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Does local knowledge spillover matter for firm productivity? The role of financial access and corporate governance

Ahamed, M. Mostak, Luintel, Kul B. ORCID: and Mallick, Sushanta K. 2023. Does local knowledge spillover matter for firm productivity? The role of financial access and corporate governance. Research Policy 52 (8) , 104837. 10.1016/j.respol.2023.104837

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Global productivity growth has either stagnated or declined, despite continued technological innovations with the rise of knowledge-intensive intangibles that arise from the growth of knowledge stock (R&D activities). Understanding the root causes of this paradox in the context of growing economies requires an investigation of whether local knowledge diffusion can explain firm-level productivity differences, including key constraining factors like sources of financing or corporate governance structure. Using financial data of 7970 Indian firms over a 20-year period and clustering firms across industries, we assess the impact of R&D stock that is external to the firm through estimating both within (intra) and between (inter) industry spillovers. We find that both R&D and non-R&D-performing firms benefit from ‘between industry’ spillovers. We further show that firms with better access to finance achieve higher productivity, not only through their own R&D capital stock but also via both types of industry-level knowledge spillover. We allow for the two key sources of international spillovers namely import intensity and FDI. While import-intensive firms experience lower productivity, FDI mitigates this adverse productivity effect across knowledge-intensive exporting firms. The paper concludes that financially unconstrained firms and firms with greater corporate board connectedness derive positive industry-level spillover effects, reflecting intra- and inter-industry as domestic spillover or local value-chain effect in the literature on technological innovation.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0048-7333
Funders: NA
Date of First Compliant Deposit: 4 July 2023
Date of Acceptance: 10 June 2023
Last Modified: 04 Jul 2023 09:03

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