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Effects of licensing reform on firm innovation : evidence from India

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  • Seker, Murat

Abstract

The regulatory environment in a country can affect firm performance. This study investigates the impact of a particular regulation, namely license requirements for certain firm activities, on the innovation performance of Indian firms. First it presents a model of firm and industry evolution that explains the dynamics of multi-product firms. Then, using a firm level panel data set, it shows that removal of license requirements led to roughly 5 percentage points faster innovation rates where innovation is measured as introduction of new product varieties that had not existed in the market. The results are robust to inclusion of controls for the other policy reforms that occurred during the period of licensing reform.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5876.

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Date of creation: 01 Nov 2011
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Handle: RePEc:wbk:wbrwps:5876
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Keywords: E-Business; Labor Policies; Microfinance; Markets and Market Access; Knowledge for Development;

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  27. Seker, Murat, 2009. "A structural model of establishment and industry evolution : evidence from Chile," Policy Research Working Paper Series 4947, The World Bank.
  28. Chamarbagwala, Rubiana & Sharma, Gunjan, 2011. "Industrial de-licensing, trade liberalization, and skill upgrading in India," Journal of Development Economics, Elsevier, vol. 96(2), pages 314-336, November.
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