Do Effective State Business Relations Matter for Firm Performance? - A Study of Indian Manufacturing
This paper examines the role of the external institutional environment captured by effective state-business relations on firm performance. By effective state-business relations, we mean a set of highly institutionalised, responsive and public interactions between the state and the business sector. We find that effective state-business relations have had a discernible positive impact on firm performance in Indian formal manufacturing over the period 1989-90 - 2004-05. We also find internal and external institutional factors are complementary to firm performance - smaller firms, firms in urban areas, and firms in simpler organizational forms benefit more.
Keywords: State business relations, firm productivity, manufacturing sector, India.
JEL Classification Codes: L25, O53, O43.
Vinish Kathuria, Rajesh Raj S. N. and Kunal Sen. June 2010
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Last modified: 10 June 2010