The Relative Role of Imports and Exports in Explaining Productivity of Indian Bio-Pharmaceutical Firms: Evidence from Non Parametric Data Envelopment Analysis

Abstract

This article estimates total factor productivity growth of eighteen Indian bio-pharmaceutical firms for the period 2000–2009, using Malmquist Productivity Index (MPI) and non-parametric, Data-Envelopment-Approach. The measured MPI is decomposed to separate the contributions of technical change, technical efficiency change and scale efficiency change of each of the firm. The article also explains for determinants of productivity taking into account the role of net exports, Research and Development, Advertisement and Marketing intensity, age and size of the firm. Estimation results suggest that most of the firms show improved performance of productivity growth rate during this post liberalization period. A second stage panel regression reveals that net exports have positive role in explaining MPI of the firms, assigning greater role to exports as compared to imports in fostering productivity. The other positive and significant determinants of MPI are Research and Development intensity, Advertisement intensity, the age and the size of the firm.