Relying on a rich frm-level dataset for one of the top product market reformers among OECD countries over the last decade, we fnd a positive association, already in the short-run, between frm-level productivity and deregulation of intermediate goods sectors. The long-run effects are mediated by frm-level productivity, with gains increasing with the distance to the (national) sectorial technological frontier. As laggard frms are more likely to be held-up by upstream producers with large market power, they have more to gain vis-à-vis more productive frms that are better equipped to deal with the ineffciencies of upstream markets. For the highly productive, the reduction of their competitive edge visà-vis low performers, coupled with decreased markups and increased uncertainty, reduce their incentives to innovate. Importantly, we fnd evidence of positive selection among laggard companies: for viable frms, the reforms unlock their growth potential and allow them to catch-up; for non-viable laggards, the likelihood of exit increases as they are not able to compete in the more demanding environment. In fact, while the increased competition downstream (resulting from increased competition upstream) is associated with higher exit probabilities for all frms, we fnd a stronger association for low productivity frms. Finally, by comparing the performance of frms more and less exposed to precrisis reforms, we show that the survival of the fttest and the unlocking of viable laggards growth boosts the resilience of the frms operating in the market.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.