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Rise of service sector outward foreign direct investment from Indian economy: trends, patterns, and determinants

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  • Pradhan, Jaya Prakash

Abstract

The rise of service sector outward FDI (OFDI) activities has emerged as one of the most important aspects of Indian economy during nineties. The present paper reviews the recent trends and patterns and tries to identify determinants of such investment. As compared to the eighties, the character of service sector OFDI flows has gone through several transformations. In the seventies it is largely a phenomenon led by firms from hotels & restaurants, finance and marketing segments and is being directed at developing regions in overwhelming cases and is mostly minority owned. In contrast, during nineties it is predominantly led by the software segment of the service sector, locationally developed country oriented and is largely majority-owned ventures. The rising trends in the service sector Investment Development Path (IDP) of Indian economy has been found to be related to the stylized aspect of economic growth expressed in terms of structural shift in economic activities. At the firm level the OFDI behavior of service sector firms is observed to be non-linearly related to the firm age and size, both relationships following inverted U-shape curves. Firm’s innovation, export orientation and profitability are also found to be important explanators in the rise of OFDI at the firm level. The import of capital goods however appears to have a negative impact on trans-border expansion of service sector firms.

Suggested Citation

  • Pradhan, Jaya Prakash, 2003. "Rise of service sector outward foreign direct investment from Indian economy: trends, patterns, and determinants," MPRA Paper 17078, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:17078
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    1. World Bank, 2002. "World Development Indicators 2002," World Bank Publications - Books, The World Bank Group, number 13921, April.
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    Cited by:

    1. Pradhan, Jaya Prakash, 2008. "Indian Direct Investment in Developing Countries: Emerging Trends and Development Impacts," MPRA Paper 12323, University Library of Munich, Germany.
    2. Nagesh Kumar, 2005. "Towards a Broader Asian Community : Agenda for the East Asia Summit," Macroeconomics Working Papers 22107, East Asian Bureau of Economic Research.
    3. Sanjay Kumar & Nupur Chowdhury, 2005. "Trade and Environment in the WTO : Negotiating Options for Developing Countries," Macroeconomics Working Papers 22106, East Asian Bureau of Economic Research.
    4. Pradhan, Jaya Prakash, 2005. "Outward Foreign Direct Investment from India: Recent Trends and Patterns," MPRA Paper 12358, University Library of Munich, Germany.
    5. S. K. Mohanty & Sachin Chaturvedi, 2005. "Emergence of China and India in the New Millennium : Will it Facilitate Market Access for LDCs and Developing Countries?," Trade Working Papers 22120, East Asian Bureau of Economic Research.
    6. Yilmaz Akyüz, 2005. "The WTO Negotiations on Industrial Tariffs : What is at Stake for Developing Countries?," Trade Working Papers 22080, East Asian Bureau of Economic Research.
    7. Sachin Chaturvedi & Lian Chawii, 2005. "Biosafety Protocol, International Trade and Agricultural Biotechnology : Policy Inferences for India," Trade Working Papers 22086, East Asian Bureau of Economic Research.
    8. Ramkishen S. Rajan, 2006. "Monetary and Financial Cooperation in Asia : Emerging Trends and Prospects," Finance Working Papers 22125, East Asian Bureau of Economic Research.
    9. S. K. Mohanty & Sachin Chaturvedi, 2005. "Prospects for Environmental Trade under the Regional Process in South Asia : Evidence from SAPTA and Proposals for SAFTA," Trade Working Papers 22119, East Asian Bureau of Economic Research.
    10. K.J. Joseph, 2005. "Strategic Approach to Strengthening the International Competitiveness in Knowledge Based Industries : Electronics Industry," Microeconomics Working Papers 22102, East Asian Bureau of Economic Research.
    11. Mukul G. Asher & Amarendu Nandy, 2006. "Demographic Complementarities and Outsourcing : Implications and Challenges for India," Macroeconomics Working Papers 22082, East Asian Bureau of Economic Research.
    12. Mirajul Haq & Syed Kafait Hussain Naqvi & Muhammad Luqman, 2016. "Is the Value Addition in Services and Manufacturing Complementary? Empirical Evidence from SAARC," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 21(2), pages 31-52, July-Dec.

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    More about this item

    Keywords

    Service Sector; Outward FDI;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L8 - Industrial Organization - - Industry Studies: Services
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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