Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320414 
Year of Publication: 
2025
Series/Report no.: 
Kiel Working Paper No. 2294
Publisher: 
Kiel Institute for the World Economy (IfW Kiel), Kiel
Abstract: 
This paper investigates the impact of services sector liberalization on product innovation of downstream manufacturing firms. Leveraging firm-product panel data from India and employing a shift-share research design, I find that services liberalization significantly increases firms' product portfolio. Allowing foreign investments in the banking sector decreases firm's credit-constraint and increases the amount of interest payments on short-term loans. This shows that services liberalization reduces firms' fixed costs of product innovation. Firms diversify into input-similar industries which changes the distribution of sales across products with the core product experiencing the most pronounced decline in the sales share.
Subjects: 
Product mix
services liberalization
India
JEL: 
F10
F61
D22
L8
Document Type: 
Working Paper

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