R&D and patenting by firms in India in high- and medium-high-technology industries

Innovation by a firm is vital in attaining a competitive edge over other firms in an industry, particularly in high- and medium-high-technology industries. The present study captures the innovative activity of Indian firms investing in research and development (R&D) and further on the output in the form of patenting simultaneously. The data cover firms of high-tech and medium-high-tech sectors during 1995-2010. We employ Heckman's two-step procedure to study the determinant of R&D equation and Hurdle count data model for patenting. The study finds that patent policy changes significantly influence R&D and patenting intensity. After the introduction of patent policy changes in India, foreign firms are relocating their R&D units into India and taking patent from Indian patent offices. However, the study does not find any direct evidence of R&D-oriented patenting activity in India.