Effects of Policy Reforms on Firm Innovation

The regulatory environment in a country is an important factor that affects firm performance. This study investigates the impact of particular regulation—license requirements for certain activities—on innovation performance Indian firms 1990s. Using unique firm-level panel data set, it shows removal license led to eight percentage points higher rate within two years following reform. We measure as introduction new product varieties had not been produced by before. It takes longer time innovate industries which they were producing findings this are also robust inclusion controls other policy reforms occurred during period licensing They persist tests with different subgroups and use alternative estimation methods.