Foreign Direct Investment and Technology Spillovers: Evidence from The Indian Manufacturing Sector

During the recent period, we observe that many countries compete with each other to attract foreign investment. When MNCs invest in a host country, it is assumed that a part of their technology spills to the host country firms. But the empirical studies on spillover effects of FDI have failed to find robust empirical results about the possibility of positive spillover effects. This study is an attempt to empirically examine the spillover effects from the entry of foreign firms using firm level data of Indian manufacturing industries for the period 1994-2002. We consider both the horizontal and vertical spillover effects of FDI. Consistent with the findings of the previous studies, we find no evidence of significant horizontal spillover effects. In contrast, we find negative vertical spillover effects, although it is not statistically significant.Foreign Direct Investment, Horizontal Spillover, Vertical Spillover, Panel Data

The Heterogeneity of MNC' Subsidiaries and Technology Spillovers: Explaining positive and negative effects in emerging economies

Conventional models of multinational corporation (MNC) related spillovers in host economies assume that they derive from the technological assets created at the headquarters. Subsidiaries' activities in the host economy are not given any role in this process. In this paper, drawing on recent advances in MNC literature, we propose an alternative model. In this alternative model the local innovative activity of subsidiaries plays a critical role in accounting for both the possibility of positive or negative effects. More specifically, we distinguish between three types of subsidiaries: "competence creating", "competence exploiting" and passive; and explore conceptually and empirically the spillover effects of each type. Our results confirm our predictions that, in less advanced contexts such as India, only creative subsidiaries have a positive effect on host country firms; that competence exploiting subsidiaries generate negative effects when domestic firms are more advanced; and passive subsidiaries have no effects. The implications for theory and policy are discussed.Technological spillovers, MNCs, emerging economies, subsidiaries heterogeneity

FDI, EXPORT SPILLOVER AND FIRM HETEROGENEITY - AN APPLICATION TO THE INDIAN MANUFACTURING CASE

The role of Foreign Direct Investments (FDI) in the process of economic development is of particular relevance since they bring in some specific technological assets that are not immediately available in the host country. The literature related to the microeconomic impact of FDI has been mainly concentrated in explaining the final effect on productivity, caused by the fact that Multinational Enterprises (MNEs) are not completely able to protect their superior assets from spilling over. However, there is a relatively unexplored effect that has recently been at the center of some studies that is the export spillover effect. Up to now, the literature has found out only mixed results with regard to the possibility that MNEs influence both export decision and export intensity of local firms. In the present paper, we provide some empirical evidence for that specific effect examining a case of an emerging economy, namely India for the period 1994-2006 by using a firm level dataset of more than 3000 firms belonging to manufacturing industries. In particular, we introduce the theoretical argument related to the MNEs heterogeneity which has not been properly investigated especially in empirical studies trying to understand whether, by using different measures characterizing MNEs behaviour, it is possible to distinguish between different impacts that MNEs have on export performance of local firms. We estimate the model through the Heckman selection technique after having built spillover variables that take into account five types of heterogeneity: the degree of involvement in trade networks, the level of embeddedness inside the innovation system of the host country, the asset seeking vs asset exploiting motivations(technological intensity), the type and amount of inputs sourced from abroad rather than from the host country and the percentage of the foreign equity stake. The second step of the analysis we perform is that of testing the relationship between the heterogeneity of MNEs with the heterogeneity of local firms splitting the sample according to the level of R&D intensity, the level of embeddness into the innovation system and the involvement in trade activities. Results confirm the hypothesis of different impacts caused by different MNEs behaviour especially with regard to the export intensity, while a greater impact on export decision is found when heterogeneity of local firms is accounted for.Exports, spillover, MNCs

MNEs and Export Spillovers : An Analysis of Indian Manufacturing Industries

In the present study, we try to provide some empirical evidence for the export spillover effect examining the case of an emerging economy, namely India using firm level data for the period 1994-2006. We disentangle different spillover channels, namely export spillover, R&D spillover and wage spillover. We also consider the heterogeneous technological behaviour of local firms considering how in-house R&D efforts and disembodied technological imports may affect the overall exporting performance. Our findings mainly confirm that the two most important channels for export spillover are mainly the demonstration effect and the R&D spillover effect The decision to export is influenced mainly by technological activities of local firms, confirming that R&D is a key variable that help firms to overcome fixed costs that are crucial to start exporting. Moreover, the findings of the analysis suggest that local firms R&D is highly relevant to internalize the positive spillover effect emanating from MNEs both with regard to decision to export and export propensity.exports, FDI spillover, MNEs

Concentration in Knowledge Output: A case of Economics Journals

This paper assesses the degree of author concentration in seven economics journals, which were published in India during 1990-2002. To measure the degree of author concentration, Lotka's Law was used. Moreover, we also make an exploratory analysis of the geographic, economics subfield and institutional concentration in 704 economics journals. An important finding of this paper is that specialized journals in the sample report the highest degree of author concentration. This result is quite similar to the findings by Cox and Chung (1991). Furthermore, there are several instances showing that the journals lean towards certain norms; this may affect the flow of innovative ideas into economics. We conclude that a knowledge activity, involving the high degree of concentration and a biased publication process, may affect the flow of new ideas into the discipline.Concentration, Lotka's Law

Evidence from India

This study examines the role of financing constraints in explaining outward FDI decisions using unique firm level panel data on Indian manufacturing during the period 2007–2014. We consider the role of both internal finance and external finance in firm decisions on outward FDI and employ instrumental variable probit model to examine financing constraints in outward FDI decisions of firms. Further, using count data models, we examine financing constraints in determining strategies regarding number of affiliates abroad. The study shows that firms with higher cash flow and liquidity are likely to have more number of foreign affiliates

Foreign Direct Investment and Technology Spillovers:Evidence from the Indian Manufacturing Sector

During the recent period, many countries compete with each other to attract foreign investment. When MNCs invest in a host country, it is assumed that a part of their technology spills to the host country firms. But empirical studies on spillover effects of FDI have failed to find robust empirical results about the possibility of positive spillover effects. This study is an attempt to empirically examine the spillover effects from the entry of foreign firms using firm level data of Indian manufacturing industries for the period 1994-2002.We consider both the horizontal and vertical spillover effects of FDI. Consistent with the findings of the previous studies, we find no evidence of significant horizontal spillover effects. In contrast, we find negative vertical spillovers effects, although it is not statistically significant. [Forum for Global Knowledge Sharing WP 29]foreign investment, technology spillovers, manufacturing industries, FDI, foreign direct investment, Economics, Indian Economy, Industry