Reforms and Entry: Some Evidence from the Indian Manufacturing Sector

Traditional research in the context of product market entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry, and have identified industry‐specific factors that affect entry rates. However, following de Soto (1989), there has been increasing emphasi...

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Bibliographic Details
Published in:Review of development economics 2009-11, Vol.13 (4), p.658-672
Main Authors: Bhaumik, Sumon Kumar, Gangopadhyay, Shubhashis, Krishnan, Shagun
Format: Article
Language:English
Subjects:
Developing countries
Development economics
Federalism
LDCs
Manufacturing
Market entry
Productivity
Studies
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Summary:Traditional research in the context of product market entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry, and have identified industry‐specific factors that affect entry rates. However, following de Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using three‐digit industry‐level data from India, for the 1984–97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry‐level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post‐1991 reforms, variations in entry rates during the 1990s were explained largely by state‐level institutional and legacy factors. Past productivity growth affects net entry rates as well.
ISSN:1363-6669
1467-9361
DOI:10.1111/j.1467-9361.2009.00519.x