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

Maria Bas and Caroline Paunov

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

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.

Date: 2018-04
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Published in Journal of Industrial Economics, 2018, 66 (1), pp.205-238. ⟨10.1111/joie.12163⟩

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Related works:
Working Paper: The Unequal Effect of India's Industrial Liberalization on Firms’ Decision to Innovate: Do Business Conditions Matter? (2018)
Working Paper: The unequal effect of India's industrial liberalization on firms' decision to innovate: Do business conditions matter? (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-02483510

DOI: 10.1111/joie.12163

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