The growth of outward FDI and the competitiveness of the underlying economy: the case of India
AbstractThere has been an impressive spurt in the outward FDI activity of Indian MNEs since the 1990s. However, despite the rhetoric, this growth has not been exceptional, when compared to other similarly developed countries. Received economic arguments propose that successful outward investors tend to be the most competitive domestic firms in their home economy. Their firm-specific assets tend to be a function of the political economy and economic structure of the home economy. In IB terms, this means that the ownership-specific assets of Indian multinationals are a subset of the ownership assets of their parent companies, which in turn are largely determined by the location-specific assets of the home economy. The evidence suggests that the strengths and weaknesses in the location assets of India have caused pockets of excellence to emerge, but that these conditions do not lend themselves to a broader growth in competitiveness, meaning that further rapid growth is ultimately not sustainable. Systematic upgrading and radical policy changes are needed to build up India's knowledge infrastructure and institutions to support a shift in India's competitive advantages to new sectors outside these pockets. This ultimately means a policy emphasis on the manufacturing sector, and within that, promoting a shift from low-tech to higher technology manufacturing sectors, and a strengthening of the formal sector.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 042.
Date of creation: 2013
Date of revision:
India; innovation systems; comparative advantage; competitiveness; MNEs; infrastructure; globalization; location advantages;
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F68 - International Economics - - Economic Impacts of Globalization - - - Policy
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-29 (All new papers)
- NEP-CSE-2013-11-29 (Economics of Strategic Management)
- NEP-INT-2013-11-29 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paola Criscuolo & Rajneesh Narula, 2008.
"A novel approach to national technological accumulation and absorptive capacity: aggregating Cohen and Levinthal,"
European Journal of Development Research,
Taylor and Francis Journals, vol. 20(1), pages 56-73.
- Narula,Rajneesh & Criscuolo,Paola, 2002. "A novel approach to national technological accumulation and absorptive capacity: Aggregating Cohen and Levinthal," Research Memorandum 018, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
- Pavitt, Keith, 1984. "Sectoral patterns of technical change: Towards a taxonomy and a theory," Research Policy, Elsevier, vol. 13(6), pages 343-373, December.
- Narula, Rajneesh & Dunning, John H., 2009.
"Multinational enterprises, development and globalisation: Some clarifications and a research agenda,"
MERIT Working Papers
023, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
- Rajneesh Narula & John Dunning, 2010. "Multinational Enterprises, Development and Globalization: Some Clarifications and a Research Agenda," Oxford Development Studies, Taylor & Francis Journals, vol. 38(3), pages 263-287.
- Klaus E. Meyer & Ram Mudambi & Rajneesh Narula, 2011. "Multinational Enterprises and Local Contexts: The Opportunities and Challenges of Multiple Embeddedness," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 235-252, 03.
- Herstatt, Cornelius & Tiwari, Rajnish & Buse, Stephan, 2008.
"India's National Innovation System: Key elements and corporate perspectives,"
51, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
- Cornelius Herstatt & Rajnish Tiwari & Dieter Ernst, 2008. "India's National Innovation System: Key Elements and Corporate Perspectives," Economics Study Area Working Papers 96, East-West Center, Economics Study Area.
- Lee G. Branstetter & Francisco Lima & Lowell J. Taylor & Ana Venâncio, 2010. "Do Entry Regulations Deter Entrepreneurship and Job Creation? Evidence from Recent Reforms in Portugal," NBER Working Papers 16473, National Bureau of Economic Research, Inc.
- Sean Dougherty & Richard Herd & Thomas Chalaux, 2009. "What is holding back productivity growth in India ?: Recent microevidence," OECD Journal: Economic Studies, OECD Publishing, vol. 2009(1), pages 1-22.
- Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004.
"Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development,"
Journal of Economic Growth,
Springer, vol. 9(2), pages 131-165, 06.
- Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
- Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
- Röller, Lars-Hendrik & Waverman, Leonard, 2000.
"Telecommunications Infrastructure And Economic Development: A Simultaneous Approach,"
CEPR Discussion Papers
2399, C.E.P.R. Discussion Papers.
- Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
- Lars-Hendrik Röller & Leonard Waverman, 1996. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," CIG Working Papers FS IV 96-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Daron Acemoglu, 2003.
"Patterns of Skill Premia,"
Review of Economic Studies,
Wiley Blackwell, vol. 70(2), pages 199-230, 04.
- John Dunning, 1981. "Explaining the international direct investment position of countries: Towards a dynamic or developmental approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 117(1), pages 30-64, March.
- Nina Czernich & Oliver Falck & Tobias Kretschmer & Ludger Woessmann, 2009.
"Broadband Infrastructure and Economic Growth,"
CESifo Working Paper Series
2861, CESifo Group Munich.
- Ole-Kristian Hope & Wayne Thomas & Dushyantkumar Vyas, 2011. "The cost of pride: Why do firms from developing countries bid higher?," Journal of International Business Studies, Palgrave Macmillan, vol. 42(1), pages 128-151, January.
- Muller-Peters, Anke, 1998. "The significance of national pride and national identity to the attitude toward the single European currency: A Europe-wide comparison," Journal of Economic Psychology, Elsevier, vol. 19(6), pages 701-719, December.
- Francesco Caselli & Wilbur John Coleman II, 2006.
"The World Technology Frontier,"
American Economic Review,
American Economic Association, vol. 96(3), pages 499-522, June.
- Rajneesh Narula & John Dunning, 2000. "Industrial Development, Globalization and Multinational Enterprises: New Realities for Developing Countries," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 141-167.
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- Simeon Djankov & Caroline Freund & Cong S. Pham, 2010.
"Trading on Time,"
The Review of Economics and Statistics,
MIT Press, vol. 92(1), pages 166-173, February.
- Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2004.
"Do Institutions Cause Growth?,"
NBER Working Papers
10568, National Bureau of Economic Research, Inc.
- Michael A Witt & Arie Y Lewin, 2007. "Outward foreign direct investment as escape response to home country institutional constraints," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 579-594, July.
- Narula, Rajneesh, 2002. "Innovation systems and 'inertia' in R&D location: Norwegian firms and the role of systemic lock-in," Research Policy, Elsevier, vol. 31(5), pages 795-816, July.
- Lall, Sanjaya, 1992. "Technological capabilities and industrialization," World Development, Elsevier, vol. 20(2), pages 165-186, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ad Notten).
If references are entirely missing, you can add them using this form.