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Technology Spillover and Determinants of Foreign Direct Investment: An Analysis of Indian Manufacturing Industries

  • smruti, Smruti Ranjan Behera
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    This paper examines the spillover effect of foreign direct investment (FDI) and determinant of FDI across Indian manufacturing industries. The result, based on two-equation model that allows for the two-way link between labor productivity of locally owned industries and foreign presence provide evidence that foreign presence brings new channels of knowledge and technology spillover to domestic industrial firms. We find that intermediate factors like R&D intensity and technology import intensity can impact positively the productivity of domestic firms. Furthermore, we find that bigger market size and highly productive domestic sectors are likely to attract more foreign capital into Indian industries.

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    File URL: http://mpra.ub.uni-muenchen.de/42178/1/MPRA_paper_42178.pdf
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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42178.

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    Date of creation: 01 Aug 2012
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    Handle: RePEc:pra:mprapa:42178
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    1. Fosfuri, Andrea & Motta, Massimo & Ronde, Thomas, 2001. "Foreign direct investment and spillovers through workers' mobility," Journal of International Economics, Elsevier, vol. 53(1), pages 205-222, February.
    2. Hamilton, James D. & Monteagudo, Josefina, 1998. "The augmented Solow model and the productivity slowdown," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 495-509, October.
    3. Easterly, William & DEC, 1993. "How much do distortions affect growth?," Policy Research Working Paper Series 1215, The World Bank.
    4. Elhanan Helpman, 1997. "R&D and Productivity: The International Connection," Harvard Institute of Economic Research Working Papers 1798, Harvard - Institute of Economic Research.
    5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    6. Sourafel Girma, 2003. "Absorptive capacity and productivity spillovers From FDI: a threshold regression analysis," European Economy Group Working Papers 25, European Economy Group.
    7. Sjöholm, Fredrik, 1997. "Technology Gap, Competition and Spillovers from Direct Foreign Investment: Evidence from Establishment Data," SSE/EFI Working Paper Series in Economics and Finance 212, Stockholm School of Economics.
    8. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
    9. Suma Athreye & Sandeep Kapur, 2004. "Industrial Concentration in a Liberalising Economy: a Study of Indian Manufacturing," Open Discussion Papers in Economics 51, The Open University, Faculty of Social Sciences, Department of Economics.
    10. Jakob Madsen & Shishir Saxena & James Ang, 2008. "The Indian Growth Miracle And Endogenous Growth," Monash Economics Working Papers 17/08, Monash University, Department of Economics.
    11. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    12. repec:acb:camaaa:2008-29 is not listed on IDEAS
    13. Findlay, Ronald, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, MIT Press, vol. 92(1), pages 1-16, February.
    14. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October.
    15. Ang, James, 2009. "Do Financial Sector Policies Promote Innovative Activity in Developing Countries? Evidence from India," MPRA Paper 14495, University Library of Munich, Germany.
    16. Noh-Sun Kwark & Yong-Sang Shyn, 2006. "International R&D spillovers revisited: Human capital as an absorptive capacity for foreign technology," International Economic Journal, Taylor & Francis Journals, vol. 20(2), pages 179-196.
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