Purpose: Industrialization has led to centralized development, urbanization, migration and concentration of people in selected areas, that is, cities. The current model of development is not a sustainable one. While progress has been made through this model, it has also increased social inequalities, damaged health and caused irreversible depletion of the natural environment. The need of the hour is to create a new model of development to achieve sustainable development across rural and semi-urban regions.

Objective: The objective of the new development model is to find out the relation between learning and innovation capability on the customer-based performance of a textile-based micro, small and medium enterprise (MSME). The research questions that will be answered are how rural women working in textile MSMEs can improve their learning and innovation capabilities? What is the impact of learning and innovation capabilities on the customer-based performance of the MSMEs?

Methodology: The research method used for this study was based on primary data collected from the stakeholders of rural textile-based MSMEs and secondary data.

Findings and Suggestions: The paper suggests that localized micro-factories enable people to stay close to their roots. The need of the hour is to train people with the required skill sets. The learning and innovation capability of the MSMEs reflects on their customer-based performance. The implementation of advanced technology will make localized micro-factories profitable. These technologies will provide services to citizens efficiently and equitably. The proposed smart cities will have to create more equitable and symbiotic relationships with the surrounding semi-urban and rural areas. The emphasis should be on learning new techniques of production using locally available resources. Once the new techniques have been learned, the company should be able to implement them innovatively to improve its customer experience.

Sustainable development, localized micro-factories, learning capability, innovation capability, customer-based performance

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