The regulatory environment in a country can affect 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.
First it presents a model of firm and industry evolution that explains the
dynamics of multi-product firms. Then, using a firm level panel data set, it
shows that removal of license requirements led to roughly 5 percentage points
faster innovation rates where innovation is measured as introduction of new
product varieties that had not existed in the market.
The results are robust to
inclusion of controls for the other policy reforms that occurred during the
period of licensing reform.
World Bank. Author: Seker,Murat;Document Date: 2011/11/01.Document Type:Policy Research Working Paper.Report Number: WPS5876.Volume No: 1 of 1
28 pages
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