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The Unequal Effect of India's Industrial Liberalization on Firms’ Decision to Innovate: Do Business Conditions Matter?

Author

Listed:
  • Maria Bas

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Caroline Paunov

    (OCDE / OECD - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development)

Abstract

Product‐market competition can boost industry growth if firms invest more in innovation. Using a natural policy experiment, the removal of India's License Raj, we show that firms in liberalized industries were 9% more likely to invest in R&D than firms in non‐liberalized industries. However, the impacts were not the same across firms of different size. After the reforms, firms in the top quartile were 23% more likely to invest in R&D than those in the lowest size quartile. Both productivity differences across firms and the heterogeneous impacts of business conditions on firms explain unequal effects of India's industrial liberalization reform.

Suggested Citation

  • Maria Bas & Caroline Paunov, 2018. "The Unequal Effect of India's Industrial Liberalization on Firms’ Decision to Innovate: Do Business Conditions Matter?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-02483510, HAL.
    • Handle: RePEc:hal:cesptp:hal-02483510
    DOI: 10.1111/joie.12163
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    Citations

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    Cited by:

    1. Luca Grilli & Boris Mrkajic & Emanuele Giraudo, 2023. "Industrial policy, innovative entrepreneurship, and the human capital of founders," Small Business Economics, Springer, vol. 60(2), pages 707-728, February.
    2. Shailender Kumar Hooda, 2024. "Firms'' R&D Activities in Indian Organised Manufacturing Sector: Are Tech-SMEs Different?," Working Papers 285, Institute for Studies in Industrial Development (ISID).
    3. Chen, Yenn-Ru & Jiang, Xiaoquan & Weng, Chia-Hsiang, 2020. "Can government industrial policy enhance corporate bidding? The evidence of China," Pacific-Basin Finance Journal, Elsevier, vol. 60(C).
    4. Paunov, Caroline & Rollo, Valentina, 2016. "Has the Internet Fostered Inclusive Innovation in the Developing World?," World Development, Elsevier, vol. 78(C), pages 587-609.
    5. Bas, Maria, 2020. "The effect of communication and energy services reform on manufacturing firms’ innovation," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 339-362.
    6. Liu, Shasha & Ji, Mianmian & Wang, Huijuan, 2021. "Decentralization and firm innovation: Evidence from a natural experiment in China," Economic Modelling, Elsevier, vol. 94(C), pages 501-512.
    7. Liu, Shasha & Yin, Shanshan & Yin, Chuan & Sheng, Yan, 2021. "Does the price of natural resources affect firms’ total factor productivity? Evidence from a natural experiment in China," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 37-50.
    8. Ivus, Olena & Jose, Manu & Sharma, Ruchi, 2021. "R&D tax credit and innovation: Evidence from private firms in india," Research Policy, Elsevier, vol. 50(1).
    9. Madan Dhanora & Ruchi Sharma & Walter G. Park, 2021. "Technological Innovations and Market Power: A Study of Indian Pharmaceutical Industry," Millennial Asia, , vol. 12(1), pages 5-34, April.

    More about this item

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • 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
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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