The Unequal Effect of India's Industrial Liberalization on Firms' Decision to Innovate: Do Business Conditions Matter?1. (16th April 2018)

• Record Type: Journal Article
• Authors: Bas, Maria; Paunov, Caroline
• Is Part Of: Journal of industrial economics. Volume 66:Number 1(2018:Mar.)
• Page Start: 205
• Page End: 238
• Publication Date: 2018-04-16
• Subjects: Industrial organization (Economic theory) -- Periodicals; 338
• DOI: 10.1111/joie.12163
• Languages: English
• ISSNs: 0022-1821

Abstract

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.