Does environmental regulation indirectly induce upstream innovation?:New evidence from India

Chakraborty, Pavel and Chatterjee, Chirantan (2017) Does environmental regulation indirectly induce upstream innovation?:New evidence from India. Research Policy, 46 (5). pp. 939-955. ISSN 0048-7333

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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.

Item Type: Journal Article
Journal or Publication Title: Research Policy
Uncontrolled Keywords: /dk/atira/pure/subjectarea/asjc/1400/1405
Departments: Lancaster University Management School > Economics
ID Code: 89519
Deposited By: ep_importer_pure
Deposited On: 08 Jan 2018 16:28
Refereed?: Yes
Published?: Published
Last Modified: 11 Feb 2020 03:51

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