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Foreign Firms and Inter-industry Spillovers in Indian Manufacturing

Author

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  • G. Chidambaran Iyer

    (G. Chidambaran Iyer is Project Fellow, Indira Gandhi Institute of Development Research, Mumbai–400065, India; e-mail: chidambaran.iyer@gmail.com)

Abstract

Foreign direct investment (FDI) has benefits both for the host country and the home country. Multinational corporations or foreign firms are supposed to have frontier technology, which are expected to have spillover effects on local firms when they enter a country. Most studies on Indian industry have focused on intra-industry spillovers and have found some evidence of this. The present study's focus is on inter-industry spillovers (for example, from auto-components to assemblers) on which there are few studies, as the literature unambiguously expects inter-industry spillovers to occur. This paper establishes the presence of spillover effects on domestic firms due to horizontal, backward and forward linkages with foreign firms in the Indian manufacturing industry, which affect domestic firms’ productivity. It also establishes that inter-industry spillovers are negative for some industries.

Suggested Citation

  • G. Chidambaran Iyer, 2009. "Foreign Firms and Inter-industry Spillovers in Indian Manufacturing," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 3(3), pages 297-317, July.
  • Handle: RePEc:sae:mareco:v:3:y:2009:i:3:p:297-317
    DOI: 10.1177/097380100900300305
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    References listed on IDEAS

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    1. Jonathan E. Haskel & Sonia C. Pereira & Matthew J. Slaughter, 2007. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 482-496, August.
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    3. Kugler, Maurice, 2006. "Spillovers from foreign direct investment: Within or between industries?," Journal of Development Economics, Elsevier, vol. 80(2), pages 444-477, August.
    4. Ejaz Ghani, 1992. "How Significant are Externalities for Development?," Palgrave Macmillan Books, in: North-South and South-South, chapter 6, pages 118-161, Palgrave Macmillan.
    5. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Multinational Firms; Inter- and Intra-industry spillovers; Inter-industry spillovers; JEL Classification: F23;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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