Does higher labour market flexibility discourage R&D? Firm-level evidence from India’s organised manufacturing
By: Roy, Gopal Krishna and Dubey, Amaresh
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Material type: 
BookPublisher: The Indian Journal of Labour Economics Description: 66(4), Oct-Dec, 2024: p.1119-1130.
In:
The Indian Journal of Labour EconomicsSummary: The empirical evidence on the association between labour market flexibility and research & development (R&D) activities of firms is limited only to developed economies. In this research note, we examine the relationship between labour market flexibility and the R&D decisions of firms in India's organised manufacturing. Using a cross-section of manufacturing firms from the Annual Survey of Industries (ASI) 2015–16 unit-level data, we model the R&D decision of firms as a two-step process. We use Cragg's Double-hurdle model that examines the probability of undertaking R&D in the first stage and the extent of R&D expenditure Amongst the R&D-performing firms in the second stage. Controlling for the firm-specific determinants of R&D expenditure, we find that the spatial variation in labour market flexibility is negatively and significantly associated with the extent of R&D expenditure of R&D-performing Indian firms. We extend the analysis by proxying R&D investment with the factories' net investment in plant and machinery. We found a similar negative correlation between labour market flexibility and the net value of plant and machinery of factories.
https://link.springer.com/article/10.1007/s41027-024-00472-x
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 66(4), Oct-Dec, 2024: p.1119-1130 | Available | AR132531 |
The empirical evidence on the association between labour market flexibility and research & development (R&D) activities of firms is limited only to developed economies. In this research note, we examine the relationship between labour market flexibility and the R&D decisions of firms in India's organised manufacturing. Using a cross-section of manufacturing firms from the Annual Survey of Industries (ASI) 2015–16 unit-level data, we model the R&D decision of firms as a two-step process. We use Cragg's Double-hurdle model that examines the probability of undertaking R&D in the first stage and the extent of R&D expenditure Amongst the R&D-performing firms in the second stage. Controlling for the firm-specific determinants of R&D expenditure, we find that the spatial variation in labour market flexibility is negatively and significantly associated with the extent of R&D expenditure of R&D-performing Indian firms. We extend the analysis by proxying R&D investment with the factories' net investment in plant and machinery. We found a similar negative correlation between labour market flexibility and the net value of plant and machinery of factories.
https://link.springer.com/article/10.1007/s41027-024-00472-x
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