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Foreign Firms and Inter-industry Spillovers in Indian Manufacturing

Author

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  • G. Chidambaran Iyer

    (G. Chidambaran Iyer is Project Fellow, Indira Gandhi Institute of Development Research, Mumbai–400065, India; e-mail: chidambaran.iyer@gmail.com)

Abstract

Foreign direct investment (FDI) has benefits both for the host country and the home country. Multinational corporations or foreign firms are supposed to have frontier technology, which are expected to have spillover effects on local firms when they enter a country. Most studies on Indian industry have focused on intra-industry spillovers and have found some evidence of this. The present study's focus is on inter-industry spillovers (for example, from auto-components to assemblers) on which there are few studies, as the literature unambiguously expects inter-industry spillovers to occur. This paper establishes the presence of spillover effects on domestic firms due to horizontal, backward and forward linkages with foreign firms in the Indian manufacturing industry, which affect domestic firms’ productivity. It also establishes that inter-industry spillovers are negative for some industries.

Suggested Citation

  • G. Chidambaran Iyer, 2009. "Foreign Firms and Inter-industry Spillovers in Indian Manufacturing," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 3(3), pages 297-317, July.
    • Handle: RePEc:sae:mareco:v:3:y:2009:i:3:p:297-317
    DOI: 10.1177/097380100900300305
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    References listed on IDEAS

    as
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    3. Holger Görg & David Greenaway, 2016. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Scientific Book Chapters, in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT Volume 53: World Scientific Studies in International Economics, chapter 9, pages 163-189, World Scientific Publishing Co. Pte. Ltd..
    4. Vinish Kathuria, 2002. "Liberalisation, FDI, and productivity spillovers--an analysis of Indian manufacturing firms," Oxford Economic Papers, Oxford University Press, vol. 54(4), pages 688-718, October.
    5. Ejaz Ghani, 1992. "How Significant are Externalities for Development?," Palgrave Macmillan Books, in: North-South and South-South, chapter 6, pages 118-161, Palgrave Macmillan.
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    More about this item

    Keywords

    Multinational Firms; Inter- and Intra-industry spillovers; Inter-industry spillovers; JEL Classification: F23;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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