We therefore replicate our baseline regression as presented in equation (3) and use, again, the Ackerman, plus the Hsieh and Klenow specification of TFP to see whether any difference appears. Again we use both types of input‐output coefficients to check the stability of our results. Table 8 shows the results and confirm the fact that conduct barriers in services are in large part the most important issue that inhibits downstream firms from reaping higher economic benefits in terms of productivity. Yet, this results does not hold up all the time. In fact, using Ackerberg this variable only becomes marginally significant in the left‐hand panel when employing country‐specific input‐output tables while EU‐wide tables do not bring any significant results on this conduct variable at all. Instead, FDI restrictions comes out as significantly strong. In contrast, the Hsieh and Klenow measure of TFP provides robust evidence that conduct barriers are indeed the main regulatory index variable that affects TFP in downstream sectors which therefore substantiates our earlier findings.

# **4.2.4 Manufacturing Firms**

So far, all firm‐level studies mentioned in our literature review have used manufacturing firms as the only downstream sector without taking downstream services into account. For some developing economies this is understandable as their manufacturing sector is relatively more important compared to their services activities in terms of value‐added. Yet, for developed economies this inter‐sectoral relationship changes into one where the services sector is generating more importance. Seen in this light, it is reasonable to expect that services sectors themselves are the main users of services as inputs. Indeed, our input‐output tables show that when taking stock of all services sectors in the economy, on average the manufacturing sector takes up only 21.6 percent of all services as inputs, while the services sector absorbs around 63 percent of this total input use from services. However, we are interested whether our results are stable when taking out services firms so that we are left with the sole situation in which services only go into the downstream manufacturing sector.

The results of this exercise are reported in Table 9 for both our preferred TFP variables from Ackerberg and Hsieh and Klenow respectively. In this table columns (1) through (12) show that actually this time it is not conduct regulations that seem to matter most, but entry barriers. This is visible by the negatively and significant outcome on entry barriers only as the conduct regulatory barriers remain insignificant. Note that when using EU‐wide input coefficient, these results become somewhat weaker although still significant. Furthermore, in columns (10) and (12) the FDI restrictions become again significant with a negative and sizable coefficient sign. Surprised by these results, we repeat the manufacturing‐only sample for using the Hsieh and Klenow TFP measure and are confirmed with this outcome in case of using the country‐specific input‐output tables. No significant results were found when using EU‐wide tables for the Hsieh and Klenow TFP measure in the right‐hand panel.

This is a somewhat surprising result and could point to two explanations. One is that including the manufacturing sector only in the analysis could create biased results in the sense that for some economies this sector count for a relatively minor share compared to the firms active in the services sector. An alternative explanation, and which is more likely, is that the results indicate that different types of regulatory restrictions matter for different types of economies: economies which are more reliant on manufacturing firms experience entry barriers as the main regulatory barrier at stake. Yet, when a country is moving more and more into services, the relative importance between conduct and entry barriers changes accordingly with regulations on the operations of the firm being the main issue of 21