Why do Indian firms go abroad?

Overseas investments by the emerging economies are a feature of globalisation. Investments by Indian firms, though not large in volume, differ from that of other emerging economies such as China in their composition, destination and modality of investments. A relatively high proportion of their investments are in the manufacturing and services sectors of the developed economies such as the UK and the USA. A number of statistical studies have attempted to identify the factors motivating Indian firms to invest abroad. Most of these studies attempt to ground the analysis in the received theory of foreign direct investment centred on the ownership advantages, location and internalisation (OLI) paradigm. This paper argues that statistical tests cannot fully account for the unique nature of India’s investments abroad. The pattern of investments that differs from that of the other emerging economies is to be attributed to India’s endowments of entrepreneurial skills centring on exploration of investment opportunities and astute management of complex organisations. These endowments are an inheritance from history augmented by the contribution of India’s diaspora abroad. The lukewarm investment climate at home may also be a factor in the decision of Indian firms in technology and skill intensive firms to venture abroad. Explanations for the unique nature of overseas direct investments by Indian firms have to be sought in the organisational structure and history of Indian business houses

Global Innovation Policy Index

Ranks fifty-five nations' strategies to boost innovation capacity: policies on trade, scientific research, information and communications technologies, tax, intellectual property, domestic competition, government procurement, and high-skill immigration

Why has China grown so fast? The role of physical and human capital formation

Cross-province growth regressions for China are estimated for the reform period. Two research questions are asked. Can the regressions help us to understand why China as a whole has grown so fast? What types of investment matter for China's growth? We address the problem of model uncertainty by adopting two approaches to model selection to consider a wide range of candidate predictors of growth. Starting from the baseline equation, the growth impact of physical and human capital is examined using panel data techniques. Both forms of capital promote economic growth. ‘Investment in innovation’ and private investment are found to be particularly important. Secondary school enrolment contributes to growth, and higher education enrolment even more so

Enterprise Restructuring and Firm Performance: A Comparison of Rural and Urban Enterprises in Jiangsu Province

We examine the contrast in the experience of ownership reforms between urban SOEs and rural TVEs using a panel of industrial enterprises in Nanjing municipality for the period from 1994 to 2001. Our objectives are twofold. First, we study how the reform program of “grasp the large and let go of the small” has been carried out in practice by comparing the patterns of enterprise restructuring in the SOEs and the TVEs. Second, we investigate how the alternative reform strategy has affected firm performance in terms of the growth of labor productivity, total factor productivity (TFP), profitability, and worker earnings. We find a sharp contrast in the reform strategies of the SOEs and TVEs in two respects. First, the changes in the SOE sector were more gradual and involved more limited transfer of property rights than did the reform of the TVEs. Secondly, the reforms in both sectors exhibited selection bias but in opposite directions, with worse performing ones being the principal targets of reforms, among SOEs, and better performing enterprises being more likely to be picked for privatization, among TVEs. Our analysis discerns strikingly strong, robust positive effects of ownership restructuring on the growth of labor productivity, TFP and profitability in the reformed SOEs, indicating that the evolutionary reform policy for the SOEs has successfully reversed the trends of declining productivity and profits in these enterprises in Nanjing. We also find that among reformed urban enterprises, those in which private ownership accounts for less than 50% of shares performed better than those in which the majority of shares are owned privately. We find mixed evidence for the TVEs: privatization had no effect on firm performance in a group fixed-effects model but significant, positive effects in a firm fixed-effects model.http://deepblue.lib.umich.edu/bitstream/2027.42/40054/3/wp668.pd

Regional innovation and spillover effects of foreign direct investment in China: a threshold approach

Using a data set on twenty-nine Chinese provinces for the period 1985–2008, this paper establishes a threshold model to analyse the relationship between spillover effects of foreign direct investment (FDI) and regional innovation in China. There is clear evidence of double-threshold effects of regional innovation on productivity spillovers from FDI. Specifically, only when the level of regional innovation reaches the minimum innovation threshold will FDI in the region begin to produce positive productivity spillovers. Furthermore, positive productivity spillovers from FDI will be substantial only when the level of regional innovation attains a higher threshold. The double threshold divides Chinese provinces into three super-regions in terms of innovation, with most provinces positioned within the middle-level innovation super-region. Policy implications are discussed

Research and Development Expenditures of Innovative Enterprises in the Time of Crisis

In an analysed group of enterprises the smallest "resistance" to crisis was observed in American companies. The enterprises from the EU also reduced research and development expenditures but the pace of a fall in these expenditures was smaller than in the case of American companies.W badanej zbiorowości przedsiębiorstw najmniejszą "odporność" na kryzys wykazaly firmy amerykańskie. Firmy wywodzące się z UE również zanotowaly zmniejszenie nakladów na badania i rozwój, jednak tempo spadku nakladów badawczo-rozwojowych bylo tu mniejsze niż w przypadku firm amerykańskich

China, India and Russia: economic reforms, structural change and regional disparities

This paper studies the different patterns of growth of China, India and Russia by exploring and comparing the processes of reforms that have generated and accompanied their high and sustained rates of growth. Focusing on the sector transformations involved into the three economies, we show that the growth strategies implemented present specific characteristics in terms of gradualism and policy choices. We analyze the effects of economic growth on regional income disparities and to what extent the recent increase in prosperity has been homogeneously distributed within the three giants. Making use of Theil's T statistics and transition probability matrices, our findings reveal that income disparities within the Indian states and Chinese provinces have increased and, more in particular, landlocked and rural areas are in general still far from reducing the income gap from coastal and richest regions. In the case of Russia, the great divide is fuelled by the presence of hydrocarbons resources, which tend to be concentrated in the West Siberia

Stimulating innovation in Russia: the role of institutions and policies

This paper examines the potential role of innovation policy in enhancing long-term productivity growth in Russia. It begins by exploring the role of framework conditions for business in encouraging innovative activities, particularly with respect to intellectual property rights and competition. Realising Russia’s innovation potential will also require reform of the large public science sector. This raises issues pertaining to the organisation and financing of public research bodies and, in particular, to the incentives and opportunities they face in commercialising the results of their research. Finally, the paper looks at the potential role of direct interventions, such as special economic zones and technoparks, as well as the scope for improving the tax regime for private-sector R&D

The Effect of the Real Exchange Rate on Technological Progress. An Application to the Textile Industry in China

Technological progress in the textile and clothing sectors is measured for 26 Chinese provinces using panel data by sector and the stochastic frontier method. The impact of the real exchange rate on this technological progress, as well as its transmission channels, are respectively estimated. The technological progress is positive for both sectors, and the real depreciation of the Chinese currency contributes to this improvement. Due to the dominant non state-owned enterprises in the clothing sector, both technological progress and the effect of real depreciation on the increase of technological progress are twice as high as in the textile sector. The principal transmission channel of the impact of the exchange rate on technological progress is through imported equipment, but not through openness.China., stochastic frontier method, technological progress, real exchange rate

Development Path of China and India and the Challenges for their Sustainable Growth

The segmentation of global manufacturing and services provided China and subsequently India with a golden opportunity to make full use of their absolute advantage?low cost yet educated labour?to integrate into the world economy within a comparatively shorter period of time than some earlier industrialisers. Though international trade functioned as a vent of surplus in view of the narrowness of their domestic markets at the beginning of their economic catch-up, the label of export-led model may not reflect the real picture as imports underwent dramatic increases during their respective growth periods, in particular for China. Foreign direct investment has played a pivotal role in their economic growth and has major presence in international trade and investment in leading sectors of both countries, giving rise to certain special features and weak links for their economic expansion and sustainability of fast economic growth. To maintain more broad-based, fast and balanced growth, it seems that both countries have to redress sectoral imbalances, encourage technology upgrading and cope with future changes in demographic profiles which constituted a trigger to fast economic growth at the time of their respective economic reform.China, India, development