Title: Rain, rain, go away? The investment climate, state–business relations and firm performance in India

Authors: Vinish Kathuria, S.N. Rajesh Raj, Kunal Sen

Addresses: Shailesh J Mehta School of Management, Indian Institute of Technology, Bombay, India. ' Centre for Multi-Disciplinary Development Research, Karnataka, India. ' Institute for Development Policy and Management, University of Manchester, PO Box 88, Manchester, M60 1QD, UK

Abstract: It is commonly argued that a better investment climate reform – i.e., lower distortions in the institutional, policy and regulatory environment in which firms operate – lead to discernible improvements in firm performance. In this paper, we argue that effective State–Business Relations (SBRs) condition better investment climate outcomes and that the deeper institutional determinants of firm performance are the former. We examine the effect of effective SBRs of Total Factor Productivity (TFP) for formal sector firms in India for the years 2000–2001 and 2004–2005 and find support for this hypothesis.

Keywords: state–business relations; total factor productivity; India; investment; firm performance; distortions; regulatory environments; government regulation; institutional determinants; formal sector; globalisation; trade; global markets; global economy; policy analysis.

DOI: 10.1504/IJTGM.2011.039322

International Journal of Trade and Global Markets, 2011 Vol.4 No.2, pp.172 - 186

Published online: 08 Apr 2015 *

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