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The determinants of outward foreign direct investment: a firm-level analysis of Indian manufacturing


  • Jaya Prakash Pradhan


This paper analyses the determinants of the overseas direct investment activity of Indian manufacturing enterprises. In general, several firm-specific characteristics such as age, size, R&D intensity, skill intensity and export orientation are observed to be important explanatory factors in the outward foreign direct investment (O-FDI) activity of Indian firms. The impact of age and size on O-FDI has been observed to be non-linear. The product differentiation activities and the productivity of firms are other useful factors in overseas production expansion in certain industries. The study reveals that the performance of these firm-specific variables is subject to sectoral dynamics. Internationalization of production activities of Indian firms has been observed to be partly fuelled by policy liberalization during the 1990s.

Suggested Citation

  • Jaya Prakash Pradhan, 2004. "The determinants of outward foreign direct investment: a firm-level analysis of Indian manufacturing," Oxford Development Studies, Taylor & Francis Journals, vol. 32(4), pages 619-639.
  • Handle: RePEc:taf:oxdevs:v:32:y:2004:i:4:p:619-639 DOI: 10.1080/1360081042000293371

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    Cited by:

    1. Morris, Sebastian & Jain, Palakh, 2013. "Empirical study on inter-country OFDI," MPRA Paper 56194, University Library of Munich, Germany.
    2. Pradhan, Jaya Prakash, 2005. "Outward Foreign Direct Investment from India: Recent Trends and Patterns," MPRA Paper 12358, University Library of Munich, Germany.
    3. Nunnenkamp, Peter & Sosa Andrés, Maximiliano & Vadlamannati, Krishna Chaitanya & Waldkirch, Andreas, 2012. "What drives India's outward FDI?," Kiel Working Papers 1800, Kiel Institute for the World Economy (IfW).
    4. Pradhan, Jaya Prakash, 2007. "How Do Indian Multinationals Affect Exports from Home Country?," MPRA Paper 19022, University Library of Munich, Germany.
    5. Narayanan K, 2008. "Technology Sourcing and Internationalisation of IT firms in India," Working Papers id:1703, eSocialSciences.
    6. Harald Oberhofer & Michael Pfaffermayr, "undated". "FDI versus Exports. Substitutes or Complements? A Three Nation Model and Empirical Evidence," Working Papers 2007-28, Faculty of Economics and Statistics, University of Innsbruck.
    7. Pradhan, Jaya Prakash, 2007. "National Innovation System and the Emergence of Indian Information and Software Technology Multinationals," MPRA Paper 12359, University Library of Munich, Germany.
    8. Dilek Demirbas & Ila Patnaik & Ajay Shah, 2013. "Graduating to globalisation: a study of Southern multinationals," Indian Growth and Development Review, Emerald Group Publishing, vol. 6(2), pages 242-259, November.
    9. Peter Nunnenkamp & Maximiliano Sosa Andrés, 2014. "Ownership Choices of Indian Direct Investors: Do FDI Determinants Differ between Joint Ventures and Wholly Owned Subsidiaries?," South Asian Journal of Macroeconomics and Public Finance, , vol. 3(1), pages 39-78, June.
    10. Chowdhury, Mamta B, 2011. "India’s Outward Foreign Direct Investment: Closed Doors to Open Souk," MPRA Paper 32828, University Library of Munich, Germany.
    11. Jesús F. Lampón & Santiago Lago-Peñas & Pablo Cabanelas, 2016. "Can the periphery achieve core? The case of the automobile components industry in Spain," Papers in Regional Science, Wiley Blackwell, vol. 95(3), pages 595-612, August.
    12. Jaya Prakash Pradhan & Neelam Singh, 2009. "Outward FDI and Knowledge Flows: A Study of the Indian Automotive Sector," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 1(1), pages 156-187, June.
    13. Patnaik, Ila & Shah, Ajay, 2010. "Why India Choked when Lehman Broke," India Policy Forum, National Council of Applied Economic Research, vol. 6(1), pages 39-72.
    14. H. Richard Nakamura & Mikael Olsson & Mikael Lönnborg, 2012. "FDI in the post-EU accession Baltic Sea Region: A global or a regional concern?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 12(2), pages 89-108, December.
    15. Naudé, Wim & Matthee, Marianne, 2012. "Do Export Costs Matter in Determining Whether, When, and How Much African Firms Export?," Working Papers 38, JICA Research Institute.
    16. Tolentino, Paz Estrella, 2010. "Home country macroeconomic factors and outward FDI of China and India," Journal of International Management, Elsevier, vol. 16(2), pages 102-120, June.
    17. repec:pal:jintbs:v:48:y:2017:i:4:d:10.1057_s41267-016-0050-z is not listed on IDEAS
    18. Jaya Prakash Pradhan, "undated". "Growth of Indian Multinationals in the World Economy: Implications for Development," Working Papers 0704, Institute for Studies in Industrial Development (ISID).
    19. Tolentino, Paz Estrella, 2008. "The determinants of the outward foreign direct investment of China and India: Whither the home country?," MERIT Working Papers 049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    20. Miria Pigato, 2009. "Strengthening China's and India's Trade and Investment Ties to the Middle East and North Africa," World Bank Publications, The World Bank, number 2626.
    21. Tiwari, Rajnish & Herstatt, Cornelius, 2009. "The emergence of Indian multinationals: An empirical study of motives, status-quo and trends of Indian investments in Germany," Working Papers 56, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
    22. Pradhan, Jaya Prakash, 2008. "Indian Direct Investment in Developing Countries: Emerging Trends and Development Impacts," MPRA Paper 12323, University Library of Munich, Germany.
    23. Anwar, Amar Iqbal & Hasse, Rolf & Rabbi, Fazli, 2008. "Location Determinants of Indian Outward Foreign Direct Investment: How Multinationals Choose their Investment Destinations?," MPRA Paper 47397, University Library of Munich, Germany.
    24. Vudayagi Balasubramanyam & N Forsans, 2013. "Why do Indian firms go abroad?," Working Papers 33867210, Lancaster University Management School, Economics Department.

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