The role of financial constraints in firm transition—Evidence from Indian manufacturing

Rabbani, Golam and Raj, S N Rajesh (2024) The role of financial constraints in firm transition—Evidence from Indian manufacturing. Journal of International Development, 36 (4). pp. 2193-2228. ISSN 0954-1748

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Abstract

In developing countries' manufacturing, the prevalence of small firms poses a conundrum, as few successfully transition to larger categories. Scholarly attention to the reasons behind this limited upward mobility remains scarce. This study, focusing on Indian manufacturing, explores the role of limited financial access as a significant obstacle hindering small firms' transition. Analysing data spanning 2001–2016, encompassing both formal and informal firms, we find robust evidence that access to finance is crucial for small firm transition in Indian manufacturing. The findings are robust to alternate specifications and methods, and also to concerns arising from reverse causality.

Item Type:	Article
Authors:	Rabbani, Golam and Raj, S N Rajesh
Document Language:	Language English
Subjects:	Social sciences > Economics Social sciences > Economics > Financial economics > Banks
Divisions:	Azim Premji University - Bengaluru > Research Centre > Centre for Sustainable Employment
Full Text Status:	None
URI:	http://publications.azimpremjiuniversity.edu.in/id/eprint/6945
Publisher URL:	https://doi.org/10.1002/jid.3898

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