DOES INNOVATION OUTCOME INFLUENCE PERFORMANCE OF INDIAN MANUFACTURING FIRMS?
Abstract
This paper investigates the impact of innovation on the performance of selected manufacturing firms in India over the period 2008-2017. Specifically, we emphasize on the role of innovation outcome in terms of number of patents on firms’ performance and consider total factor productivity growth, firms’ growth in terms of total gross sales, and profitability as indicators of firm performance. The results based on the panel Feasible Generalized Least Square estimator shows that the effect of innovation on firms’ performance is positive. Further, the impact of innovation on performance is higher for large firms compared to small firms.
Downloads
References
Ackerberg, D. A., Caves, K., & Frazer, G. (2015). Identification Properties of Recent Production Function Estimators. Econometrica, 83, 2411-2451.
Aghion, P., & Howitt, P. (1992). A Model of Growth Through Creative Destruction. Econometrica, 60, 323–351.
Aghion, P., & Howitt, P. (1998). Endogenous Growth Theory. Cambridge, MA: Cambridge University Press.
Ambrammal, S. K., & Sharma, R. (2016). Impact of Patenting on Firms’ Performance: An Empirical Investigation based on Manufacturing Firms in India. Economics of Innovation and New Technology, 25, 14-32.
Anselin, L. (2001). Spatial Econometrics. In: Baltagi, B. (Ed.), A Companion to Theoretical Econometrics. Blackwell, Oxford.
Aw, B. Y., Roberts, M. J., & Xu, D. Y. (2011). R&D Investment, Exporting, and Productivity Dynamics. American Economic Review, 101, 1312–1344.
Balakrishnan, P., & K. Pushpangadan. (1994). Total Factor Productivity Growth in Manufacturing Industry: A Fresh Look. Economic and Political Weekly, 29, 2028 – 2035.
Basant, R., & Fikkert, B. (1996). The Effects of R&D, Foreign Technology Purchase, and Domestic and International Spillovers on Productivity in Indian Firms. Review of Economics and Statistics, 78, 187–199.
Biesebroeck, J. V. (2005). Firm Size Matters: Growth and Productivity Growth in African Manufacturing. Economic Development and Cultural Change, 53, 545-583.
Chundakkadan, R., & Sasidharan, S. (2019a). Financial Constraints, Government Support, and Firm Innovation: Empirical Evidence from Developing Economies. Innovation and Development. https://doi.org/10.1080/2157930X.2019.1594680
Chundakkadan, R., & Sasidharan, S. (2019b). Firm Size, R&D and Innovation: Evidence from India. Asian Research Policy, 10, 39-46.
Clarke, R. (2003). Industrial Economics. Blackwell Publishers, Oxford, UK.
Crépon, B., Duguet, E., & Mairessec, J. (1998). Research, Innovation and Productivity: An Econometric Analysis at the Firm Level. Economics of Innovation and New Technology, 7, 115–158.
Crespi, G., & Zuniga, P. (2012). Innovation and Productivity: Evidence from Six Latin American Countries, World Development, 40, 273-290.
Crino, R., & Epifani, P. (2008). Productivity and Export Intensity to High-Income and Low-Income Countries. https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.522.1664&rep=rep1&type=pdf
Demirel, P., & Mazzucato, M. (2012). Innovation and Firm Growth: Is R&D Worth It? Industry and Innovation, 19, 45–62.
Deschryver, M. (2014). R&D, Firm Growth and the Role of Innovation Persistence: An Analysis of Finnish SMES and Large Firms. Small Business Economics, 43, 767–785.
Economic Survey. (2019-20). State of the Economy, Ministry of Finance, Government of India. Vol, II, pp.5.
Franco, C., & Sasidharan, S. (2010). MNEs, Technological Efforts and Channels of Export Spillover: An Analysis of Indian Manufacturing Industries, Economic System, 34, 270-288.
Geroski, P. A. (1991). Innovation and Sectoral Sources of UK Productivity Growth. The Economic Journal, 101, 1438-1451.
Greene, W. H. (2008). Econometric Analysis 6th ed. NJ: Prentice Hall, Upper Saddle River.
Griliches, Z. (1979). Issues in Assessing the Contribution of Research and Development to Productivity Growth. Bell Journal of Economics, 10, 92-116.
Grossman, G. M., & Helpman, E. (1993). Innovation and Growth in the Global Economy. MIT Press, Cambridge.
Guarscio, D., & Tamagni, F. (2019). Persistence of Innovation and Patterns of Firm Growth. Research Policy, 48, 1493–1512.
Hall, B. H. (2011). Innovation and Productivity. National Bureau of Economic Research.
Hasan, R. (2002). The Impact of Imported and Domestic Technologies on the Productivity of Firms: Panel Data Evidence from Indian Manufacturing Firms, Journal of Development Economics, 69, 23-49.
Hegde, D., & Shapira, P. (2007). Knowledge, Technology Trajectories, and Innovation in a Developing Country Context: Evidence from a Survey of Malaysian Firms. International Journal of Technology Management, 40, 349–370.
Hu, A. G., Jefferson, G. H., & Jinchang, Q. (2005). R&D and Technology Transfer: Firm-level Evidence from Chinese Industry. Review of Economics and Statistics, 87, 780–786.
Karz, H. D. (2008). Innovations and Profits Schumpeter and Classical Heritage. Journal of Economic Behavior & Organization, 67, 263–278.
Kathuria, V. (2002). Liberalisation, FDI and Productivity Spillovers: An Analysis of Indian Manufacturing Firms. Oxford Economic Papers, 54, 688–718.
Lee, H. H., and Stone, J. A., (1994). Product and Process Innovation in the Product Life Cycle: Estimates for U.S. Manufacturing Industries, Southern Economic Journal, 60, 754-763.
Lee, K., & Kang, S. M. (2007). Innovation Types and Productivity Growth: Evidence from Korean Manufacturing Firms. Global Economic Review, 36, 343-359.
Levinsohn, J., & Petrin, A. (2003). Estimating Production Functions using Inputs to Control for Unobservables. Review of Economic Studies, 70, 317-341.
Madheswaran, S., Liao, H., & Rath, B. N. (2007). Productivity Growth of Indian Manufacturing Sector: Panel Estimation of Stochastic Production Frontier and Technical Inefficiency. Journal of Developing Areas, 40, 35–50.
Nadiri, M. I., & Kim, S. (1996). International R&D Spillovers, Trade and Productivity in Major OECD Countries. NBER Working Paper, No. 5801.
National Innovation Survey (2014). Ministry of Science and Technology, Government of India. http://nationalinnovationsurvey.nstmis-dst.org
Olley, G. S., & Pakes, A. (1996). The Dynamics of Productivity in the Telecommunications Equipment Industry. Econometrica, 64. 1263-1297.
Pesaran, M. H. (2004). General Diagnostic Tests for Cross Section Dependence in Panels, CESifo Working Paper Series no. 1229.
Pesaran, M. H. (2006). Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure. Econometrica, 74, 967–1012.
Rath, B. N. (2018). Productivity Growth and Efficiency Change: Comparing Manufacturing- and Service-based Firms in India. Economic Modelling, 70, 447-457.
Raut, L. K., (1995). R&D Spillover and Productivity Growth: Evidence from Indian Private Firms. Journal of Development Economics, 48, 1-23.
Raymond, V., Mairesse, J., Mohnen, P., & Palm, F. (2015). Dynamic Models of R&D, Innovation and Productivity: Panel Data Evidence for Dutch and French Manufacturing. European Economic Review, 78, 285-306.
Roberston, D., & Symons, J. (2000). Factors Residuals in SUR Regression: Estimating Panels Allowing for Cross Sectional Correlation, LSE Research Online Documents on Economics. London School of Economics Library, 20163.
Romer, P. (1990). Endogenous Technological Change. Journal of Political Economy, 98, 71-102.
Sasidharan, S., & Kathuria, V. (2011). Foreign Direct Investment and R&D: Substitutes or Complements, a Case of Indian Manufacturing after 1991 Reforms. World Development, 39, 1226-1239.
Schumpeter, J. A. (1934). The Theory of Economic Development, Cambridge, Mass, Harvard University Press.
Schumpeter, J. A. (1942). Capitalism, Socialism and Democracy. Harper and Brothers, New York.
Seenaiah, K., & Rath, B. N. (2019). Does Innovation Enhance Productivity in Selected Indian Manufacturing Firms, Singapore Economic Review, 64,1225-1250.
Seenaiah, K., & Rath, B. N. (2018). Determinants of Innovation in Selected Manufacturing Firms in India: Role of R&D and Exports. Science, Technology and Society, 23, 65-84.
Sharma, C. (2012). R&D and Firm Performance: Evidence from the Indian Pharmaceutical Industry. Journal of the Asia Pacific Economy, 17, 332-342.
Sharma, C., & Mishra, R. K. (2011). Does Export and Productivity Growth Linkage Exist? Evidence from the Indian Manufacturing Industry, International Review of Applied Economics, 25, 633-652.
Solow, R. M. (1957). Technical Change and the Aggregate Production Function. Review of Economics and Statistics, 39, 312-320.
Unel, B. (2003). Productivity Trends in India’s Manufacturing Sectors in the Last Two Decades, IMF Working Paper no. WP/03/22, IMF, Washington, D.C.
Waldman, D. E., & Jensen, E. J. (2005). Industrial Organization: Theory & Practice. Pearson Education Pvt. Ltd., Singapore.
Copyright (c) 2022 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
