupling has been widely construed as structural, involving a loss of the positive
contributions of coupling, for example of jobs or revenue (Coe and Hess, 2010; Bair and
Werner, 2011; MacKinnon, 2012). In such circumstances, any subsequent recoupling
may continue to be on asymmetric terms, owing to a lack of territorial assets. However,
territories may also have the opportunity to take advantage of decoupling from some
GPNs, especially if the detrimental effects of global ties on the economy and society
outweigh their contribution to value creation (Coe and Hess, 2010, 136). This article
explores how such a decoupling from global firms and markets may be strategic if it
leads to positive regional or national development outcomes that can overcome a
prevailing negative form of incorporation (Table 2). With the enhanced development of
territorial assets, strategic decoupling may pave a path toward more symmetrical forms
of recoupling (strategic or organic) in the future.
Unlike the view that incorporation in the world economy leads to underdevelopment
(Frank, 1966; Amin, 1976), a strategic decoupling perspective does not reject outright
the possibility of improved territorial development prospects through participating in
GPNs. Rather, strategic decoupling is a temporary and sequential strategy to improve
value creation, enhancement and capture for developmental objectives, and may be

Table 2. Types of decoupling

Associated Empirical Impacts on Value creation, Potential for

with examples territorial enhancement, subsequent
development capture recoupling

Structural Divestment of FDI Old industrial Negative aspects Loss (e.g. jobs, High for structural
decoupling and loss of jobs regions in UK of decoupling regional recoupling; Low
to lower cost (MacKinnon, outweigh revenues) for strategic and
regions due 2012); La positive impacts organic
to declining Laguna, Mexico recoupling
competitiveness (Bair and
Werner, 2011)
Strategic Promotion and India and pharma- Positive aspects Gain (e.g. growth Low for structural
decoupling protection of ceutical industry of decoupling of local firms, recoupling; High
domestic firms (Section 5.2) outweigh functional for strategic and
and start-ups negative impacts upgrading); New organic
by a variety of opportunities recoupling
institutional in domestic
and policy markets; South
mechanisms south trade

Source: Authors compilation.

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 1122 . Horner

followed by recoupling with the same or, usually, other GPNs. Depending on the extent
of territorial assets developed, a re-engagement may be based on a more symmetric
degree of power leading to a coupling that is more strategic and organic, and less
structural. As such, strategic decoupling may serve as a crucial component of a state
and regional strategy that takes advantage of globalization, rather than disengaging
entirely from it.
By decoupling from global lead firms, new opportunities for value creation and
enhancement may arise through engagement with other production networks, for
example those centered on domestic and regional (supra-national) markets. In lower
income markets with less stringent process and product standards, entry barriers can be
lower than those to supply markets in the Global North (Kaplinsky and Farooki, 2011;
Staritz et al., 2011). Strategic decoupling may also offer an avenue for functional
upgrading by moving into higher end activities such as product development and
design, branding and marketing. For example, footwear and furniture firms in Brazil
have upgraded by specializing in the domestic and regional market (Navas-Aleman,
2011). Local firms can thus initiate and expand activities previously discouraged by
powerful global lead firms.
Opportunities for value enhancement through learning can also lead to strategic
decoupling. The early stages of industrial learning may draw on borrowing from abroad
in the form of copying and self-teaching (Amsden, 1989). For this imitative activity,
which does not require the involvement or cooperation of the innovator of that
technology, firms may access codified knowledge and/or take advantage of labor
mobility to develop a copied version of a product. Another learning opportunity is
provided through apprenticeship with other firms in the Global South (Haakonsson,
2009; Murphy, 2012). For example, SouthSouth production linkages with limited
involvement in the production networks of companies from the Global North led to
functional and process upgrading for Ugandas pharmaceutical industry (Haakonsson,
2009). Ultimately, if decoupling leads to the building up of firms that are domestically
owned and controlled (Wade, 2010), greater value is likely to be captured within the
territorial economy.
Greater value clearly does not arise automatically as a result of exiting lead-firm
GPNs and entering new production networks. However, the presence of competitive
pressure on domestic firms as a disciplinary factor combined with state regulation (Lall,
2004) can prevent uncompetitive industries emerging after decoupling. In return for
meeting performance requirements (e.g. exporting, import replacing, reducing the gap
between international and domestic prices, or increasing the proportion of local
content), the East Asian developmental states have supported firms in target industries
through policy mechanisms such as subsidies, licenses and protection (Amsden, 2001;
Chibber, 2003; Wade, 2010). Regional and national institutions can play an active role
in facilitating positive territorial development outcomes through the formation outside
global lead firms of domestic and other production networks, including those linked
to expanding markets in the Global South (Fold and Larsen, 2011; Pietrobelli and
Rabellotti, 2011, 1267).
As the following sections demonstrate, evidence from the Indian pharmaceutical
industry since independence suggests that its capabilities developed through a process
of strategic decoupling and recoupling. As key policies governing relationships with
MNCs have been set at the national level, the regulatory role of Indias central
government is particularly relevant to the development, including the public health

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 Strategic decoupling, recoupling and GPNs . 1123

dimensions, of the pharmaceutical industry. The national scale has not been widely used
in the analysis of coupling with GPNs, yet it is a key governance framework for
territorial development and is also significant because national economies differ
so much in their global integration (Coe et al., 2004, 281; Hess and Yeung, 2006;
Rodrik, 2013).

4. Research context and methods

The Indian pharmaceutical industry is the third largest in the world today in volume and
14th largest in value terms, comprising approximately 10% of the global pharmaceutical
market in volume and 1.5% in value (Maira Committee, 2011). The output of the
industry, which involves over 10,000 pharmaceutical manufacturing units, rose substan-
tially from 3500 Crore Rupees (US$63.1 million) in 19711972 (Narayana, 1984) to
104,209 Crore Rupees (US$18.8 billion) in 2010 (Department of Pharmaceuticals, 2012).
In 2010, the size of the domestic market was 62,055 Crore Rupees (US$11.2 billion), while
exports were 42,154 Crore Rupees (US$7.6 billion). In value, the majority of Indias
exports are to Europe and America (57.8%) (Chaudhuri et al., 2010, 453), yet in volume
terms, the majority of Indias pharmaceutical exports are outside those regions. The
chemistry-based pharmaceutical industry is significantly larger than bio-pharmaceuticals
in India, which was $1.9 billion in 20102011 (EBTC, 2012).
The following analysis is drawn from material arising out of firm-level interviews
and a detailed review of secondary sources. The field research comprised 89 interviews
with various stakeholders involved in the Indian pharmaceutical industry, conducted
in July 2009, SeptemberDecember 2011 and May 2012. The 30 largest pharmaceutical
firms (as ranked by sales according to the Centre for Monitoring the Indian Economy
for 20072008) were contacted while smaller and medium sized firms were approached
based on a geographically stratified sampling of firms identified from the National
Pharmaceutical Pricing Authoritys 2007 list of pharmaceutical manufacturing units
in India. Table 3 provides summary characteristics of the 65 firms interviewed.
Following a semi-structured interview format, senior managers of various-sized firms
were asked how their firm started and the subsequent evolution of business activities,
including the impact of policy changes in patent law, foreign investment restrictions,
quality controls, price controls, experience exporting and broader nature of activities
abroad. In addition, a total of 201 industry associations, civil society groups,
policymakers and consultants were interviewed as to the activities of their organiza-
tions, their achievements, and the perceived impact of different policies affecting, and
major challenges facing, the pharmaceutical sector. All interview notes and transcrip-
tions were coded, using QSR NVivo 9.0 software, according to value creation
activities, barriers to entry, current and future challenges facing firms, varying forms
of engagement with foreign GPNs (partnerships, exporting, hosting FDI, home to
FDI) and the influence of state institutions, policies and non-firm actors (e.g. civil
society) on processes of value creation, enhancement and capture. From this broad
analysis, it was subsequently possible to identify the three periods of (de/re)coupling

1 A single representative was interviewed from most of the 65 firms and 20 other stakeholders, although in
four cases, two people were interviewed.

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Table 3. Background information on the firms interviewed

Characteristic Distribution for each characteristic (number of firms)

Size (mfg. firms) Large (top 30): 8

Medium (31100): 7
Small (101): 44
Location of HQ Mumbai: 15
Ahmedabad: 14
Delhi: 11
Hyderabad: 11
Vadodara: 9
Bangalore: 4
Chennai: 1
Year founded: Pre-1970: 12
19701990: 32
1991present: 21
Primary activity: Trading: 6
Bulk drugs: 12
Formulations: 33
Bulk and formulation: 14
Highest level of quality (mfg. firms): Domestic: 14
WHO: 27
Regulated market (e.g. USFDA, UKMHRA): 18
Facilities abroad (mfg. firms): None: 44
Marketing and financial subsidiary only: 6
Manufacturing: 6
Marketing, manufacturing and R&D: 3
Rank of person interviewed: Chairman: 2
Managing director: 25
Vice-president/deputy managing director: 6
Chief financial officer: 6
Technical director: 7
General manager: 11
Business development manager: 2
Export/international marketing manager: 4
Investor relations manager: 2

which form the structure of the following description of value creation, enhancement
and capture processes. Secondary literature (e.g. academic, policy documents,
corporate websites, media reports) has provided an additional macro-level perspective
and greater historical depth.

5. Structural coupling, strategic decoupling and recoupling: the

case of Indias pharmaceutical industry since 1947
In this section, the development of the Indian pharmaceutical industry is discussed in
relation to the processes of value creation, enhancement and capture. Three general
periods of engagement with GPNs are distinguished: structural coupling from
Independence in 1947 until 1970, strategic decoupling from 1970 to 1991 and
recoupling from 1991 to the present.

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5.1. Structural coupling

5.1.1. Value creation and enhancement
Value creation activities in pharmaceuticals were limited in India in the 1950s and
1960s, largely dominated by global lead firms. As the Indian domestic market was small
in value terms, many foreign companies did not perceive local production could be
justified (Ravindranath, 2002, 41). Most final products were imported, although firms
such as Glaxo, Boots, Burroughs Wellcome, Parke Davis, Lederle, Merck, Ciba,
Hoechst, Roche and Wyeth did engage in a limited amount of basic formulations
activity (e.g. filling capsules, pressing tablets, packaging) (Hamied, 2005). However, the
more technically challenging bulk drugs production, involving chemical reactions to
convert raw materials into active pharmaceutical ingredients or bulk drugs, remained
outside the country (Table 4). The overwhelming majority of licenses granted to MNCs
in India between 1952 and 1968 were in formulations (360 licenses) rather than bulk
drugs (4 licenses) (Lal, 1990, 20). Domestic production was also highly dependent on
imported basic chemicals (Ramachandran and Rangarao, 1972). The presence of the
MNCs provided some industry exposure to scientists and business people, leading to
the development of initial capabilities in pharmaceuticals. For the most part, however,
as the MNCs had limited depth to their integration, this exposure was restricted to the
business side and less demanding technical operations.

Table 4. Pharmaceutical MNCs in India in 1956

Firm Year of Manufacturing presence in India

entry
Formulations Bulk drugs

Abbott Laboratories (India) 1946 No No

Alkali and Chemical Corp of India 1938 No No
Anglo French Drug Co. (Eastern) 1923 Industrial license in 1955 No
Biological Evans 1953 No
Boots Co. 1929 In 1949 No
Burroughs Wellcome & Co. (India) 1912 In 1950 No
Ciba Geigy 1928 Between 1947 and 1951 No
Cyanamid India 1947 In 1953 No
Geoffrey Manners 1943 Information not available No
German Remedies 1949 No No
Glaxo Laboratories 1924 In 1947 In 1956
Hoechst Pharmaceuticals 1956
May and Baker 1928 In 1943 In 1948
ParkeDavis 1907 In 1954 No
Pfizer 1950 cf. 1952 No
Rallis 1948 Information not available No
Reckitt & Colman 1951 Information not available No
Richardson Hindustan 1951 No No
Roussel Pharmaceuticals 1956 No No
Sandoz 1947 No No
Smith, Kline and French 1950 No No
Whiffen 1954 No No

Source: Adapted from Tyabji (2010, 10).

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With global lead firms dominating the Indian market, domestic firms had limited
opportunities to participate in value creation activity. A few domestic companies
imported pharmaceuticals from global lead firms in the United States and Western
Europe and then coordinated local distribution. Only a very small number, however,
were able to enhance their value in this period, most notably Ranbaxy. Originally, a
supplier to A. Sinoigi, a Japanese firm, and then Lepetit SpA, an Italian firm, and now
one of the largest Indian pharmaceutical firms, Ranbaxy was able to initiate
manufacturing after Lepetit SpA exited. Typically, Indian firms were only able to
initiate their own manufacturing by operating independently of the MNCs. For
example, a Vadodara-based, small-scale company interviewed commenced operations
from 1952 to 1962 by importing medicines from Parke Davis in the US and then
repacking and selling, but only later initiated its own manufacturing by supplying
government health programs, an alternative to the MNC dominated market (Interview,
Vadodara, 8 October 2011). The quality of production from the small domestic
industry which did exist was questionable (Bakshi, 2011, 12). The most significant
expansion of domestic value creation at this time was the establishment of two
public sector firmsHindustan Antibiotics in 1954 and Indian Drugs and
Pharmaceuticals Limited (IDPL) in 1961, drawing on technology from the US-owned
Merck and from the Soviet Union. With MNCs reluctant to produce bulk drugs
in India, these units helped initiate domestically based pharmaceutical production,
introducing Indian scientists to production activity and thereby creating initial domestic
capabilities.
Domestic firms faced three major challenges to greater value enhancement. First, the
pharmaceutical MNCs enjoyed a technological advantage over the developing world
(Gereffi, 1983), arising from the huge advances, among them the discovery and
manufacture of antibiotics, of the therapeutic revolution in the world-wide pharma-
ceutical industry between 1940 and 1955. Although a nationalist industrialization
programme was launched promising to regulate foreign investment (Encarnation,
1989), to access the benefits of the therapeutic revolution few alternatives existed for
India other than to permit foreign companies to enter the domestic market in the
pharmaceutical industry. As an interviewee noted:

in those days, technology was driving the industry. Technology was very secretly guarded
by the multinational companies, so it was not coming out.
Interview, Vadodara, 8 October 2011

Second, owing to their reputation for better quality products and their large teams of
medical representatives, the MNC subsidiaries had a significant marketing advantage
within India. Referring to the dominance of such firms as Pfizer, Glaxo, Abbot,
Sandoz and Ciba in the 1960s, Bhandari observes that doctors were not willing to
touch drugs made by Indian companies (2005, 48). Third, the Patent Act 1911 also
regulated Indian firms, restricting their production of imitations of new drugs
(Hamied, 1988). Although several post-Independence government enquiries had
recommended changes, MNCs succeeded for 20 years in preventing any change to
domestic patent laws. Their success underscores the corporate power MNCs then
enjoyed and has been represented as perhaps the best example [in India] of the
deployment of foreign business pressure to influence government policy (Kochanek,
1974, 308).

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 Strategic decoupling, recoupling and GPNs . 1127

5.1.2. Value capture

In the early 1960s, the prices of medicine in India were amongst the highest in the world
(U.S. Senate, 1961) and, as a result of foreign ownership, limited value was captured
within India. With limited economic and health benefits from foreign MNCS, friction
grew between foreign pharmaceutical companies and the Indian government. The
period from 1947 to 1970 can be characterized as structural coupling, with a highly
uneven power relationship between the global lead firms controlling the Indian market
and the state possessing limited bargaining power.

5.2. 19701991: strategic decoupling

Official policies from 1970 onwards supported a wide-ranging strategic decoupling with
an objective of increasing domestic pharmaceutical production and making medicines
more affordable. Disengagement from MNC control was a logical strategy, particularly
in view of the costs arising in the pharmaceutical industry as a result of transfer pricing,
the lack of R&D for developing country diseases, over-prescribing and mis-prescribing.
As Lall (1979, 22) argued:

in the absence of an alternative system of drug production, innovation and marketing, it

becomes impossible for developing countries to provide essential medicines to the majority of
their population.

An incremental policy shift involved a sequence of initiatives, starting with the Patent
Act 1970, the Drugs (Prices Control) Order 1970, the Foreign Exchange Regulation Act
(FERA) 1973, and finally and most significantly the New Drug Policy 1978. While
general restrictions on foreign-investment (FERA) were applied widely at a time when
Prime Minister Indira Gandhi would often refer to the foreign conspiracy against
India (Encarnation, 1989, 199), other policies and factors were more sector-specific and
are key to the trajectory of the pharmaceutical industry. The Patent Act of 1970, which
provided for short process patents (5 years) and no product patents in pharmaceuticals,
required relatively little state capacity to implement and was particularly influential in
an industry where new drugs can be copied relatively easily. As a result and unlike other
industries in India (Kohli, 2007), pharmaceuticals was less affected by the states limited
capacity to implement its industrial policy. As the Indian state moved to give less
priority to rapid industrialization during the 1970s, the pharmaceuticals sector received
considerable policy support because of its potential benefit for public health. Other key
distinguishing factors were the later start date of decoupling in pharmaceuticals, the
influential role of the public sector companies in developing pharmaceutical
technologies, and the lack of entry barriers for domestic firms.
Official initiatives in India during the 1970s and 1980s can be situated within the
broader movement across the developing world that came to be consolidated in the
New International Economic Order, and which sought to reform relationships with the
multinational pharmaceutical industry (Patel, 1983) to capture greater health and
economic value. While other countries made similar patent law revisions, however,
India achieved greater change in the pharmaceutical industry by imposing more
extensive restrictions. In Brazil, for example, pharmaceutical patent protection was
abolished in 1969, yet there were few other restrictions comparable to those in India,
and foreign investment in the pharmaceutical sector multiplied more than 5 times

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 1128 . Horner

between 1971 and 1979 (Gereffi, 1983, 229). In India, the FERA of 1973 and New Drug
Policy 1978 were particularly significant in reducing MNC involvement. The FERA
imposed restrictions on foreign equity holdings in core high technology industries,
including drugs and pharmaceuticals (Sahu, 1998, 67). Arising from the recommenda-
tions of the official Hathi Committee Report (1975), the New Drug Policy limited
foreign equity ownership (40% or less) and required MNCs to operate at a significantly
higher share of bulk drug production.2 This initiative was aimed at encouraging MNCs
to commence local production of bulk drugs and to protect the lucrative formulation
market for Indian firms. The Drugs (Prices Control) Order 1979 that followed placed
more than 347 drugs under price control.

5.2.1. Value creation and enhancement

The value creation activities of MNCs were significantly constrained in the new policy
environment. With patents of their own, MNC subsidiaries were not willing to copy the
patented products of rival companies (Interview, Mumbai, 19 October 2011). The head
of Sandoz India recalled that everything went well till 1974 when FERA came in, after
which they concentrated on non-pharmaceutical activities, such as agrochemicals and
dyes, which did not come under FERA restrictions (Ravindranath, 2002, 96). The New
Drug Policy was a particularly significant disincentive for MNCs in India (Fifer and
Rahman, 1983, 20). For one interviewee, it was the real critical thing that has
controlled the influence of foreign and encouraged Indian entrepreneurs (Interview,
Hyderabad, 1 November 2011). MNCs reluctantly set up a few bulk drug plants under
the restrictions, but the policy overwhelmingly favored domestic firms. The number of
foreign pharmaceutical companies more than halved in a few years, from 45 in 1978 to
22 in 1981 (Lal, 1990, 18). While the multinationals had dominated the pharmaceutical
industries in both countries in 1971, by the end of the decade the Indian domestic
private share was double that of the less-restricted Brazil (Encarnation, 1989). By the
late 1980s, only half a dozen foreign pharmaceutical companies remained in India
Bayer, Johnson and Johnson, Roche, Wyeth, IEL and Sandoz (Sahu, 1998, 74).
For domestic firms, the policy changes of the 1970s opened significant value creation
and enhancement opportunities. Some already-established firms greatly expanded and
diversified their activities during this period leading to functional upgrading. Ranbaxy,
which had earlier imported on behalf of MNCs, rapidly expanded its manufacturing.
In other interviewed examples, a medium-sized, Mumbai-based company expanded
from repacking activity into formulations production in 1979, while a small-scale Delhi-
based company, founded in 1968, started its production activities in 1978.
A large number of new firms were formed, creating domestically based production
networks, mostly independent of MNCs. Of the 58 different manufacturing firms
interviewed, more than half (31) were established between 1970 and 1991, with 26 of
those being founded after the New Drug Policy in 1978. The many companies founded
in this time period include Glenmark (1977), Jubilant Life Sciences (1978), Sun
Pharmaceutical Industries (1983), Dr. Reddys (1984) and Aurobindo (1986)all in the
15 largest in India by 2007/08 (according to CMIE). The majority of the interviewees

2 A minimum bulk drug: formulation ratio of 1:5 was allowed for foreign firms, compared with 1:10 for
Indian firms and the previous 1:12.53 for MNCs (Drabu, 1986, 194).

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stated that they had little difficulty with approval procedures for their firms. For
example, the director of a company set up in 1982 recalled how, compared with today,
the regulatory requirements to start and operate a pharmaceutical entity were less
stringent (Interview, Ahmedabad, 24 September 2011). Entrepreneurs also emerged
from IDPL, the public sector company, and its offshoots, founding Uniloids (1976),
Standard Organics (1980), Virchow Laboratories (1981), and most notably Dr. Reddys
Laboratories (1984), now one of the three largest Indian pharmaceutical firms. These
firms played a key role in the establishment of bulk drugs production in India.
Indian entrepreneurs also emerged from among those who had already gained crucial
technical and/or business experience working for MNCs in India. An interviewee
recalled how for:

technical people working in a multinational company, after 5 or 6 years you left that company
and started another company. You know all the technology.
Interview, Vadodara, 8 October 2011

For example, the managing director of a large Hyderabad-based bulk drugs producer
completed a PhD in chemistry and then, after 10 years experience working for Glaxo
India, started his own firm in 1984. He had experience:

in all aspects of the pharmaceutical product development, R&D, quality control, process devel-
opment, CGMP manufacture, so he figured if I can do it for Glaxo, why dont I do it for myself?
Interview, Hyderabad, 15 November 2011

In other instances, the founders of two Bangalore-based companies worked for Smith
Kline & French (SKF) before starting their own firms, respectively a bulk drugs
operation in 1984 and a small scale formulations facility in 1989. The former recalled
that working at SKF in the late 1970s and early 1980s gave:

exposure to a number of areas. I went to meetings with people from various departments,
various divisions. It was really my learning ground.
Interview, Bangalore, 24 November 2011

In addition to technical expertise, entrepreneurs also gained business experience. Some

of those who had worked as marketing representatives for pharmaceutical MNCs also
set up their own small formulation units (Interview, Delhi, 8 September 2011; Interview,
Ahmedabad, 30 September 2011).
Domestic firms adopted two distinct value enhancement strategies. Some supplied
MNCs, for example one interviewee described how his company, which had none of its
own formulation brands in the market, was able to become the preferred partner of
MNCs exiting India (Interview, Mumbai 27 July 2009). In another example, a Mumbai-
based trading company, founded in 1954, created a manufacturing arm in 1980 to
produce one of Upjohns products before subsequently further diversifying (Interview,
Mumbai, 19 October 2011). MNCs made use of the loan licensing system, whereby one
company could supply another with ingredients to manufacture a product that it would
then take back to sell. Drabu (1986, 195) estimated that 32% of the bulk drugs required
by MNCs were manufactured by other firms in India in the mid-1980s. Through
supplying MNCs which still dominated the marketing of formulations, the domestic
sector, particularly small scale firms, expanded.

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 1130 . Horner

An alternative strategy for value enhancement was through imitative learning as part
of an altered relationship with MNCs. Indian firms had opportunities to access
technology independently of MNCs, by introducing products that were under patent
abroad. One interviewee recalled that:

we were not governed in the patent law. The multinationals say you cannot market a brand,
but you can reengineer and you can market the similar brand product in a different
manufacturing form or different process. That was the breakthrough.
Interview, Vadodara, 8 October 2011

Domestic firms could access knowledge through journals, manuals, contacts abroad
and by deconstructing global lead firms products in their laboratories, to then produce
their own imitated version (Horner, 2014). In this manner, Indian companies became
extremely good at chemistry skills (Interview, Mumbai, 28 July 2009), developing
numerous new processes. A number of drugs were introduced within 23 years of their
creation abroad (Hamied, 1988). MNCs were seemingly reluctant to license in
circumstances where Indian firms had the ability to copy their technology (Interview,
Bangalore, 21 November 2011), something which was legally permissible in the absence
of product patents. The technological advantage of the MNCs, the basis of their power
during the earlier period of structural coupling, was gradually and progressively eroded.
By the late 1970s, decoupling had allowed the Indian domestic firms to master the
technology of at least 76.8% of the bulk drugs and 97.5% of the formulations in
the Indian market, thereby making technology no longer a bottleneck for undertaking
the task of replacing most of the manufacturing activities of the TNCs (Chaudhuri,
1984, 1373).
The major remaining barrier to greater value enhancement for domestic firms was
the marketing advantage of the MNCs. Doctors and patients evidently had little
confidence in locally made products. One interviewee noted that in the 1980s and
earlier, for the doctors to initially believe [a product was effective], a multinational
had to promote it (Interview, Hyderabad, 17 November 2011). MNCs also had
considerably greater resources to provide as incentives to doctors (Interview, 20
October 2011, Mumbai). Nevertheless, corporate and legislative restrictions limited
the activities of MNC subsidiaries, with one interviewee suggesting that people in
May & Baker couldnt shift a reaction six inches without consulting London
(Interview, Hyderabad, 10 November 2011). More importantly, once Indian domestic
manufacturing did emerge, foreign companies were apparently unable to compete with
the cost structure of Indian manufacturers and so they cut back their activities
(Interview, 15 November 2011, Hyderabad).

5.2.2. Value capture

Considerably greater value was captured domestically as Indian-owned firms took the
opportunity to serve the once foreign-dominated domestic market during this period.
The share of the MNCs in the domestic pharmaceutical market declined from 80% to
90% in 1970 to 39% in 1993 (Table 5).
As a result of these changes, the prices of some products fell substantially to among
the lowest in the world. By 1988, the average price of a range of nine drugs, including
antihypertensives, antiulcer and cardiovascular drugs was only 25% of the cost of the

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 Strategic decoupling, recoupling and GPNs . 1131

Table 5. Pharmaceutical market share (percent): MNCs vs. Indian companies

Year Multinational Indian public sector Indian private firms

1970 8090 510 510

1982 50 2 48
1993 39 1 60

Source: Huang and Hogan (2002, 18).

same drugs in the UK (calculated from Hamied, 1988). In the 1617 year period
following the first moves toward strategic decoupling in the pharmaceutical sector, the
rise in the wholesale price index of medicines in India was, at 103.7%, significantly
lower than all products, at 277.8% (Singh, 1988).
In sum, the power relationship between multinationals and the Indian host territory
was radically rebalanced during the 1970s and 1980s. Global lead firms faced
progressively heavier restrictions, leading to a decline in the foreign dominance of the
Indian market. The Indian domestic industry grew, much of it independently from the
global lead firms. A sequence of policies had the cumulative effect of producing
strategic decoupling, facilitating the development of initial capabilities in preparation
for subsequent recoupling.

5.3. 1991-Present: recoupling and emerging SouthSouth production networks

Since 1991, as part of a shift towards the Washington Consensus approach to
economic development, Indias economic policy has emphasized external liberaliza-
tion. State reforms have dramatically changed the policy environment for Indias
pharmaceutical industry, reducing price controls and allowing 100% inward and
outward FDI in pharmaceuticals. Constrained in part since joining the World Trade
Organization (WTO) in 1994, the state has become much less confrontational vis-a-vis
MNCs, and has used the agency of Pharmexcil, a specialized exports promotion
organization established in 2004 and a special Department of Pharmaceuticals set up
since 2008 to promote the participation of Indian firms into various GPNs. A new
phase involving recoupling has been given further impetus by the reintroduction of
pharmaceutical product patents since 2005 as a result of Indias compliance with
the WTOs Trade-Related Aspects of Intellectual Property Rights Agreement
(Chaudhuri, 2005). A mix of external pressure and emergent domestic lobbies
(Pedersen, 2000) facilitated these changes in state orientation and in the policy
environment for coupling.

5.3.1. Value creation and enhancement

Global lead firms have been increasingly engaged, particularly since the mid-2000s, in
greater value creation activity in India. As well as their traditional emphasis on
patented products, MNCs are increasingly active as powerful buyers of quality
generics production, acting as manufacturers without factories (Haakonsson, 2009).
India provides key assets, in particular the low cost generic production and
considerable process chemistry skills developed during the period of strategic

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 1132 . Horner

decoupling, to meet this emerging need. One interviewee explained: in India there are
two things which are very clearly advantageousthe skill and the knowledge which is
available in abundance; second, the cost (Interview, Mumbai, 23 July 2009). Another
explained that:

You see what Indian companies are doing in, say, US markets - taking market share or putting
that kind of pricing pressure into those markets. Other [multinational] companies have to
ensure that they have similar skills or infrastructure available to them. That is why they have to
come here.
Interview, Mumbai, 20 July 2009

The growing domestic market is another reason for the increasing interest of
pharmaceutical MNCs in India:

All the MNC companies who had already exited are now you know frantically strategising
their India business. You know how do I enter the market? Because its a $7 billion3 market,
growing at 12%. It cant be ignored.
Interview, Mumbai, 27 July 2009

Pharmaceutical MNCs have been partnering with large Indian firms, such as
Wockhardt, Cipla and Piramal Healthcare, as part of a more symmetrical coupling
with mutually advantageous value enhancement opportunities. One executive from a
large Indian firm observed that foreign MNCs need a marketing channel in India and
we need access to the product pipeline (Interview, Mumbai, 21 July 2009). In the
reverse direction, global lead firms provide access to highly-regulated markets in North
America and Western Europe by marketing and distributing products on behalf of
Indian firms. For example, an interviewee explained that:

We have partnered with multiple generic companies like Hospira, Actavis, Apotex, and Dava
to name a few in terms of putting our medicines into the market. We followed a policy where
we concentrate more on development and manufacturing and leave the front-end marketing
to the local people.
Interview, telephone, 20 July 2009

By providing a growing number of Indian firms with a revenue stream far greater than
could be obtained by solely serving the domestic market, these arrangements have acted
as an increasingly significant additional source of value enhancement as well as a source
of opportunities for learning about quality standards and production techniques for
regulated markets (Interview, Mumbai, 21 July 2009). In the words of the technical
manager of a medium-sized contract manufacturer:

Basically all the systems, the processes, the requirements, the SOPs [standard operating
procedures], everything is what we have adopted from these multinational companies.
Interview, Vadodara, 8 October 2011

3 By the end of 2010, the official estimate for the size of the domestic market was $11.2 billion (Department
of Pharmaceuticals 2012).

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 Strategic decoupling, recoupling and GPNs . 1133

These improvements are complemented by Indian firms greater engagement in process

and product R&D, encouraged by government tax incentives, and increasing
involvement in research partnerships with MNCs. Under recoupling, for the most
part, Indian pharmaceutical firms have greater bargaining power to engage in these
relationships than under the structural coupling of the 1950s and 1960s.
Value creation and enhancement activities also involve Indian firms establishing their
own, increasingly global, production networks. Those firms now emerging as global
generic firms target both regulated and semi-regulated markets (19 of the 59
manufacturing firms interviewed), and have quality approvals from bodies such as
the United States Food and Drug Administration (USFDA), United Kingdom
Medicines and Healthcare Products Regulatory Agency (UKMHRA) and the World
Health Organization (WHO). Most firms still conduct the vast majority of their
production from India. Cipla and Orchid, two of the largest, do so exclusively, taking
advantage of the lower costs available, the presence of skilled scientists in the generics
industry and the availability of facilities that meet international regulatory require-
ments.4 Increasingly successful in the lucrative markets of North America and Western
Europe, and focusing on generic products once they come off patent, these Indian-
controlled enterprises are also internationalizing through establishing manufacturing (9
of the 59 manufacturing firms interviewed), R&D (3 of the 59), marketing and financial
subsidiaries (15 of the 59) abroad. The highly regulated markets of the United States
and United Kingdom are favored manufacturing locations, with market access a major
consideration in the acquisition of plants. Ranbaxy and Dr. Reddys, in particular, have
large numbers of subsidiaries overseas, in addition to a few other firms including
Jubilant Life Sciences, Wockhardt and Sun Pharmaceuticals. Indian pharmaceutical
firms are thus increasingly forming GPNs of their own from their base in the Global
South.
The new network relationships include Indian firms forging partnerships across the
Global South, exporting exclusively to Asian, African, and Latin American markets.
Compared with regulated markets, these are destinations where the registration and
quality approval process is less demanding (Interview, Delhi, 3 September 2011).
Indian firms are particularly attracted to larger developing country markets, such as
Ghana and Nigeria in West Africa, Brazil and Mexico in Latin America, Sri Lanka
and Bangladesh in South Asia, while Russia and CIS countries are also important
export destinations. In addition to 19 firms which serve regulated and semi-regulated
markets, these exporters include a significant number of smaller firms (32 of the 59).
Operating mostly independently of any global lead firms, smaller pharmaceutical
enterprises have formed alternative networks that rely on merchant exporters or
distributorship arrangements rather than overseas manufacturing subsidiaries.
Pharmexcil has helped promote such trade relationships through, for example
organizing buyerseller meets with industry representatives from Latin America
and Africa. In these locations, Indian firms are participating in production networks
for low-value generics, without powerful lead firms (Haakonsson, 2009), exporting to
semi-regulated markets where the challenges for value enhancement are less than in the
more competitive environment within India (Interview, Vadodara, 7 October 2011).
However, in a sign of changed circumstances, some Indian firms are now facing

4 India now has the largest number of USFDA-approved plants outside of the United States.

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 1134 . Horner

challenges as a few African countries, in particular, attempt to develop their own

domestic pharmaceutical industries. One interviewee noted that Kenya is now
supporting its own local pharmaceutical industry and is in a similar situation to
India in the 1970s, with a comparable emphasis on restricting foreign companies
(Interview, Delhi, 3 September 2011).

5.3.2. Value capture

Value captured by the pharmaceutical industry in India has continued to grow rapidly
in recent years during recoupling. Indeed, significant expansion in global markets as
well as the domestic market has allowed the industry to grow rapidly, at between 9%
and 19% per annum over the 5 years from 2005 to 2010 (Department of
Pharmaceuticals, 2012). With the domestic pharmaceutical market still dominated by
Indian-owned and predominantly India-based firms, the value created is largely
captured domestically. The industry has also created considerable value from a health
perspective, providing more affordable medicines not only within India but also
globally, and as a result becoming known as the pharmacy of the developing world.
Perhaps most notably, competition from India and China has been shown to have
lowered prices across a variety of therapeutic categories (Hafner and Popp, 2011, 2).
Cipla, one of the largest Indian companies, provides a striking example of price
reduction, having in the early 2000s lowered the price of antiretroviral medicine supply
from $10,000 to $350 a year. However, gaps have remained in access to medicines
within India (Gopakumar, 2008), while concerns persist from a health perspective
regarding potential access issues that may arise from recoupling and reintegration into
GPNs. Large Indian pharmaceutical firms can earn substantial revenue from partnering
with MNCs to serve lucrative export markets, particularly in North America and
Western Europe. However, such an orientation may promote R&D spending for those
therapeutic categories most associated with high-income markets while reducing the
incentive to produce generic alternatives to MNCs products (Chaudhuri et al., 2010). In
the light of recent acquisitions by MNCs in India, the debate has resurfaced as to
whether restrictions on FDI should be re-introduced (Maira Committee, 2011), an
indication that tensions surrounding the role of foreign pharmaceutical firms in India
are again on the rise as a result of the repercussions of recoupling.
In sum, the case of GPNs and the Indian pharmaceutical industry involves a series of
distinct coupling and decoupling processes. Each of these stages has had distinct
implications for the type and degree of value creation and enhancement activities and
the degree of value capture, as summarized in Table 6.

6. Conclusion
The Indian pharmaceutical experience demonstrates how a sequence of strategic
decoupling and recoupling can create opportunities for imitative learning and
functional upgrading while also re-balancing the earlier asymmetrical power relations
between territories and GPNs. Strategic decoupling in the Indian pharmaceutical
industry has been driven by dual imperatives, one focused on economic benefits and
another on public health concerns, in particular the provision of medicines. Granting a
historical trajectory of strategic decoupling and recoupling has emerged, some of it has
been forced out of circumstance, notably the extent of liberalization and the

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 Strategic decoupling, recoupling and GPNs . 1135

Table 6. Summary of value creation, enhancement and capture in GPNs for India and the pharmaceutical
industry

Value creation Value enhancement Value capture

Structural Limited: import of Restricted: technological, Limited: MNCs dominate,

coupling formulation by marketing and legal transfer pricing and
(19471970) MNCs (patent law) barriers high prices
Strategic Growing for domestic Expanded: process and Growing: Indian firms
decoupling market: bulk drug, functional upgrading increase domestic market
(19701991) formulation share, lower medicine
prices for consumers
Recoupling Growing for global Expanded: Increased Growing: Indian firms
(1991present) market: bulk drug, volumes, process and expand in global markets
formulation product R&D

Source: Authors compilation.

introduction of product patents, both of which have had major influences on the
subsequent forms of coupling. Although the state has aimed at breaking the negative
relationship with the multinational pharmaceutical industry and promoting domestic
firms, state action, particularly in relation to recoupling, has also been very much
contingent on the global and domestic economic contexts.
A focus on the couplings between territories and firms illuminates the relational
nature of development under economic globalization, and the analysis of decoupling in
GPNs gives renewed attention to the cautionary approach to integration taken by the
original world systems literature (Bair, 2009). Decoupling may be strategic for a
particular phase of development, allowing various scales of territories to improve their
form of integration into GPNs. By focusing on the varied Indian experience, this article
has sought to produce a deeper understanding of the breaking up and reform of
coupling relationships and their development implications. Strategic decoupling in the
Indian context was influenced by the possibility of governing access to a very large
internal market with growing purchasing power, which provided opportunities for
domestic firms to engage in a wide range of activities. However, smaller countries
elsewhere in the Global South may be more constrained in their opportunities for
engaging in similar forms of decoupling and recoupling.
With changes in global trade rules since the formation of the WTO in 1994, the policy
autonomy of developing countries has been substantially reduced (Wade, 2003; Lall,
2004), but states still have policy options to shape interaction with MNCs in areas such
as tariff ceilings, restrictions on FDI, requirements to hire local labor, technology
transfer, R&D, and domestic subsidies (Chang, 2009). The rise of new end markets in
the Global South (Kaplinsky and Farooki, 2011; Staritz et al., 2011; Gereffi and Lee,
2012) presents new opportunities for coupling and decoupling. In 2012, for the first
time, a greater volume of exports from the Global South went to other countries in the
South than to the Global North (The Economist, 2013). Yet, many current
development policies give priority to attracting the FDI of global lead firms (Reiter
and Steensma, 2010) and to providing technical assistance and capacity building to
meet the export standards for high income markets (Staritz et al., 2011). The Indian

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 1136 . Horner

experience from the recent past suggests that alternative pathways may be available for
regions and nations struggling to achieve strategic coupling and upgrading through
GPN integration.
With the prospect that more inward-looking development strategies focused on
domestic and regional markets in the Global South may be emerging (Gereffi, 2014),
further research might explore how the potential of, and limits to, strategic decoupling,
as well as coupling, processes are manifest, including in smaller countries who might be
able to exploit growing niche opportunities in supra-national regional markets within
the Global South. The continued role of the state and its scope in planning and
anticipating coupling processes for territorial benefit also warrants further attention.
Ultimately, more analysis in other sectors and territories is needed to further
understand when these realignments become strategic and significant as economic
globalization continues to unfold.

Acknowledgements
The National Science Foundation Geography and Regional Science Programs Doctoral
Dissertation Research Improvement Grant (no. 1103231) and the Association of American
Geographers Economic Geography Specialty Group Graduate Student Research Award 2012
are gratefully acknowledged for supporting the fieldwork on which this paper is based. The
insightful comments of Harald Bathelt, the journal referees, Yuko Aoyama, James T. Murphy,
Balaji Parthasarathy and Seth Schindler are also gratefully acknowledged, as is feedback from the
organisers and participants in the Expanding the economic geography-development geography
trading zone session at RGS-IBG 2012 in Edinburgh and in the Value chains, neoliberalism
and global restructuring session at AAG 2013 in Los Angeles. The usual disclaimers apply.

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