The Determinants of Firm’s Growth in the Telecommunication Services Industry: Empirical Evidence from India
Surabhi Somya (surabhi.somya@ifmr.ac.in) and
Madhuri Saripalle
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Surabhi Somya: Krea University
Journal of Quantitative Economics, 2023, vol. 21, issue 1, No 7, 193-211
Abstract:
Abstract The growth and evolution of the industry has an important bearing on the economic development of a country. The extant literature on firm growth provides valuable insights into firm behavior and factors influencing the evolution of the industry over time. The topic becomes even more relevant in the context of the telecommunication industry because of its positive impact on economic growth and productivity, which has been well documented in both the developed and developing country context. Based on the firm-growth literature, this study analyzes the factors influencing the growth of the Indian telecommunication industry using an unbalanced panel of 204 firms across two decades from 2000 to 2020. Dynamic Panel estimation technique (System GMM) is used to take care of endogeneity issues caused by the dynamic nature of firm growth models. Results indicate that the growth of firms in the Indian telecom services industry is explained by systematic factors like size, age, profitability, financial leverage, and trade orientation. The study finds that the larger firms grow at a decreasing rate compared to small firms. The firm's age negatively impacts the growth rate of firms, i.e., younger firms have a faster growth rate than the older ones supporting the case of convergence of firm growth in the Indian telecom services sector. Factors such as lagged R&D intensity, financial leverage, and profitability negatively impact the firms’ growth rate. Export intensity is found to have a negative and significant impact on the growth rate of the firms. The findings have important policy implications in the context of the growth of the telecommunication industry in India, which has witnessed intense competition, steep decline in profitability, and high debt structure over a period of time.
Keywords: Firm growth; ICT; Telecommunication; System GMM; Dynamic panel (search for similar items in EconPapers)
JEL-codes: D22 L25 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s40953-022-00334-7
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