An Insight into the Dimension-Specific impact of Globalization on Productivity of Firms

ABSTRACT

Using a firm-level panel dataset, the paper analyzes the impact of various components of globalization on the productivity of firms from fourteen different sectors of the Indian economy amid the structural and policies reforms adopted in the early 1990s. The study examined financial and non-financial data of 912 firms from 2000 to 2018 to measure firm total factor productivity and utilized six sub-dimensions of globalization as defined by KOF index to represent globalization. The results revealed that three out of six dimensions of globalization is found to have a positive association with firms productivity. Sector-specific examination revealed that the productivity growth of firms is highest in the consumer goods sector, followed by wholesale, retail, and trade, while the financial and communications sectors reported the least gain in firms productivity. The study found no long-run causation between globalisation and firm productivity, although trade, financial, and informational globalisation did establish a short-run causal relationship with firm productivity.

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