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Does higher productivity and efficiency lead to spillover? evidence from Indian manufacturing


  • Pritish Kumar Sahu


  • Sakiru Adebola Solarin

    (Multimedia University, Malaysia)


This paper empirically analyzes spillover effects from foreign direct investment using the firm level panel data of Indian manufacturing during 2000-01 and 2009-10. It first estimates the productivity and efficiency of the domestic and foreign firms separately before examining the spillover effects by using PROWESS dataset. The use of the Cobb-Douglas production function for productivity and stochastic frontier approach for efficiency reveals higher productivity and efficiency of the foreign firms over their domestic counterparts. Similarly, the findings show a significant impact of FDI on output growth. This indicates that any increase in foreign equity at the firm and sector level directly affects productivity. We attempt to find the possible reason for positive spillover effects by analyzing the detail of the present trends and the dataset.

Suggested Citation

  • Pritish Kumar Sahu & Sakiru Adebola Solarin, 2014. "Does higher productivity and efficiency lead to spillover? evidence from Indian manufacturing," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(3), pages 175-193, July-Sept.
  • Handle: RePEc:jda:journl:vol.48:year:2014:issue3:pp:175-193

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    Cited by:

    1. 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.

    More about this item


    Foreign Direct Investment (FDI); Productivity; Efficiency; Spillover; Foreign Firms Domestic Firms etc.;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East


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