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Does the Technology Gap Influence Spillovers? A Post-liberalization Analysis of Indian Manufacturing Industries

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  • Vinish Kathuria

Abstract

The purpose of this article is twofold: first to examine spillovers from existing foreign firms in India to local firms and whether the technology gap between foreign and domestic firms has any role to play in influencing spillovers; and second, to investigate whether the liberalization of the 1990s resulting in increased inflow of foreign direct investment (FDI) has had any influence in increasing the productivity of Indian firms. Using panel data for 1840 firms from 1995 to 2005, this study finds that in a large number of industries domestic firms are more productive than foreign firms, thereby precluding the possibility of spillovers to all the sectors. Even in the sectors where foreign firms are more productive and the technology gap is accounted for, there is no evidence of spillovers resulting from the presence of foreign firms. Similarly, FDI inflow seems to have no impact on productivity once industries are divided according to the size of the technology gap.

Suggested Citation

  • Vinish Kathuria, 2010. "Does the Technology Gap Influence Spillovers? A Post-liberalization Analysis of Indian Manufacturing Industries," Oxford Development Studies, Taylor & Francis Journals, vol. 38(2), pages 145-170.
    • Handle: RePEc:taf:oxdevs:v:38:y:2010:i:2:p:145-170
    DOI: 10.1080/13600811003793079
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    References listed on IDEAS

    as
    1. Okada, Yosuke, 2005. "Competition and productivity in Japanese manufacturing industries," Journal of the Japanese and International Economies, Elsevier, vol. 19(4), pages 586-616, December.
    2. Yosuke Okada, 2005. "Competition and Productivity in Japanese Manufacturing Industries," NBER Working Papers 11540, National Bureau of Economic Research, Inc.
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    1. C. Imbriani & R. Pittiglio & F. Reganati & E. Sica, 2014. "How Much do Technological Gap, Firm Size, and Regional Characteristics Matter for the Absorptive Capacity of Italian Enterprises?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(1), pages 57-72, February.
    2. Binyam A. Demena & Peter A. G. van Bergeijk, 2017. "A Meta-Analysis Of Fdi And Productivity Spillovers In Developing Countries," Journal of Economic Surveys, Wiley Blackwell, vol. 31(2), pages 546-571, April.
    3. Shawn W. Tan & Dea Tusha, 2023. "Foreign firm characteristics, labour market restrictions and FDI spillovers: Evidence from Moldova," The World Economy, Wiley Blackwell, vol. 46(1), pages 85-119, January.
    4. Razzaq, Asif & An, Hui & Delpachitra, Sarath, 2021. "Does technology gap increase FDI spillovers on productivity growth? Evidence from Chinese outward FDI in Belt and Road host countries," Technological Forecasting and Social Change, Elsevier, vol. 172(C).
    5. Bishwanath Goldar & Karishma Banga, 2018. "Country Origin of Foreign Direct Investment in Indi an Manufacturing and Its Impact on Productivity of Domestic Firms," Working Papers id:12730, eSocialSciences.
    6. Vinish Kathuria, 2019. "Growth and Investment: Testing for the Relationship for South Asian Countries," Millennial Asia, , vol. 10(3), pages 337-371, December.
    7. Rakesh Basant, 2018. "Exploring Linkages between Industrial Innovation and Public Policy: Challenges and Opportunities," Vikalpa: The Journal for Decision Makers, , vol. 43(2), pages 61-76, June.
    8. Pooja Thakur & L.G. Burange, 2016. "An Analysis of Productivity Spillovers from Foreign Direct Investment in India’s Services Sector," Foreign Trade Review, , vol. 51(4), pages 271-286, November.

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