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FDI liberalization, firm heterogeneity and foreign ownership: German firm decisions in reforming India

  • Görg, Holger
  • Mühlen, Henning
  • Nunnenkamp, Peter

The paper investigates the role of firm-level productivity and industry-level R&D for MNEs' choice of undertaking FDI, and the share of ownership in foreign affiliates. Two firm-specific datasets on German MNEs with varying equity stakes in Indian affiliates are used to account for the two-step decision process. The paper also analyses how German firm decisions were affected by the liberalisation of FDI regulations in India. Results show remarkable differences between the selection and the ownership share equation, and also between the pre-reform and post-reform periods. The evidence clearly reveals the tradeoffs involved in selective FDI approvals and foreign ownership restrictions.

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Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Hannover 2010 with number 35.

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Date of creation: 2010
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Handle: RePEc:zbw:gdec10:35
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  17. Vidya Mahambare & V. N. Balasubramanyam, 2005. "FDI in India," International Trade 0505007, EconWPA.
  18. Beata Smarzynska Javorcik & Mariana Spatareanu, 2003. "To share or not to share : does local participation matter for spillovers from foreign direct investment?," Policy Research Working Paper Series 3118, The World Bank.
  19. Elizabeth Asiedu & Hadi Salehi Esfahani, 2001. "Ownership Structure In Foreign Direct Investment Projects," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 647-662, November.
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