Journal
RESEARCH POLICY
Volume 46, Issue 5, Pages 939-955Publisher
ELSEVIER
DOI: 10.1016/j.respol.2017.03.004
Keywords
'Azo-dyes' ban; Innovation; R&D expenditure; Technology transfer; Dye-producing firms; India
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Funding
- Young Faculty Research Chair at IIM Bangalore
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Exploiting a quasi-natural experiment, which involves the imposition of a ban by Germany in 1994 on an input ('Azo-dyes') used by the Indian leather and textile industries, we estimate the indirect impact of the environmental regulation on innovation activities of upstream (dye-producing) firms in India and examine how it varies by different firm characteristics: size and ownership. We find robust evidence of a significant increase (11-61%) in innovation expenditure for the dye-makers in response to the 'Azo-dyes' ban. Additionally, we find: (i) increase in technology transfer to the tune of 1.2-2.5 times more than that of internal R & D; (ii) increase in innovation expenditure with firm size; (iii) domestic firms investing more in technology transfer as compared to R&D, whereas foreign firms only undertaking the latter and (iv) decrease in investments towards innovation by downstream firms, thereby pointing towards a possible substitution effect in aggregate innovation by upstream firms. Our results are consistent with a variety of estimation methods and robustness checks. (C) 2017 Elsevier B.V. All rights reserved.
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