Abstract
Four decades of pro-market reforms in emerging economies have produced highly different benefits for firms across nations. Drawing on the institution-based view, we introduce the idea of the complementarity of pro-market reforms as one of the key drivers behind the diversity of firm profitability across countries. Specifically, focusing on trade and financial reforms, we posit that trade liberalization harms profitability because it increases competition while financial reforms help profitability because it provides more funds for investments. Moreover, jointly they support firm profitability because of their complementarities. Additionally, we propose that the effect of their complementarity is stronger for firms that are more dependent on external finance. We test these ideas on a sample of 4,792 firms from 42 emerging economies during 1996-2018. Our study extends institutional economics by analyzing the role of complementarities among reforms and discussing their impact on firms.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
