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Is the evolution of India’s Outward FDI consistent with Dunning’s Investment Development Path sequence?

Listed author(s):
  • Swati Virmani
  • Edmund Amann

This paper examines whether India’s Outward Foreign Direct Investment (OFDI) pattern is consistent with Dunning’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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File URL: http://www.lancaster.ac.uk/media/lancaster-university/content-assets/documents/lums/economics/working-papers/LancasterWP2015_019.pdf
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Paper provided by Lancaster University Management School, Economics Department in its series Working Papers with number 92160912.

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Date of creation: 2015
Handle: RePEc:lan:wpaper:92160912
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  1. Isabel Faeth, 2009. "Determinants Of Foreign Direct Investment - A Tale Of Nine Theoretical Models," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 165-196, 02.
  2. 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).
  3. Amiti, Mary & Wakelin, Katharine, 2003. "Investment liberalization and international trade," Journal of International Economics, Elsevier, vol. 61(1), pages 101-126, October.
  4. Chowdhury, Mamta B, 2011. "India’s Outward Foreign Direct Investment: Closed Doors to Open Souk," MPRA Paper 32828, University Library of Munich, Germany.
  5. 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.
  6. Miguel Fonseca & António Mendonça & José Passos, 2007. "The Investment Development Path Hypothesis: Evidence from the Portuguese Case – A Panel Data Analysis," Working Papers Department of Economics 2007/21, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  7. Kun-Ming Chen & Shu-Fei Yang, 2013. "Impact of Outward Foreign Direct Investment on Domestic R&D Activity: Evidence from Taiwan's Multinational Enterprises in Low-wage Countries," Asian Economic Journal, East Asian Economic Association, vol. 27(1), pages 17-38, 03.
  8. Rabin Hattari & Ramkishen Rajan, 2010. "India as a Source of Outward Foreign Direct Investment," Oxford Development Studies, Taylor & Francis Journals, vol. 38(4), pages 497-518.
  9. John Dunning, 1981. "Explaining the international direct investment position of countries: Towards a dynamic or developmental approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 117(1), pages 30-64, March.
  10. Pradhan, Jaya Prakash, 2005. "Outward Foreign Direct Investment from India: Recent Trends and Patterns," MPRA Paper 12358, University Library of Munich, Germany.
  11. Frank Barry & Holger Gorg & Andrew Mcdowell, 2003. "Outward FDI and the Investment Development Path of a Late-industrializing Economy: Evidence from Ireland," Regional Studies, Taylor & Francis Journals, vol. 37(4), pages 341-349.
  12. Liu, Xiaohui & Buck, Trevor & Shu, Chang, 2005. "Chinese economic development, the next stage: outward FDI?," International Business Review, Elsevier, vol. 14(1), pages 97-115, February.
  13. 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.
  14. Mathews, John A., 2002. "Dragon Multinational: A New Model for Global Growth," OUP Catalogue, Oxford University Press, number 9780195121469.
  15. Kalotay, Kalman, 2008. "Russian transnationals and international investment paradigms," Research in International Business and Finance, Elsevier, vol. 22(2), pages 85-107, June.
  16. Stoian, Carmen, 2013. "Extending Dunning's Investment Development Path: The role of home country institutional determinants in explaining outward foreign direct investment," International Business Review, Elsevier, vol. 22(3), pages 615-637.
  17. Kalotay, Kalman & Sulstarova, Astrit, 2010. "Modelling Russian outward FDI," Journal of International Management, Elsevier, vol. 16(2), pages 131-142, June.
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