Effects of Licensing Reform on Firm Innovation: Evidence from India

Seker, Murat and Ulu, Mehmet Fatih (2017): Effects of Licensing Reform on Firm Innovation: Evidence from India.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Innovation, research and development, regulatory environment, regulations, industrial policy, India.
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L5 - Regulation and Industrial Policy > L52 - Industrial Policy ; Sectoral Planning Methods; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization ; Manufacturing and Service Industries ; Choice of Technology; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy

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