Foreign Ownership and Export Performance in the Large Corporate Sector of India

The contribution that foreign investors make to the export of manufactured products from Third World countries has been a subject of debate in recent years. It has been felt by many host countries that MNCs export ‘too little’, either in aggregate terms or in relation to domestic enterprises (or both). In India, in particular, there is a pervasive impression, supported by some empirical studies, that MNCs have performed rather poorly in this regard. It is suggested in this chapter that such criticisms of the foreign contribution to Indian industrial exports may be misplaced. Some of the arguments of the critics have not taken broad policy influences on export activity into account. The empirical justification for the critical conclusion has not been sound, because it has been based on very restricted samples and has excluded other influences (apart from ownership) on export performance. This chapter attempts to analyse econometrically the influence of foreign ownership on the export performance of 24 industries containing the largest private-sector companies in India — the appropriate setting in which to evaluate this issue. It uses some additional industry-level variables to control for other influences on export performance; the data only permit a simple model to be tested, but the results are instructive for analysis and policy.