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The effect of communication and energy services reform on manufacturing firms’ innovation

Maria Bas

Journal of Comparative Economics, 2020, vol. 48, issue 2, 339-362

Abstract: Upstream services liberalization improves the efficiency and cost of communication and energy services, reducing the marginal costs of downstream manufacturing firms through input-output linkages. This study explores one possible mechanism behind this finding: innovation. I investigate the effects of communication and energy services reform in India in the mid-1990s on downstream manufacturing firms’ decisions to invest in R&D. The empirical analysis uses manufacturing-firm level data and regulation indicators in the communications and energy service sectors. The liberalization of services in India had a positive effect on manufacturing-firm innovation. These results are concentrated on firms in the middle of the initial productivity distribution. The main channel is the elimination of entry barriers into the communication sector.

Keywords: Communication and energy services; Services liberalization; Manufacturing firms’ innovation; Firm heterogeneity and firm-level data (search for similar items in EconPapers)
JEL-codes: L8 O10 O12 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jce.2019.10.003

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Handle: RePEc:eee:jcecon:v:48:y:2020:i:2:p:339-362