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Inward FDI and firm-specific advantages of Indian manufacturing industries

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  • Mishra, Bikash Ranjan

Abstract

The unprecedented growth of international productions and Foreign Direct Investment (FDI) flows over the last two decades has led to the upsurge in scientific investigation into the distinctive facets of FDI. Despite the considerable amount of research undertaken, it seems that there is very little comprehensive economic analysis of FDI flows with respect to Indian firms. The present study attempts to bridge this gap by answering the following research question: what are the micro-level causes of FDI inflow, i.e. what are the determinants or pull factors of FDI inflow into Indian domestic firms? In order to analyze this question the study uses a panel data structure constructed over the recent 5 years, ranging from 2006 to 2010 and covering 22 sectors in Indian Manufacturing Industries. Adoption of Fixed and Random effects estimation procedure help to identify that among a set of firm-specific factors, only technological intensity, both in-house and import along with product differentiation have negatively contributed for foreign investors’ shareholding of local firms. The export performance, age, asset size and sales volume are among other remaining firm-specific characteristics which lack effective pulling effects in attracting FDI.

Suggested Citation

  • Mishra, Bikash Ranjan, 2011. "Inward FDI and firm-specific advantages of Indian manufacturing industries," MPRA Paper 35119, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35119
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    Keywords

    Key words: FDI; firm-specific factors; panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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