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Outward foreign direct investment and domestic innovation efforts: Evidence from India

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  • Reddy, Ketan
  • Sasidharan, Subash
  • Doytch, Nadia

Abstract

This paper examines the role of outward foreign direct investment (OFDI) by Indian firms on domestic firms' R&D using unique firm-level data for 2008–2018. While correcting for endogeneity arising from the sample selection, we apply panel data models to evaluate the OFDI and domestic R&D nexus. Our empirical analysis highlights the presence of positive impact of OFDI on the firm's decision to undertake R&D activities. Further, we find that irrespective of the mode of OFDI, i.e., both wholly-owned subsidiaries and joint ventures encourages firms to participate in R&D activities. However, only OFDI in the form of wholly-owned subsidiaries increases the R&D intensity of the parent firms' R&D activities.

Suggested Citation

  • Reddy, Ketan & Sasidharan, Subash & Doytch, Nadia, 2022. "Outward foreign direct investment and domestic innovation efforts: Evidence from India," Journal of Economics and Business, Elsevier, vol. 122(C).
    • Handle: RePEc:eee:jebusi:v:122:y:2022:i:c:s0148619522000406
    DOI: 10.1016/j.jeconbus.2022.106084
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    Keywords

    OFDI; R&D; Manufacturing;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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