Pradhan, Jaya Prakash and Das, Keshab and Paul, Mahua (2006): Export-orientation of Foreign Manufacturing Affiliates in India: Factors, Tendencies and Implications.
Download (787Kb) | Preview
This paper addresses an important development issue in literature of international production, namely what motivates market‐seeking foreign direct investment (FDI) to undertake export activities. It is well recognized in the concerned literature that export‐oriented FDI is more beneficial for the host country than purely domestic market‐seeking FDI. Hence, many developing countries like India have policy concerns on foreign firms playing a very minimal role in their export activities. Various studies including that of UNCTAD (2003) noted that foreign direct investment (FDI) in Indian manufacturing has been and remains largely domestic market‐seeking. In view of this low export contribution by foreign firms, existing studies suggest that developing countries like India should improve their locational advantages to attract export‐oriented FDI as opposed to local market‐oriented FDI like quality of available infrastructure, availability of cheap but skilled manpower, expanding the size of export processing zones, participation in bilateral/multilateral trade and investment regimes, etc. However, these studies have not examined those factors that could motivate the existing market‐seeking FDI into export activities. The contribution of the present study is precisely to address this issue and identify factors encouraging market‐seeking FDI to take up export activities. The empirical analysis has been conducted in two stages. In the first stage, we have estimated the export shares and export‐orientation of foreign firms in Indian manufacturing across 17 Indian industries over 1991–2005. In the second stage, we have analyzed the impact of five set of factors—size and growth of host country market, local competition, policy regime, import competition and industry‐characteristics on the export‐orientation of foreign firms in Indian manufacturing. The empirical findings from the panel data analysis of 17 Indian industries over 1991–2005 has thrown up several policy implications important for increasing export‐orientation of foreign firms in a developing country like India.
|Item Type:||MPRA Paper|
|Original Title:||Export-orientation of Foreign Manufacturing Affiliates in India: Factors, Tendencies and Implications|
|Keywords:||Export–Orientation, Foreign Manufacturing Affiliates, Local Competition, Host Country Market|
|Subjects:||F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms; International Business
F - International Economics > F1 - Trade > F10 - General
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General
|Depositing User:||Jaya Prakash Pradhan|
|Date Deposited:||23. Dec 2008 13:24|
|Last Modified:||12. Feb 2013 10:32|
Aggarwal, A. (2002), ‘Liberalization, Multinational Enterprises and Export Performance: Evidence from Indian Manufacturing’, Journal of Development Studies, 38 (3), pp. 119–137.
Bhagwati, J.N. and A.O. Krueger (Eds.) (1974), Foreign Trade Regimes and Economic Development: A Special Conference Series on Foreign Trade Regimes and Economic Development, New York: Cambridge University Press.
Blomstrom, M., A. Kokko and M. Zejan (1994), ‘Host Country Competition, Labour Skills and Technology Transfer by Multinationals’, Weltwirtschaftliches Archiv, 130, pp. 521–533.
CFO Asia (1999), ‘Dungeons and the Dragon’, March.
Chudnovsky, D. and A. López (2004), ‘Transnational Corporations’ Strategies and Foreign Trade Patterns in MERCOSUR Countries in the 1990s’, Cambridge Journal of Economics, 28 (5), pp. 635–652.
Currie, J. and A. Harrison (1997), ‘Sharing the Costs: The Impact of Trade Reform on Capital and Labor in Morocco’, Journal of Labor Economics, 15 (3, part 2), pp. 544–571.
ECLAC (2004), Foreign Investment in Latin America and the Caribbean, United Nations, Santiago, Chile.
Economic Intelligence Unit (2004), Coming of Age: Multinational Companies in China, June.
Ganesh, S. (1997), ‘Who is Afraid of Foreign Firms? Current Trends in FDI in India’, Economic and Political Weekly, 32 (22), pp. 1265–1274.
Greene, W. (2000), Econometric Analysis, New York: Prentice-Hall.
IMF (1997), Balance of Payments Manual, Fifth Edition, IMF.
Jensen, C. (2002), ‘Foreign Direct Investment, Industrial Restructuring and the Upgrading of Polish Exports’, Applied Economics, 34 (2), pp. 207–217.
Krishna, P. and D. Mitra (1998), ‘Trade Liberalization, Market Discipline and Productivity Growth: New Evidence from India,’ Journal of Development Economics, 56 (2), pp. 447–462.
Kumar, N. (1994), ‘Determinants of Export Orientation of Foreign Production by U.S. Multinationals: An Inter-Country Analysis,’ Journal of International Business Studies, First Quarter, pp. 141–156.
Kumar, N. (1994), Multinational Enterprises and Industrial Organization: The Case of India, New Delhi: Sage Publications.
Kumar, N. (1998), ‘Multinational Enterprises, Regional Economic Integration and Export-Platform Production in the Host Countries: An Empirical Analysis for the US and Japanese Corporations’, Weltwirtschaftliches Archiv, 134 (3), pp. 450–483.
Kumar, N. and J.P. Pradhan (2003), ‘Export Competitiveness in the Knowledge-Based Industries: A Firm-Level Analysis of Indian Manufacturing’, RIS Discussion Paper, No. RIS-DP#43/2003, New Delhi.
Kumar, N. and N.S. Siddharthan (1994), ‘Technology, Firm Size and Export Behaviour in Developing Countries: The Case of Indian Enterprises’, Journal of Development Studies, 31 (2), pp. 289–309.
Kumar, N. and N.S. Siddharthan (1997), Technology, Market Structure and Internationalisation, Routledge: New York.
Leichenko, R.M. and R.A. Erickson (1997), ‘Foreign Direct Investment and State Export Performance’, Journal of Regional Science, 37 (2), pp. 307–329.
Liu, X. and C. Shu (2003), ‘Determinants of Export Performance: Evidence from Chinese Industries’, Economics of Planning, 36 (1), pp. 45–67.
Liu, X., P. Burridge, and P.J.N. Sinclair 2002), ‘Relationships between Economic Growth, Foreign Direct Investment and Trade: Evidence from China’, Applied Economics, 34 (11), pp. 1433–1440.
Lutz, S. and O. Talavera (2004), ‘Do Ukrainian Firms Benefit from FDI?’, Economics of Planning, 37 (2), pp. 77–98.
MacDonald, J.M. (1994), ‘Does Import Competition Force Efficient Production?’, Review of Economics and Statistics, 76 (4), pp. 721–727.
OECD (1999), OECD Benchmark Definition of Foreign Direct Investment, Third Edition.
Pant, M. (1993), ‘Export Performance, Transnational Corporations and the Manufacturing Sector: A Case Study of India’, Indian Economic Review, 28 (1), pp. 41–54.
Pradhan, R. P. (2005-06), ‘FDI in the Globalization Era: Chinese and Indian Experiences’, Prajnan, 34(4), pp. 323–343.
Ramstetter, E.D. (1999), ‘Comparisons of Foreign Multinationals and Local Firms in Asian Manufacturing over Time’, Asian Economic Journal, 13 (2), pp. 163–203.
Ramstetter, E.D. (1999), ‘Trade Propensities and Foreign Ownership Shares in Indonesian Manufacturing’, Bulletin of Indonesian Economic Studies, 35 (2), pp. 43–66.
Rasiah, R. (2004), ‘Exports and Technological Capabilities: A Study of Foreign and Local Firms in the Electronics Industry in Malaysia, the Philippines and Thailand’, European Journal of Development Research, 16 (3), pp. 587–623.
Roberts, M. and J. Tybout (1996), Industrial Evolution in Developing Countries: Micro Patterns of Turnover, Productivity and Market Structure, New York: Oxford University Press.
Saggi, K. (1999), ‘Trade, Foreign Direct Investment, and International Technology Transfer: A Survey’, Policy Research Working Paper, No. 2349, The World Bank.
Shenkar, O. (2004), The Chinese Century: The Rising Chinese Economy and Its Impact on the Global Economy, the Balance of Power, and Your Job, Wharton School Publishing.
Siddharthan, N.S. and S. Nollen (2004), ‘MNE Affiliation, Firm Size and Exports Revisited: A Study of Information Technology Firms in India’, Journal of Development Studies, 40 (6), pp. 146–168.
Sun, H. (2001), ‘Foreign Direct Investment and Regional Export Performance in China’, Journal of Regional Science, 41 (2), pp. 317–336.
UNCTAD (1993), Explaining and Forecasting Regional Flows of Foreign Direct Investment, United Nations, New York.
UNCTAD (2002), The World Investment Report 2002: Transnational Corporations and Export Competitiveness, United Nations, New York and Geneva.
UNCTAD (2003), The World Investment Report 2003: FDI Policies for Development: National and International Perspectives, United Nations Publications, Geneva.
Woodward, D.P. and R.J. Rolfe (1993), ‘The Location of Export-Oriented Foreign Direct Investment in the Caribbean Basin’, Journal of International Business Studies, First Quarter, pp. 121–144.
Wooldridge, J.M. (2002), Econometric Analysis of Cross Section and Panel Data, Cambridge, MA: MIT Press.