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Conditional technology spillovers from foreign direct investment: evidence from Indian manufacturing industries

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  • Sanjaya Malik

Abstract

This paper examines the productivity effect of technology spillovers via vertical linkages through foreign direct investment (FDI) in India. An analysis of firm-level panel data from the Indian manufacturing sector from 2000–2001 to 2007–2008 employing the semi-parametric method of Levinsohn–Petrin to correct the endogeneity bias in productivity estimation shows productivity improvements in domestic firms due to vertical technology spillovers are only through backward linkages from FDI. The study confirms that firms in high-technology industries benefit more from vertical technology spillovers from foreign firms compared to firms in low-technology industries. It also shows that minority-owned foreign firms are more prone to technology spillovers than majority-owned foreign firms. Nonetheless, domestic firms in high-technology industries are able to access both horizontal as well as vertical technology spillovers from majority-owned foreign firms. The paper concludes that technology spillovers from FDI are not spontaneous, but are constrained by the technological ability of domestic firms and the ownership structure of foreign firms. Copyright Springer Science+Business Media New York 2015

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  • Sanjaya Malik, 2015. "Conditional technology spillovers from foreign direct investment: evidence from Indian manufacturing industries," Journal of Productivity Analysis, Springer, vol. 43(2), pages 183-198, April.
    • Handle: RePEc:kap:jproda:v:43:y:2015:i:2:p:183-198
    DOI: 10.1007/s11123-014-0425-8
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    Cited by:

    1. Sanjaya Kumar Malik, 2019. "Foreign Direct Investment and Employment in Indian Manufacturing Industries," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(4), pages 621-637, December.
    2. Anup Kumar Bhandari & Vipin V, 2018. "Does Export Intensity Affect Firm Performance? Evidence from Basic Metal Industry in India," Working Papers id:12767, eSocialSciences.
    3. Moralles, Herick Fernando & Moreno, Rosina, 2020. "FDI productivity spillovers and absorptive capacity in Brazilian firms: A threshold regression analysis," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 257-272.
    4. Rawat, Pankaj S. & Sharma, Seema, 2021. "TFP growth, technical efficiency and catch-up dynamics: Evidence from Indian manufacturing," Economic Modelling, Elsevier, vol. 103(C).
    5. Özcan Karahan, 2016. "Technology Spillover from Foreign Direct Investment in Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 9(3), pages 7-12, December.
    6. Bhattacharya, Mita & Okafor, Luke Emeka & Pradeep, V., 2021. "International firm activities, R&D, and productivity: Evidence from Indian manufacturing firms," Economic Modelling, Elsevier, vol. 97(C), pages 1-13.
    7. Sarker, Bibhuti & Serieux, John, 2022. "Foreign-invested and domestic firm attributes and spillover effects: Evidence from Brazil," Journal of Multinational Financial Management, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Manufacturing industries; Multinational enterprises; Foreign direct investment; Technology spillovers; Total factor productivity; D24; F23; L6;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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