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Outward FDI and Knowledge Flows: A Study of the Indian Automotive Sector

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Listed author(s):
  • Jaya Prakash Pradhan

    ()

    (Sardar Patel Institute of Economic and Social Research)

  • Neelam Singh

    (Lady Shri Ram College, Delhi University)

Abstract

In recent years developing countries have emerged as significant participants in the OFDI (outward foreign direct investment), seeking strategic assets. Such asset exploiting-cum-augmenting OFDI involves potential two-way cross-border knowledge flows. This study examines several dimensions of OFDI in the Indian automotive industry – currently internationalizing rapidly in terms of OFDI. This study undertakes a quantitative analysis of the influence of OFDI activities on the in-house (domestic) R&D performance of the Indian automotive firms during 1988-2008, and finds expected favourable impact on the R&D intensity. The study concludes with suggestions to promote OFDI, particularly the strategic asset enhancing OFDI.(Please Puchase For Further Reading)

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Article provided by Faculty of Economics and Administration, University of Malaya in its journal International Journal of Institutions and Economies.

Volume (Year): 1 (2009)
Issue (Month): 1 (June)
Pages: 156-187

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Handle: RePEc:umk:journl:v:1:y:2009:i:1:p:156-187
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Keywords: OFDI; knowledge flows; strategic asset-seeking FDI; R&D; automotives;

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Find related papers by JEL classification:
  • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
  • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
  • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
  • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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  1. Rui, Huaichuan & Yip, George S., 2008. "Foreign acquisitions by Chinese firms: A strategic intent perspective," Journal of World Business, Elsevier, vol. 43(2), pages 213-226, March.
  2. 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).
  3. Bruno Van Pottelsberghe De La Potterie & Frank Lichtenberg, 2001. "Does Foreign Direct Investment Transfer Technology Across Borders?," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 490-497, August.
  4. Deng, Ping, 2007. "Investing for strategic resources and its rationale: The case of outward FDI from Chinese companies," Business Horizons, Elsevier, vol. 50(1), pages 71-81.
  5. Holger Görg & David Greenaway, 2004. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Bank Research Observer, World Bank Group, vol. 19(2), pages 171-197.
  6. Badri Narayanan G. & Pankaj Vashisht, 2008. "Determinants of Competitiveness of the Indian Auto Industry," Microeconomics Working Papers 22234, East Asian Bureau of Economic Research.
  7. Pradhan, Jaya Prakash & Abraham, Vinoj, 2004. "Overseas Mergers and Acquisitions by Indian Enterprises: Patterns and Motivations," MPRA Paper 17076, University Library of Munich, Germany.
  8. Fishman, Arthur & Rob, Rafael, 1999. "The Size of Firms and R&D Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 915-931, November.
  9. 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.
  10. Lall, Sanjaya, 1983. "Determinants of R&D in an LDC : The Indian engineering industry," Economics Letters, Elsevier, vol. 13(4), pages 379-383.
  11. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
  12. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 45-66, March.
  13. Lee Branstetter, 2000. "Is Foreign Direct Investment a Channel of Knowledge Spillovers? Evidence from Japan's FDI in the United States," NBER Working Papers 8015, National Bureau of Economic Research, Inc.
  14. Okada, Aya, 2004. "Skills Development and Interfirm Learning Linkages under Globalization: Lessons from the Indian Automobile Industry," World Development, Elsevier, vol. 32(7), pages 1265-1288, July.
  15. Dunning,John H. & Hoesel,Roger,van & Narula,Rajneesh, 1996. "Explaining the 'new' wave of outward FDI from developing coountries : the case of Taiwan and Korea," Research Memorandum 009, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  16. Kumar, Nagesh & Aggarwal, Aradhna, 2005. "Liberalization, outward orientation and in-house R&D activity of multinational and local firms: A quantitative exploration for Indian manufacturing," Research Policy, Elsevier, vol. 34(4), pages 441-460, May.
  17. Blomstrom, Magnus & Persson, Hakan, 1983. "Foreign investment and spillover efficiency in an underdeveloped economy: Evidence from the Mexican manufacturing industry," World Development, Elsevier, vol. 11(6), pages 493-501, June.
  18. Steven Globerman, 1979. "Foreign Direct Investment and `Spillover' Efficiency Benefits in Canadian Manufacturing Industries," Canadian Journal of Economics, Canadian Economics Association, vol. 12(1), pages 42-56, February.
  19. Poon, Jessie P.H. & MacPherson, Alan, 2005. "Technology acquisition among Korean and Taiwanese firms in the United States," International Business Review, Elsevier, vol. 14(5), pages 559-575, October.
  20. Pradhan, Jaya Prakash, 2005. "Outward Foreign Direct Investment from India: Recent Trends and Patterns," MPRA Paper 12358, University Library of Munich, Germany.
  21. Henrik Braconier & Karolina Ekholm & Karen Knarvik, 2001. "In search of FDI-transmitted R&D spillovers: A study based on Swedish data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(4), pages 644-665, December.
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Cited by:

  1. Pradhan, Jaya Prakash, 2011. "Regional heterogeneity and firms’ innovation: the role of regional factors in industrial R&D in India," MPRA Paper 28096, University Library of Munich, Germany.
  2. Morris, Sebastian & Jain, Palakh, 2013. "Empirical study on inter-country OFDI," MPRA Paper 56194, 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. Jaya Prakash Pradhan, 2010. "Strategic Asset-Seeking Activities of Emerging Multinationals: Perspectives of Foreign Acquisitions by Indian Pharmaceutical MNEs," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 1(2).
  5. Celeste Amorim Varum & Lucia Piscitello, 2011. "The Role of Public Policy in Strengthening Innovation through Internationalization," Chapters,in: Science and Innovation Policy for the New Knowledge Economy, chapter 7 Edward Elgar Publishing.
  6. Ronny Thomas & K. Narayanan, 2016. "Outward FDI, Exports and Technological Efforts: A Study of Indian Manufacturing Firms," Working Papers id:11383, eSocialSciences.
  7. Singh, Neelam, 2013. "Automotive Industry Response to its Global QMS Standard ISO/TS-16949," MPRA Paper 51342, University Library of Munich, Germany.
  8. Swati Virmani & Edmund Amann, 2015. "Is the evolution of India’s Outward FDI consistent with Dunning’s Investment Development Path sequence?," Working Papers 92160912, Lancaster University Management School, Economics Department.
  9. Cozza, C. & Rabellotti, R. & Sanfilippo, M., 2015. "The impact of outward FDI on the performance of Chinese firms," China Economic Review, Elsevier, vol. 36(C), pages 42-57.
  10. Tiwari, Rajnish, 2016. "India's potential as a lead market for frugal innovation and the role of socio-cultural context factors," Working Papers 94, Hamburg University of Technology (TUHH), Institute for Technology and Innovation Management.
  11. Pradhan, Jaya Prakash & Singh, Neelam, 2010. "Group Affiliation and Location of Indian Firms’ Foreign Acquisitions," MPRA Paper 24018, University Library of Munich, Germany.
  12. Massimo G. Colombo & Luca Grilli & Lucia Piscitello & Cristina Rossi-Lamastra (ed.), 2011. "Science and Innovation Policy for the New Knowledge Economy," Books, Edward Elgar Publishing, number 13746.

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