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Domestic capital vs. foreign capital new enterprise creation: the case of FDI in India

Author

Listed:
  • Sajikumar Tulasidharan

    (1 Entrepreneurship Development Institute of India, Ahmedabad, India)

  • Da Silva Amândio F. C.

    (2 ISCA, University of Aveiro, GOVCOPP, Portugal, and FCHS, University Fernando Pessoa, Portugal)

Abstract

The attempt of this paper is to find an empirical relationship between Foreign Direct Investment and New Firms (Paid up Capital) and Gross Capital Formation (proxy for business growth) and Credit to Commercial Sector and Gross Capital Formation using the test of stationarity (ADF, PP, and KPSS methods), Johansen Cointegration and Granger’s Causality. The results show that FDI crowds out creation of new firms and capital formation and it is the Credit flow to the commercial sector that causes Gross Capital Formation at current price. It shows domestic flow of credit is more influential in capital formation rather than foreign capital inflow.

Suggested Citation

  • Sajikumar Tulasidharan & Da Silva Amândio F. C., 2023. "Domestic capital vs. foreign capital new enterprise creation: the case of FDI in India," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 19(4), pages 9-24, December.
    • Handle: RePEc:vrs:finiqu:v:19:y:2023:i:4:p:9-24:n:2
    DOI: 10.2478/fiqf-2023-0024
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    More about this item

    Keywords

    Foreign Direct Investment; Gross Capital Formation; Commercial Sector; Savings-Investment Gap; Paid-Up Capital;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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