Technological Capability as a Determinant of FDI Inflows: Evidence from Developing Asia & India
This paper contributes to the empirical literature on determinants of FDI by addressing the question: Why do some developing countries from Asia continue to receive more FDI, while others from the region have fallen behind? It finds R&D-based innovative capacities, and the ability to apply such capacities through modern IT-based techniques, as the two key determinants explaining FDI inflows to developing Asian economies. These traits are found significant for inward FDI in India too with more technology intensive sectors receiving greater FDI. The findings of the paper suggest that in the absence of strong technological foundations and well-developed communications infrastructure, liberal policies alone are not enough for drawing FDI, once initial advantages, like cheap labour, fizzle out. For developing countries like India, strong thrust on R&D and innovative skills is needed for attracting FDI in technology-intensive exports. Therefore, policy actions would have to go further than a broad-based opening up of sectors to FDI, and increasing the limit of such investment in these sectors, for sustained inflows of FDI.
|Date of creation:||Apr 2007|
|Date of revision:|
|Contact details of provider:|| Postal: India Habitat Centre, Core 6A, Lodhi Road, New Delhi 110 003|
Web page: http://www.icrier.res.in
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ronald Jones, 1970. "The Role of Technology in the Theory of International Trade," NBER Chapters, in: The Technology Factor in International Trade, pages 73-94 National Bureau of Economic Research, Inc.
- John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 1-31, March.
- Bende-Nabende, A. & Ford, J.L. & Sen, S. & Slater, J., 2000. "FDI Locational Determinants and the Linkage Between FDI and Other Macro-Economic Factors: Long-run Dynamics in Pacific Asia," Discussion Papers 00-11, Department of Economics, University of Birmingham.
- Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-90, September.
- Robert E. Lipsey, 1999. "The Location and Characteristics of U.S. Affiliates in Asia," NBER Working Papers 6876, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ind:icrier:193. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (G.K. Manjunath)
If references are entirely missing, you can add them using this form.