Essays on Globalization and Firms’ Performance

In response to globalisation, many developing countries have pursued trade liberalisation to deepen their integration into global markets. This thesis examines how Indian manufacturing firms engage with these processes of globalisation. It comprises three empirical chapters that analyse distinct but interconnected dimensions of firms’ global integration using manufacturing firm-level data from the Prowess database over the period 2000–2017.

The first empirical chapter analyses the determinants of servitised exports, defined as the joint export of goods and services. Using a linear probability model, it shows that firms’ engagement in servitised exports is positively associated with R&D, imported inputs, foreign direct investment, and productivity. These results point to the importance of firm-level productivity, technological capabilities, and international linkages in enabling Indian manufacturing firms to participate in integrated product–service export activities.

The second empirical chapter examines how firms’ access to diverse sources of finance relates to service imports. Drawing on detailed information on both formal and relationship-based external finance, the analysis shows that relationship-based sources of finance—such as trade credit and other informal arrangements—are positively associated with service imports, whereas formal external sources, including bank debt and equity finance, exhibit weak or negative associations. The findings further emphasise the importance of sustained access to finance, indicating that stable and continuous financing relationships are strongly linked to service imports, while temporary or sporadic access is not.

The third empirical chapter examines the relationship between imported intermediate inputs and firms’ internal R&D using firm fixed effects. The analysis finds a positive association between imported intermediates and internal R&D. A time-dependent analysis further shows that importing intermediates is consistently linked to higher internal R&D, with the relationship strengthening as firms accumulate longer import experience. These patterns remain robust across linear and nonlinear probability models and when the sample is restricted to firms without other forms of international engagement.

The findings highlight the value of an integrated approach to India’s globalisation strategy. Facilitating outward investment and reducing trade frictions can strengthen firms’ engagement in servitised exports. At the same time, financial policy that promotes flexible, relationship-based financing can support service imports, while ensuring stable access to imported intermediates underpins firms’ long-term innovation and technological upgrading.