Patterns of Innovation and Firms’ Efficiency in Case of Indian Manufacturing Sector

Abstract

This study examines the linkage between patterns of innovation and firms’ efficiency of Indian manufacturing sector. The results based on primary survey show that firms which have either introduced new products or improved their products through process innovation are relatively efficient. Further, by employing a stochastic production frontier analysis, the study finds that firms those are engaged in various patterns of innovation are more technically efficient. We also find that firms’ age, capital intensity, skilled workforce and capital-output ratio are key factors that affect the technical efficiency of these innovative firms.