The Decision to Import Capital Goods in India: Firms' Financial Factors Matter
Are financial constraints preventing firms from importing capital goods? Sourcing capital goods from foreign countries is costly and requires internal or external financial resources. A simple model of foreign technology adoption shows that credit constraints act as a barrier to importing capital goods under imperfect financial markets. In our study, we investigate this prediction using detailed balance-sheet data from a sample of about 5,500 Indian manufacturing firms per year, having reported information on financial statements and imports by type of good over the period 1996-2006. Our empirical findings shed new light on the micro determinants of firms’ choice to import capital goods. Baseline estimation results show that firms with a lower leverage and higher liquidity are more likely to source their capital goods from foreign countries. Quantitatively, an improvement of the liquidity or leverage ratio by 10% increases the probability of importing capital goods by 3% to 5% respectively, independently of productivity. These findings are robust to alternative measures of foreign technology. The effect of leverage is also robust with respect to specifications dealing directly with reverse causality.
|Date of creation:||Mar 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 33 01 53 68 55 00
Fax: 33 01 53 68 55 01
Web page: http://www.cepii.fr
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mirabelle Muûls & Mauro Pisu, 2007.
"Imports and Exports at the Level of the Firm: Evidence from Belgium,"
CEP Discussion Papers
dp0801, Centre for Economic Performance, LSE.
- Mirabelle Mu�ls & Mauro Pisu, 2009. "Imports and Exports at the Level of the Firm: Evidence from Belgium," The World Economy, Wiley Blackwell, vol. 32(5), pages 692-734, 05.
- Mirabelle Muûls & Mauro Pisu, 2007. "Imports and Exports at the Level of the Firm : Evidence from Belgium," Working Paper Research 114, National Bank of Belgium.
- Mirabelle Muuls & Mauro Pisu, 2007. "Imports and exports at the level of the firm: evidence from Belgium," LSE Research Online Documents on Economics 19711, London School of Economics and Political Science, LSE Library.
- Mirabelle Muûls & Mauro Pisu, . "Imports and exports at the level of the firm: Evidence from Belgium," Discussion Papers 07/28, University of Nottingham, GEP.
- Ann E. Harrison & Margaret S. McMillan, 2001. "Does Direct Foreign Investment Affect Domestic Firms' Credit Constraints?," NBER Working Papers 8438, National Bureau of Economic Research, Inc.
- Joel Rodrigue & Hiroyuki Kasahara, 2004.
"Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence,"
Econometric Society 2004 North American Summer Meetings
511, Econometric Society.
- Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
- Hiroyuki Kasahara & Joel Rodrigue, 2005. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," University of Western Ontario, Economic Policy Research Institute Working Papers 20057, University of Western Ontario, Economic Policy Research Institute.
- Schor, Adriana, 2004. "Heterogeneous productivity response to tariff reduction. Evidence from Brazilian manufacturing firms," Journal of Development Economics, Elsevier, vol. 75(2), pages 373-396, December.
- Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
- Rivera-Batiz, Luis A. & Romer, Paul M., 1991.
"International trade with endogenous technological change,"
European Economic Review,
Elsevier, vol. 35(4), pages 971-1001, May.
- Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:cii:cepidt:2011-06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.