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Retentions, relations and innovation: the financing of R&D in India

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  • Sumit Majumdar

Abstract

Based on data for a panel of several thousand Indian firms covering a period of 15 years, between 1991-1992 and 2005-2006, this article has examined the impact of financial retentions and debt types on the levels of R&D undertaken by firms. Retentions by firms clearly influence firms' R&D spending levels. The results show that the important relational debt types, such as bank borrowing, corporate borrowings and deferred payments, have a positive and significant impact in influencing levels of R&D undertaken by firms in India. The economic impact of such debt in impacting R&D spending levels is also substantial. For Indian firms, where relational borrowings, especially from banks, have been very substantial, such borrowings have influenced their capability-building activities. Conversely, debt that is of the transactional variety has no material impact on firms' R&D spending levels. These results hold consistently across specifications and data stratification.

Suggested Citation

  • Sumit Majumdar, 2011. "Retentions, relations and innovation: the financing of R&D in India," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(3), pages 233-257.
    • Handle: RePEc:taf:ecinnt:v:20:y:2011:i:3:p:233-257
    DOI: 10.1080/10438590903516335
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    References listed on IDEAS

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    1. Bhagwati, Jagdish, 1993. "India in Transition: Freeing the Economy," OUP Catalogue, Oxford University Press, number 9780198288473.
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    Cited by:

    1. Filipe Silva & Carlos Carreira, 2012. "Do financial constraints threat the innovation process? Evidence from Portuguese firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(8), pages 701-736, November.
    2. Majumdar, Sumit K., 2016. "R&D and the overseas earnings of Indian firms," Technology in Society, Elsevier, vol. 44(C), pages 104-111.
    3. Majumdar, Sumit K., 2014. "Technology and wages: Why firms invest and what happens," Technology in Society, Elsevier, vol. 39(C), pages 44-54.

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