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Does Institutional Quality Matter for Firm Performance? Evidence from India


  • Rajesh Raj S.N.
  • Kunal Sen


How does institutional quality affect firm performance? We examine the effect of various measures of institutions on firm productivity, using a rich micro level data on manufacturing enterprises in India drawn from the Enterprise Surveys of the World Bank. Our results suggest that bureaucratic corruption negatively influences firm productivity. In contrast, other institutional variables seem to have less influence on firm performance. This suggests that the focus of the Indian government needs to be redirected to address the corrupt practices at various levels rather than focusing just on improving the measures of doing business.

Suggested Citation

  • Rajesh Raj S.N. & Kunal Sen, 2017. "Does Institutional Quality Matter for Firm Performance? Evidence from India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 18(2), pages 184-213, September.
  • Handle: RePEc:sae:soueco:v:18:y:2017:i:2:p:184-213

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    Cited by:

    1. Adamu Jibir & Musa Abdu & Farida Bello & Iliya Garba, 2019. "Do Institutions Promote Firm Performance? Evidence from Sub-Saharan Africa," Review of Market Integration, India Development Foundation, vol. 11(3), pages 111-137, December.
    2. Jain, Ritika, 2020. "Bribery and firm performance in India: A political economy perspective," Journal of Asian Economics, Elsevier, vol. 68(C).

    More about this item


    Institutional quality; corruption; firm performance; productivity; WBES; India;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance


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