Firms, Entrepreneurship & Microfinance

Barriers to Product Upgradation in the Sialkot Surgical Goods Sector

Project members:
David Atkin, MIT
Azam Chaudhry, Lahore School of Economics
Shamyla Chaudry, Lahore School of Economics
Amit K. Khandelwal, Columbia University
Eric Verhoogen, Columbia University

The project has been developed under the International Growth Centre (IGC) and the Private Enterprise in Developing Countries (PEDL) initiative. In this project, they investigate the extent to which fixed costs of innovation are a barrier to upgrading in the surgical-goods sector in Sialkot. If there are externalities in the process of innovation, there may be an important role for governments in subsidizing the costs of innovation. A leading policy idea is to provide matching grants, in which governments provide supplemental funding for projects chosen by individual firms. However, there has never been a rigorous randomized evaluation of such a program (Campos et al, 2012). They are conducting such an evaluation in the surgical-goods industry in Sialkot and plan to offer matching grants for innovations that increase exports.