The clean development mechanism and technology transfer: firm-level evidence from India

ABSTRACT

This study assesses the impact of the Clean Development Mechanism (CDM) on the transfer of clean technology in India. The reason this study is unique is because firstly, it adopts an outcome-oriented approach to define ‘technology transfer’, which means that technology transfer occurs if firms are able to upgrade their ‘dynamic capabilities’. It uses three indicators of firms’ dynamic capabilities: R&D expenditures to sales ratio, fuel consumption to sales ratio and total factor productivity growth. Secondly, it moves away from the analysis of technology transfer claims made in either Project Development Documents or primary surveys to using actual information on firms’ performance for the analysis. The empirical analysis is based on a difference-in-difference design. It draws on the balance sheet data of 612 firms from India between 2001 and 2012 from the PROWESS database. The results reveal that CDM has the potential of laying a foundation for capability building in developing countries but in its current form, it is not effective.

KEYWORDS:

• CDM
• dynamic capability
• India
• R&D
• fuel efficiency
• total factor productivity

Acknowledgements

I would like to thank the South Asian Network of Development Economics and Environment (SANDEE) for providing this study with funding and technical support. My sincere gratitude is due to Jeff Vincent for his guidance and comments on earlier drafts of this paper. I would like to thank Mani Nepal and E. Somanathan for their useful comments on earlier drafts. I am especially grateful to the two anonymous reviewers for their constructive comments and suggestions. I must also thank the participants of the workshops organized by SANDEE from time to time for their valuable suggestions to improve the study. I gratefully acknowledge the comments of participants at the seminar organized by the Copenhagen Business School in May 2014. Finally, I must specially thank Raj Laxmi Mohanty for her invaluable research assistance.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 The negative TFPG in 2010 could be due to the global slowdown.

2 Productivity growth is calculated as where V, L and K are real gross value added, labour and real gross fixed represent capital, respectively, and and stand for the share of labour and capital.