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Effects of Policy Reforms on Firm Innovation

Author

Listed:
  • Murat Şeker

    (Turkish Airlines Headquarter)

  • Mehmet Fatih Ulu

    (Koc University)

Abstract

The regulatory environment in a country is an important factor that affects firm performance. This study investigates the impact of a particular regulation—license requirements for certain firm activities—on the innovation performance of Indian firms in the 1990s. Using a unique firm-level panel data set, it shows that the removal of license requirements led to an eight percentage points higher innovation rate within two years following the reform. We measure innovation as the introduction of new product varieties that had not been produced by the firm before. It takes a longer time for firms to innovate in industries in which they were not producing before. The findings of this study are also robust to the inclusion of controls for other policy reforms that occurred during the period of licensing reform. They also persist in tests with different subgroups of firms and with the use of alternative estimation methods.

Suggested Citation

  • Murat Şeker & Mehmet Fatih Ulu, 2022. "Effects of Policy Reforms on Firm Innovation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(1), pages 95-121, August.
    • Handle: RePEc:kap:revind:v:61:y:2022:i:1:d:10.1007_s11151-022-09861-2
    DOI: 10.1007/s11151-022-09861-2
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    Cited by:

    1. Şeker, Murat & Ulu, Mehmet Fatih & Rodriguez-Delgado, Jose Daniel, 2024. "Imported intermediate goods and product innovation," Journal of International Economics, Elsevier, vol. 150(C).

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    More about this item

    Keywords

    Innovation; Research and development; Regulatory environment; Regulations; Industrial policy; India;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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