R & D, patenting and performance of Indian firms in medium and high technology industries

Abstract

The production of innovation and the link with firms’ productivity is theoretically and empirically well established in advanced nations (Crepon et al. 1998; Mairesse et al. 2005; Hall and Sena 2014). The link between innovation and productivity is however inconclusive in developing nations. Data analysis of innovative activity of Indian firms during 1995-2010 using R&D expenditure and patents reveals interesting fact. R&D expenditure in India is low and stagnant (0.7-0.8% of GDP) whereas Indian Patent Office witnesses a remarkable progress in patent filing (on an average of 15% increase) during the same period. Further, the government of India made radical changes in Intellectual Property Rights (IPR) including patent policy, which is likely to boost both domestic innovation and transfer of technology to the nation. These observations, changes along with scant research on innovation in Indian context provide us the motivation to undertake the current research. The underlying questions are a) what are the determinants of the technological base of firm, measured in terms of R&D and patenting, b) what contributes to patenting? -contemporaneous or lagged R&D expenditure and c) how far the technology base of a firm can influence it’s performance in terms of productivity, market value and profit.Based on the above research questions, we frame the objectives of the thesis as follows: 1) To understand the determinants of firms’ innovative activities. 2) To understand the relationship between the research input and research output in terms of R&D and patenting particularly in the context of the new patent policy in the country. 3) To estimate the impact of R&D and patenting on firms’ productivity and financial performance indicators. The present doctoral work therefore assesses the determinants of innovative activities and the influence of these innovations on the performance of medium and high technology firms in India. The present study argues that under the new patentregime firms in India has lifted up their technological base, which is measured through its investment in R&D and ensuing patenting activity, which further contributes to the performance of firms.