Digitization and Product Quality: Evidence from India

Abstract This study explores the effects of digitization on product quality. Combining firm-product-level data on Indian manufacturing firms from 2001 to 2014 with a sectoral index that captures performance in Indian ICT service sectors used as inputs into manufacturing, I show that the development of ICT services, especially telecommunication service, has a positive and statistically significant effect on product quality. Mechanisms analysis indicates that the impacts of ICT development on product quality upgrading work through inducing manufacturing firms to use high-quality imported raw materials and outsource manufacturing jobs.