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Testing the effect of investments in IT and R&D on labour productivity: New method and evidence for Indian firms

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  • Khanna, Rupika
  • Sharma, Chandan

Abstract

Utilizing a micro-level dataset of 900 firms for the period 2000–2016 from Indian manufacturing, this paper explores the effects of technological investments on labour productivity performance of firms by looking at investments in Information Technology (IT) and Research & Development (R&D). The present study is the first to assess the role of IT and R&D jointly for Indian manufacturing. To control for transmission bias in production function estimation, a GMM-based one step control function estimator is applied. We find large effects of both IT and R&D across various sub-samples. Further, our results imply that there is a complementarity between IT and R&D in generating labour productivity growth.

Suggested Citation

  • Khanna, Rupika & Sharma, Chandan, 2018. "Testing the effect of investments in IT and R&D on labour productivity: New method and evidence for Indian firms," Economics Letters, Elsevier, vol. 173(C), pages 30-34.
    • Handle: RePEc:eee:ecolet:v:173:y:2018:i:c:p:30-34
    DOI: 10.1016/j.econlet.2018.09.003
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    References listed on IDEAS

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    Cited by:

    1. Sahoo, Pradipta Kumar & Rath, Badri Narayan & Le, Viet, 2022. "Nexus between export, productivity, and competitiveness in the Indian manufacturing sector," Journal of Asian Economics, Elsevier, vol. 79(C).
    2. Stefan Schweikl & Robert Obermaier, 2020. "Lessons from three decades of IT productivity research: towards a better understanding of IT-induced productivity effects," Management Review Quarterly, Springer, vol. 70(4), pages 461-507, November.
    3. Arup Mitra & Chandan Sharma, 2020. "Employment and TFP Impact of Technologies in the Developing World: Domestic versus Imported Expertise," IEG Working Papers 410, Institute of Economic Growth.
    4. Asmita Goswami & K. Narayanan, 2022. "Technological Efforts, Firm Ownership and Productivity: A Study of Information Technology Service Firms in India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 23(1), pages 86-109, March.
    5. Huňady, Ján & Pisar, Peter & Durcekova, Ina, 2019. "Business R&D Expenditure in the ICT Sector: Effects on Business Performance Indicators," Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference (2019), Rovinj, Croatia, in: Proceedings of the ENTRENOVA - ENTerprise REsearch InNOVAtion Conference, Rovinj, Croatia, 12-14 September 2019, pages 519-530, IRENET - Society for Advancing Innovation and Research in Economy, Zagreb.
    6. Khanna, Rupika & Sharma, Chandan, 2022. "Impact of information technology on firm performance: New evidence from Indian manufacturing," Information Economics and Policy, Elsevier, vol. 60(C).
    7. Dimitrios Exadaktylos & Mahdi Ghodsi & Julia Grübler & Tatiana Romanova & Roman Stöllinger, 2021. "Monthly Report No. 1/2021," wiiw Monthly Reports 2021-01, The Vienna Institute for International Economic Studies, wiiw.
    8. Khanna, Rupika & Sharma, Chandan, 2021. "Do technological investments promote manufacturing productivity? A firm-level analysis for India," Economic Modelling, Elsevier, vol. 105(C).

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    More about this item

    Keywords

    Information technology; Research & development; Production function estimation; Labour productivity;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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