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Regional foreign direct investment and technology spillover: evidence across different clusters in India

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  • Smruti Ranjan Behera

Abstract

This paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms at the regional level, using firm-level panel dataset covering 22 manufacturing industries in India from 2000 to 2012. In order to estimate the productivity spillovers from FDI at the regional level, we select 10 industrial clusters across 4 regions in India. In estimating productivity, we control for a possible simultaneity bias by using semi-parametric estimation techniques. We find that local firms benefit from horizontal and vertical FDI, but the benefits from the latter are found to be substantially stronger. The absorptive capacity of domestic firms is highly relevant to harvest the spilled technology from foreign-owned firms. Furthermore, we find that domestic firms belonging to high-technology industries benefit more from FDI at the regional level. We also find that market concentration is a crucial conduit for firm innovation, technological upgradation, and having a direct effect on local firm total factor productivity.

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  • Smruti Ranjan Behera, 2017. "Regional foreign direct investment and technology spillover: evidence across different clusters in India," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(7), pages 596-620, October.
    • Handle: RePEc:taf:ecinnt:v:26:y:2017:i:7:p:596-620
    DOI: 10.1080/10438599.2016.1254850
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    2. Islam, Md. Monirul & Irfan, Muhammad & Shahbaz, Muhammad & Vo, Xuan Vinh, 2022. "Renewable and non-renewable energy consumption in Bangladesh: The relative influencing profiles of economic factors, urbanization, physical infrastructure and institutional quality," Renewable Energy, Elsevier, vol. 184(C), pages 1130-1149.
    3. Hien T. N. Huynh & Phuong V. Nguyen & Hoa D. X. Trieu & Khoa T. Tran, 2021. "Productivity Spillover from FDI to Domestic Firms across Six Regions in Vietnam," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(1), pages 59-75, January.
    4. Xiaoyong Qiao & Xingyao Li & Xin Ling & Rui Xue & Claude Baron & Xiaoxuan Xin, 2023. "Value-Added Trade, Trade Barriers, and International Technology Spillover—Evidence from China’s Manufacturing Industry," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(2), pages 1-6.
    5. Sugam Agarwal & Smruti Ranjan Behera, 2022. "Geographical concentration of knowledge and technology-intensive industries in India: empirical evidence from establishment-level analysis," Indian Economic Review, Springer, vol. 57(2), pages 513-552, December.

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