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Inward FDI and firm-specific advantages of Indian manufacturing industries

  • Mishra, Bikash Ranjan

The unprecedented growth of international productions and Foreign Direct Investment (FDI) flows over the last two decades has led to the upsurge in scientific investigation into the distinctive facets of FDI. Despite the considerable amount of research undertaken, it seems that there is very little comprehensive economic analysis of FDI flows with respect to Indian firms. The present study attempts to bridge this gap by answering the following research question: what are the micro-level causes of FDI inflow, i.e. what are the determinants or pull factors of FDI inflow into Indian domestic firms? In order to analyze this question the study uses a panel data structure constructed over the recent 5 years, ranging from 2006 to 2010 and covering 22 sectors in Indian Manufacturing Industries. Adoption of Fixed and Random effects estimation procedure help to identify that among a set of firm-specific factors, only technological intensity, both in-house and import along with product differentiation have negatively contributed for foreign investors’ shareholding of local firms. The export performance, age, asset size and sales volume are among other remaining firm-specific characteristics which lack effective pulling effects in attracting FDI.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35119.

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Date of creation: 01 Dec 2011
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Handle: RePEc:pra:mprapa:35119
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  1. Dunning, John H, 1979. "Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 269-95, November.
  2. Charles P. Kindleberger, 1984. "Multinational Excursions," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262611996, June.
  3. 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.
  4. Lenn Gomes & Kannan Ramaswamy, 1999. "An Empirical Examination of the Form of the Relationship Between Multinationality and Performance," Journal of International Business Studies, Palgrave Macmillan, vol. 30(1), pages 173-187, March.
  5. Kumar, Nagesh, 1990. "Mobility Barriers and Profitability of Multinational and Local Enterprises in Indian Manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 449-63, June.
  6. John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan, vol. 11(1), pages 9-31, March.
  7. Lall, Sanjaya & Siddharthan, N S, 1982. "The Monopolistic Advantages of Multinationals: Lessons from Foreign Investment in the U.S," Economic Journal, Royal Economic Society, vol. 92(367), pages 668-83, September.
  8. Magnus Blomstrom & Robert E. Lipsey, 1986. "Firm Size and Foreign Direct Investment," NBER Working Papers 2092, National Bureau of Economic Research, Inc.
  9. Louis T. Wells, 1983. "Third World Multinationals: The Rise of Foreign Investments from Developing Countries," MIT Press Books, The MIT Press, edition 1, volume 1, number 026273169x, June.
  10. Chwo-Ming J Yu & Kiyohiko Ito, 1988. "Oligopolistic Reaction and Foreign Direct Investment: The Case of the U.S. Tire and Textiles Industries," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 449-460, September.
  11. Daniel Sullivan, 1994. "Measuring the Degree of Internationalization of a Firm," Journal of International Business Studies, Palgrave Macmillan, vol. 25(2), pages 325-342, June.
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