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The unequal effect of India's industrial liberalization on firms' decision to innovate: Do business conditions matter?

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  • Bas, M.

    (Sciences Po and CEPII)

  • Paunov, C.

    (OECD)

Abstract

This paper examines the heterogeneous impact of industrial liberalization policy, the dismantling of the License Raj in India, on firms innovation performance. Our results show that larger and more productive firms in liberalized industries were more likely to take up RD while the smallest and least efficient firms were less likely to do so. We also show that this inequality of effects was strongest in economically less developed Indian states and where financial development and the knowledge base are weaker. This suggests business conditions shape heterogeneous impacts of liberalization policies to the advantage of initially larger and more efficient firms.

Suggested Citation

  • Bas, M. & Paunov, C., 2014. "The unequal effect of India's industrial liberalization on firms' decision to innovate: Do business conditions matter?," MERIT Working Papers 2014-044, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2014044
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    More about this item

    Keywords

    Industrial policy; Innovation policy; India; Industrial performance; Firm behavior; R&D; Research and development; Innovation.;
    All these keywords.

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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