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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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    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. Khanna, Rupika & Sharma, Chandan, 2024. "Beyond information technology and productivity paradox: Analysing the channels of impact at the firm-level," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    3. 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.
    4. Ishmael Tingbani & Samuel Salia & Christopher A. Hartwell & Alhassan Yahaya, 2025. "Looking in the rear‐view mirror: Evidence from artificial intelligence investment, labour market conditions and firm growth," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 961-982, January.
    5. Lebrand,Mathilde Sylvie Maria & Mongoue,Arcady & Pongou,Roland & Zhang,Fan, 2024. "Does Africa Need More Roads in the Digital Age ? Evidence of Complementarities in Infrastructure," Policy Research Working Paper Series 10730, The World Bank.
    6. Arup Mitra & Chandan Sharma, 2025. "Technological Effects on Employment and Productivity in Developing World: Domestic Versus Imported Expertise," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 68(2), pages 511-540, June.
    7. 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.
    8. 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.
    9. 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).
    10. Sumaira Saeed & Miraj ul Haq & Arshad Ali Bhatti, 2024. "The Role of Moderators on Product Quality and Export Flows: The Case of Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 6(1), pages 27-36.
    11. 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.
    12. 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.
    13. 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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    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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