IDEAS home Printed from https://ideas.repec.org/a/wsi/serxxx/v57y2012i02ns0217590812500117.html
   My bibliography  Save this article

Foreign Direct Investment And Technology Spillover: Evidence Across Indian Manufacturing Industries

Author

Listed:
  • SMRUTI RANJAN BEHERA

    (Department of Economics, Shyamlal College, University of Delhi, Delhi, India)

  • PAMI DUA

    (Department of Economics, Delhi School of Economics, University of Delhi, Delhi, India)

  • BISHWANATH GOLDAR

    (V.K.R.V. Rao Centre for Studies in Globalization, Institute of Economic Growth, University Enclave, Delhi, India)

Abstract

The paper attempts to analyze the spillover effect of Foreign Direct Investment (FDI) across Indian manufacturing industries. Foreign presence by way of FDI brings new channels of technology spillover to the domestic industrial firms in the form of enhanced efficiency and diffusion of knowledge in the long-run. By carrying out Pedroni cointegration tests, the analysis tries to provide a long-run relationship between endogenous variables and explanatory variables, pertaining to technology spillovers across Indian manufacturing industries. We find that technology spillovers are relatively higher in industries like food products, textiles, chemicals, drugs and pharmaceuticals and non-metallic mineral products.

Suggested Citation

  • Smruti Ranjan Behera & Pami Dua & Bishwanath Goldar, 2012. "Foreign Direct Investment And Technology Spillover: Evidence Across Indian Manufacturing Industries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(02), pages 1-23.
    • Handle: RePEc:wsi:serxxx:v:57:y:2012:i:02:n:s0217590812500117
    DOI: 10.1142/S0217590812500117
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217590812500117
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0217590812500117?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Easterly, William, 1993. "How much do distortions affect growth?," Journal of Monetary Economics, Elsevier, vol. 32(2), pages 187-212, November.
    2. Madsen, Jakob B. & Saxena, Shishir & Ang, James B., 2010. "The Indian growth miracle and endogenous growth," Journal of Development Economics, Elsevier, vol. 93(1), pages 37-48, September.
    3. Kohpaiboon, Archanun, 2006. "Foreign direct investment and technology spillover: A cross-industry analysis of Thai manufacturing," World Development, Elsevier, vol. 34(3), pages 541-556, March.
    4. 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.
    5. Elhanan Helpman, 1997. "R&D and Productivity: The International Connection," NBER Working Papers 6101, National Bureau of Economic Research, Inc.
    6. Ronald Findlay, 1978. "Relative Backwardness, Direct Foreign Investment, and the Transfer of Technology: A Simple Dynamic Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(1), pages 1-16.
    7. Magnus Blomström & Ari Kokko & Mario Zejan, 2000. "Multinational Corporations and Spillovers," Palgrave Macmillan Books, in: Foreign Direct Investment, chapter 8, pages 101-133, Palgrave Macmillan.
    8. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    9. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    10. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    11. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    12. Wang, Jian-Ye & Blomstrom, Magnus, 1992. "Foreign investment and technology transfer : A simple model," European Economic Review, Elsevier, vol. 36(1), pages 137-155, January.
    13. 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.
    14. Magnus Blomström & Ari Kokko & Mario Zejan, 2000. "Technology, Market Characteristics and Spillovers," Palgrave Macmillan Books, in: Foreign Direct Investment, chapter 10, pages 160-176, Palgrave Macmillan.
    15. Lichtenberg, Frank R. & Pottelsberghe de la Potterie, Bruno v., 1998. "International R&D spillovers: A comment," European Economic Review, Elsevier, vol. 42(8), pages 1483-1491, September.
    16. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    17. Ambos, Tina C. & Ambos, Björn & Schlegelmilch, Bodo B., 2006. "Learning from foreign subsidiaries: An empirical investigation of headquarters' benefits from reverse knowledge transfers," International Business Review, Elsevier, vol. 15(3), pages 294-312, June.
    18. Suma Athreye & Sandeep Kapur, 2006. "Industrial concentration in a liberalising economy: A study of Indian manufacturing," Journal of Development Studies, Taylor & Francis Journals, vol. 42(6), pages 981-999.
    19. Fredrik Sjoholm, 1999. "Technology gap, competition and spillovers from direct foreign investment: Evidence from establishment data," Journal of Development Studies, Taylor & Francis Journals, vol. 36(1), pages 53-73.
    20. Ang, James, 2009. "Do Financial Sector Policies Promote Innovative Activity in Developing Countries? Evidence from India," MPRA Paper 14495, University Library of Munich, Germany.
    21. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
    22. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
    23. 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.
    24. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    25. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    26. repec:bla:jecsur:v:12:y:1998:i:3:p:247-77 is not listed on IDEAS
    27. Ramirez, Miguel D., 2007. "Is Foreign Direct Investment Productive in the Latin America Case? A Panel Unit Root and Panel Cointegration Analysis, 1980-2001," Working Papers 23, Yale University, Department of Economics.
    28. 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 921-947, October.
    29. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, June.
    30. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
    31. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
    32. Xu, Bin, 2000. "Multinational enterprises, technology diffusion, and host country productivity growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 477-493, August.
    33. repec:bla:obuest:v:61:y:1999:i:0:p:653-70 is not listed on IDEAS
    34. Taotao Chen & Ari Kokko & Patrik Gustavsson Tingvall, 2011. "FDI and spillovers in China: non-linearity and absorptive capacity," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 9(1), pages 1-22.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khanindra Ch. Das & Nilanjan Banik, 2015. "Outbound Foreign Direct Investment from China and India," China Report, , vol. 51(3), pages 204-229, August.
    2. Ghosh, Taniya & Parab, Prashant Mehul, 2021. "Assessing India’s productivity trends and endogenous growth: New evidence from technology, human capital and foreign direct investment," Economic Modelling, Elsevier, vol. 97(C), pages 182-195.
    3. Sahoo, Pradipta Kumar & Rath, Badri Narayan & Le, Viet, 2022. "Nexus between export, productivity, and competitiveness in the Indian manufacturing sector," Journal of Asian Economics, Elsevier, vol. 79(C).
    4. Lucian Belascu & Alexandra Horobet & Georgiana Vrinceanu & Consuela Popescu, 2021. "Performance Dissimilarities in European Union Manufacturing: The Effect of Ownership and Technological Intensity," Sustainability, MDPI, vol. 13(18), pages 1-19, September.
    5. Krishan SINGH & Sandeep Kaur BHATIA, 2017. "Whether Fdi Or Exports Enhance Innovation: Evidence From Indian Manufacturing Firms, 2001-2012," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 26(3), pages 19-32.
    6. Bishwanath Goldar & Yashobanta Parida, 2017. "Intangible Capital and Firm Productivity," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 18(2), pages 246-275, September.
    7. Sucre Reyes, M.A., 2014. "Finance, growth and social fairness : Evidence for Latin America and Bolivia," Other publications TiSEM ad514338-1973-4ec9-b5c7-2, Tilburg University, School of Economics and Management.
    8. Bishwanath Goldar & Karishma Banga, 2018. "Country Origin of Foreign Direct Investment in Indi an Manufacturing and Its Impact on Productivity of Domestic Firms," Working Papers id:12730, eSocialSciences.
    9. Özcan Karahan, 2016. "Technology Spillover from Foreign Direct Investment in Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 9(3), pages 7-12, December.
    10. Brian Tavonga Mazorodze & Devi Datt Tewari, 2018. "Impact of Chinese, Korean and Japanese Innovation Spillover on Labour Productivity in South African Manufacturing," Journal of Economics and Behavioral Studies, AMH International, vol. 10(5), pages 16-28.
    11. 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.
    12. Smruti Ranjan Behera, 2015. "Do Domestic Firms Really Benefit From Foreign Direct Investment? The Role Of Horizontal And Vertical Spillovers And Absorptive Capacity," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(2), pages 57-86, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. smruti, Smruti Ranjan Behera, 2012. "Technology Spillover and Determinants of Foreign Direct Investment: An Analysis of Indian Manufacturing Industries," MPRA Paper 42178, University Library of Munich, Germany.
    2. Behera, Smruti Ranjan Behera & Dua, Pami Dua & Goldar, Bishwanath Goldar, 2012. "Horizontal and Vertical Technology Spillover of Foreign Direct Investment: An Evaluation across Indian Manufacturing Industries," MPRA Paper 43293, University Library of Munich, Germany.
    3. Smruti Ranjan Behera, 2015. "Do Domestic Firms Really Benefit From Foreign Direct Investment? The Role Of Horizontal And Vertical Spillovers And Absorptive Capacity," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(2), pages 57-86, June.
    4. Smruti Ranjan Behera, 2015. "Technology Spillover And Determinants Of Foreign Direct Investment: An Analysis Of Indian Manufacturing Industries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 40(3), pages 55-83, September.
    5. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
    6. Coe, David T. & Helpman, Elhanan & Hoffmaister, Alexander W., 2009. "International R&D spillovers and institutions," European Economic Review, Elsevier, vol. 53(7), pages 723-741, October.
    7. Neil Foster-McGregor, 2012. "Innovation and Technology Transfer across Countries," wiiw Research Reports 380, The Vienna Institute for International Economic Studies, wiiw.
    8. Holger Görg & David Greenaway, 2016. "Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?," World Scientific Book Chapters, in: MULTINATIONAL ENTERPRISES AND HOST COUNTRY DEVELOPMENT Volume 53: World Scientific Studies in International Economics, chapter 9, pages 163-189, World Scientific Publishing Co. Pte. Ltd..
    9. Muller, Thomas & Schnitzer, Monika, 2006. "Technology transfer and spillovers in international joint ventures," Journal of International Economics, Elsevier, vol. 68(2), pages 456-468, March.
    10. Della Temenggung, 2007. "Productivity Spillovers from Foreign Direct Investment: Indonesian Manufacturing Industry’s Experience 1975-2000," DEGIT Conference Papers c012_048, DEGIT, Dynamics, Economic Growth, and International Trade.
    11. Muhammad Ali & Uwe Cantner & Ipsita Roy, 2017. "Knowledge Spillovers Through FDI and Trade: The Moderating Role of Quality-Adjusted Human Capital," Economic Complexity and Evolution, in: Andreas Pyka & Uwe Cantner (ed.), Foundations of Economic Change, pages 357-391, Springer.
    12. Natasha Agarwal & Chris Milner, 2011. "FDI Spillovers in China – Connecting the Missing Link between Micro and Macro," Discussion Papers 11/20, University of Nottingham, GEP.
    13. Mohammad Sharif Karimi & Andrzej Cieslik, 2017. "Foreign Knowledge Spillovers and Total Factor Productivity Growth: Evidence from Four ASEAN Countries," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 21(2), pages 267-299, Spring.
    14. Benzaim, Samia & Ftiti, Zied & Khedhaouria, Anis & Djermane, Rebai, 2023. "US foreign investments: Technology transfer, relative backwardness, and the productivity growth of host countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 275-295.
    15. Klaus E Meyer & Evis Sinani, 2009. "When and where does foreign direct investment generate positive spillovers? A meta-analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(7), pages 1075-1094, September.
    16. Tomáš Havránek & Zuzana Iršová, 2010. "Meta-Analysis of Intra-Industry FDI Spillovers: Updated Evidence," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(2), pages 151-174, May.
    17. Matija Rojec & Mark Knell, 2018. "Why Is There A Lack Of Evidence On Knowledge Spillovers From Foreign Direct Investment?," Journal of Economic Surveys, Wiley Blackwell, vol. 32(3), pages 579-612, July.
    18. Greenaway, David & Görg, Holger, 2002. "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Investment?," CEPR Discussion Papers 3485, C.E.P.R. Discussion Papers.
    19. Teixeira, Aurora A.C. & Fortuna, Natércia, 2010. "Human capital, R&D, trade, and long-run productivity. Testing the technological absorption hypothesis for the Portuguese economy, 1960-2001," Research Policy, Elsevier, vol. 39(3), pages 335-350, April.
    20. Liu, Xiaohui & Zou, Huan, 2008. "The impact of greenfield FDI and mergers and acquisitions on innovation in Chinese high-tech industries," Journal of World Business, Elsevier, vol. 43(3), pages 352-364, July.

    More about this item

    Keywords

    Foreign Direct Investment; technology spillover; manufacturing; panel cointegration; unit root tests; O41; F43; E23; C22; C23;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:57:y:2012:i:02:n:s0217590812500117. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.