Do technological investments promote manufacturing productivity? A firm-level analysis for India

Abstract

This paper assesses the effects of firms' investments in Information Technology (IT) and Research and Development (R&D) on their productivity growth. Unlike prior studies, our models examine individual as well as combined effects of these investments. We employ recently developed methods to control for transmission bias in production function estimation. For analysis, we utilise a panel of 900 manufacturing firms in India during 2000–2016. Our results show that (i) firms in high-technology industries are more productive than those in low-technology industries (ii) combined use of IT and R&D inputs yields higher productivity growth (iii) export-oriented firms are more technology-intensive and more productive than non-exporting firms (iv) exporting firms' productivity gains from IT investment are higher by around 0.03–0.04 percentage-points compared to non-exporting firms’