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What drives the boom in outward FDI from India?

Author

Listed:
  • Munmi Saikia
  • Khanindra Ch. Das
  • Saundarjya Borbora

Abstract

Purpose - The Indian economy has experienced a boom in outward FDI (OFDI) in 2006. The study aims at exploring the factors that drive the boom in OFDI of Indian firms. Design/methodology/approach - The participation of a firm in OFDI is a two-stage process -first, the decision to internationalization and second, how much to invest. We employ a two-stage model to decompose the effects on the decision to internationalization from effects on how much to invest. The two-stage model has the advantage of allowing us to estimate separately the probability of internationalization by a firm – Pr(OFDI > 0) – and the expected volume of investment, E(OFDI|OFDI > 0). The former is estimated by the probit model and the latter is estimated by the ordinary least square model. Findings - The study finds that prior experience and institutional advantage can strongly drive the internationalization of Indian multinationals. The study also examines the relative importance of two aspects of prior knowledge – length of prior knowledge and depth of prior knowledge on OFDI of Indian firms. The study finds that the depth of prior knowledge is a must influential driver of OFDI in comparison to its length. Originality/value - The present study is a novel attempt to investigate, ‘What drives the boom in OFDI from India?’

Suggested Citation

  • Munmi Saikia & Khanindra Ch. Das & Saundarjya Borbora, 2020. "What drives the boom in outward FDI from India?," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 15(5), pages 899-922, March.
    • Handle: RePEc:eme:ijoemp:ijoem-12-2017-0538
    DOI: 10.1108/IJOEM-12-2017-0538
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    Citations

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    Cited by:

    1. Tajeddin, Mahdi & Farashahi, Mehdi & Moghaddam, Kaveh & Simba, Amon & Edwards, Gwyneth, 2023. "Internationalization of Emerging Economy SMEs: A Tripod Approach," Journal of International Management, Elsevier, vol. 29(1).
    2. Prajukta Tripathy & Pragyanrani Behera & Bikash Ranjan Mishra, 2023. "Study of linkages between productivity, export, and outward foreign direct investment: An empirical perspective of Indian manufacturing industries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1527-1548, April.

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