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Effects of Licensing Reform on Firm Innovation: Evidence from India

Murat Seker and Mehmet Ulu

MPRA Paper from University Library of Munich, Germany

Abstract: The regulatory environment in a country is an important factor affecting 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. Using a firm level panel data set, it shows that removal of license requirements led to roughly eight percentage points faster innovation rates within two years following the reform where innovation is measured as introduction of new product varieties that had not existed in the market. When the residual increase in sales revenues even after controlling for product innovation is called as process innovation, substantial improvements in process innovation are also observed. The results are robust to inclusion of controls for the other policy reforms that occurred during the period of licensing reform, and persist in different subcategories of firms.

Keywords: Innovation; research and development; regulatory environment; regulations; industrial policy; India. (search for similar items in EconPapers)
JEL-codes: L11 L52 O14 O31 O38 (search for similar items in EconPapers)
Date: 2017-07-26
New Economics Papers: this item is included in nep-bec, nep-ino, nep-sbm and nep-tid
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