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FDI Outflows from India: An Examination of the underlying Economics, Policies and their Impact

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  • Subramanian Ravi
  • Sachdeva Charu
  • Morris, Sebastian

Abstract

This paper discusses the trends in India's outward FDI over the last decade and then attempts to identify the driving factors for the same. The aim is to provide policy makers with insights regarding levers which would help in encouraging FDI outflows and to stimulate further research in foreign investment from emerging economies. The analysis is based on 287 instances of foreign investment from India by top Indian companies across 17 sectors. The paper draws on the "eclectic" paradigm to study the impact of ownership, location and internalization variables on India's foreign investment. A sector wise analysis of mode of entry, intent of entry and geographic concentration has been performed. At an aggregate level, it has been found that acquisitions have been the predominant mode of entry for Indian firms investing abroad and seeking new markets the primary intent of investment. A regression model was also developed to understand the impact and relative importance of owndership variables such as distribution system, need for resources, factor of production, post sales service requirement, presence of IP and brand on foreign investment from India. It was found that high distribution expenses and need for resources had a very positive influence on foreign investment. The paper also discusses the key policy changes that impacted outward FDI from India in the last decade and relationship of outward FDI with other macroeconomic indicators such as GDP and Fischer Open Differential.

Suggested Citation

  • Subramanian Ravi & Sachdeva Charu & Morris, Sebastian, 2010. "FDI Outflows from India: An Examination of the underlying Economics, Policies and their Impact," IIMA Working Papers WP2010-03-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:9862
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    References listed on IDEAS

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    1. Dunning, John H & Rugman, Alan M, 1985. "The Influence of Hymer's Dissertation on the Theory of Foreign Direct Investment," American Economic Review, American Economic Association, vol. 75(2), pages 228-232, May.
    2. John H Dunning, 1988. "The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(1), pages 1-31, March.
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    Cited by:

    1. Asif Hussain & Xue Yang & Lu Yali & MS Nazir, 2020. "Foreign Direct Investment (FDI) by Asian and European Union (EU) Countries: The Investment Effects of Pharmaceutical Sector," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(4), pages 1-16, April.
    2. Abrar Ali Saiyed & Stephanie A. Fernhaber & Rakesh Basant & Karthik Dhandapani, 2021. "The internationalization of new ventures in an emerging economy: The shifting role of industry concentration," Asia Pacific Journal of Management, Springer, vol. 38(4), pages 1467-1497, December.
    3. Morris, Sebastian & Jain, Palakh, 2013. "Empirical study on inter-country OFDI," MPRA Paper 56194, University Library of Munich, Germany.

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