In the auto-parts sector in India, a handful of auto suppliers who were exposed to greater competition since the 1990s achieved higher productivity and became global suppliers, while carmakers who were protected remained sub-scale and unproductive to a large extent (Saraf 2016). Opening up markets through reduction of import tariffs from 60 to 12.5 percent since the 1990s enabled auto-parts suppliers to cross the fixed cost of exporting through accessing cheaper intermediate inputs, learning from working with discerning buyers in OECD and other markets, and forming technical alliances to learn new technologies. Although there were subsidized public training programs, these global suppliers invested in their own OJT programs to ensure a supply of talented line managers, business managers, and technical floor-level workers to maintain the high productivity levels required to participate in export markets.

More product market competition is found to be linked to increasing aggregate management capability—another channel that affects provision of OJT, as previously noted. More competitive product markets would push the badly managed firms out and “raise the stakes” for existing firms that could capture more market share and allocate better resources toward them (Bloom and others 2009).<sup>19</sup> In such markets, managers would be more fearful of losing their jobs and firm owners would be more likely to select competent Chief Executive Officers (CEOs) (ideally non-family member).<sup>20</sup> Another way more competition and trade could influence internal firm levers is by helping firms grow or creating the conditions for this. Large firms tend to invest more in skills, R&D and other technologies. Indeed, studies also show a positive correlation between firm size and OJT provision in developed and developing countries (Almeida and Aterido 2008; Black and Lynch 2001; Frazer 2006; Frazis, Gittleman and Joyce 2000; Pierre and Scarpetta 2004; and Rosholm and others 2007). Some of these studies also find that firms that initiate more innovative activities (for example, more investment in R&D) tend to train more. Pierre and Scarpetta (2004) and Almeida and Aterido (2008) find that larger and more innovative firms tend to train more (based on data from the World Bank Enterprise Data Surveys for 66 countries). There is evidence of a positive and significant relationship between OJT and firm characteristics (size, innovative activities, and technology adoption) for the Latin America and Caribbean region (Gonzales-Velosa, Rosas, and Flores 2016).

Overall, the argument for competition and trade increasing the incidence of OJT is not very different from the reasons why firms exposed to competition increase their demand for other productivity-enhancing activities, such as ICT or R&D.<sup>21</sup> However, as in the case of these activities, it remains unclear whether the directional link is from size to productivity, or vice versa. Do firms grow larger first, obtain economies of scale, and then demand new technologies and OJT? Or, does it work the other way around? Do firms that are able to adopt productivity-

> 19 In their surveys, Bloom and others (2009) asked managers how many competitors they faced, and found the average management score was significantly higher when firms reported facing more competitors. Using other measures of competition not reported by managers, like the import penetration rates (measured by imports as a share of domestic production) or Lerner indices of competition, yields a similar general result that management quality tends to increase with competitive intensity.

> 20 Meritocratic selection of a CEO (ideally a non-family member) is linked to better management outcomes. However, as family-owned firms typically have less debt, they are less vulnerable to product market pressures, and continue to survive—although with economic losses.

> 21 See Bayo-Moriones and Lera Lopes 2007; Dasgupta and others 1999; Giunta and Trivieri 2007; Haller and Siedschlag 2011; Hollenstein 2004; Keller, 2004; Kowtha and Choon 2001; Kretschmer, Miravete, and Pernías 2012; Narula and Zanfei, 2005; and Lucchetti and Sterlacchini 2004.

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