What Drives R&D Investment Decisions of Indian Firms?
Posted: 18 Dec 2010 Last revised: 2 Mar 2012
Date Written: December 16, 2010
Studies have examined the association between property rights, government appropriation, access to finance and indicators of economic growth such as profit reinvestment and corporate R&D investment decision using Chinese firm level data. In this study, we intend to find the determinants of corporate R&D in the context of India. We use a unique firm level dataset obtained from surveys of Indian enterprises in the years 2002 and 2005. Our findings indicate the contract enforcement system has no significant association with R&D decision of an establishment but the ownership structure play a crucial role in such decisions. In addition, we find that the local government’s incentive to make the location attractive for firms, informal payments and access to finance have significant positive association with the likelihood of making positive R&D investment decision and the amount of R&D investment made by firms. Our findings are supported further by a series of robustness checks and the associated consistency of the results.
Keywords: R&D, property rights, corruption, access to finance, India
JEL Classification: O12, O17, C25
Suggested Citation: Suggested Citation