Is the evolution of Indiaâ€™s Outward FDI consistent with Dunningâ€™s Investment Development Path sequence?
This paper examines whether Indiaâ€™s Outward Foreign Direct Investment (OFDI) pattern is consistent with Dunningâ€™s Investment Development Path (IDP) sequence using macro data over the period 1980-2010. We test whether the level of development - proxied by GDP per capita - is the main factor explaining OFDI, and augment the IDP by studying other major determinants such as Exports, Inward FDI (IFDI), Human Capital, and R&D using the Cointegration and Error Correction Model techniques. Our results support the main proposition of the IDP, but also highlight the importance of other factors. We also find that OFDI Granger-causes R&D, suggesting a possibility of reverse technology spillover.
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