Growth of the Firms and Investments in Innovations: An Empirical Investigation of the Indian Manufacturing Industry

Sukhdeep Singh and Indrani Chakraborty ()
Additional contact information
Indrani Chakraborty: Institute of Development Studies Kolkata (IDSK)

Journal of Quantitative Economics, 2021, vol. 19, issue 1, No 6, 87-122

Abstract: Abstract The paper investigates the effect of the growth in R&D on firms’ growth (measured by growth in sales) in the Indian manufacturing industry during 1995–2017. As R&D strategy and outcomes of the firms may be different in developing countries than the developed ones, a study of developing economy should be an important addition to the literature which has earlier focussed mainly on developed countries. Panel ARDL model has been used to empirically test the relationship between growth and R&D investments. It helps to observe the short-run as well as the long-run association between growth in R&D and sales. For testing the robustness of our findings, we have also applied the Panel VAR method. Panel VAR provides the empirical evidence without assuming a priori direction of causality between the growth of R&D and sales. The overall results from both the econometric techniques point out that the growth of investment in innovations has a positive yet weak/limited effect on the growth of firms in the Indian manufacturing industry. However, a separate analysis of the manufacturing sub-sectors indicates that the association between the two variables is relatively stronger in case of the sub-sectors which have experienced rising R&D intensity than those where it has remained stagnant. Another important finding is that there exists two-way causality among R&D growth and sales growth in the overall manufacturing industry, as well as in the sub-sectors with rising R&D intensity. Nevertheless, among the sub-sectors with stagnant R&D intensity, R&D growth does not Granger-cause sales growth, whereas sales growth leads to the growth of R&D investments.

Keywords: Firm growth; Innovation; R&D; Manufacturing industry; India (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s40953-020-00218-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jqecon:v:19:y:2021:i:1:d:10.1007_s40953-020-00218-8

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40953

DOI: 10.1007/s40953-020-00218-8

Access Statistics for this article

Journal of Quantitative Economics is currently edited by Dilip Nachane and P.G. Babu

More articles in Journal of Quantitative Economics from Springer, The Indian Econometric Society (TIES) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().