Journal Press India^®

Author Details ( * ) denotes Corresponding author

This paper aims to study whether foreign and domestic firms can be distinguished from each other on the basis of their behaviour in terms of the factors that are considered to be the determinants of spillover effects from foreign firms to domestic firms. For this purpose logistic regression is used at firm level. The results show that this model could very well explain the behaviour of the foreign firms’ vis-à-vis domestic firms. Firms with higher export intensity, import intensity, R & D intensity, technical fees intensity are foreign firms. It is observed that as the predictor variables are added one by one to the model the results improve at every step which shows that these predictor variables explain the group membership to foreign or domestic category very well. On the basis of analysis of five test criteria, five models and individual exponential beta coefficients, it is fairly evident that foreign firms behave differently from domestic firms in terms of spillover effects.

Keywords

Foreign direct investment; Spillover effects; Indian manufacturing industry

1. Aitken, B. & Harrison, A. (1999). Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. American Economic Review, 89(3), 605-18.
2. Barrios, S. & Strobl, E. (2002). Foreign direct investment and productivity spillovers: Evidence from the Spanish experience. Welwirtchaftliches Archiv, 138(3), 459-81.
3. Basant, R. & Fikkert, B. (1996).The effects of R & D, Foreign technology purchase, and domestic and international spillovers on productivity in Indian firms. The Review of Economics and Statistics, 78(2), 187-199.
4. Basti, E. & Akin, A. (2008). The comparative productivity of the foreign-owned companies in Turkey: A malmquist productivity index approach. International Research Journal of Finance and Economics, 8(22), 58-65.
5. Behera, S. R. & Yashobanta, P. (2010). Technology spillovers and determinants of foreign direct investment: Evidence across Indian manufacturing industries. Retrieved from http://www.igidr.ac.in/conf/money/mfc13/Technology%20Spillovers%20and%20Determinants%20of%20Foreign%20Direct%20Investment_Smruti_Yash.pdf.
6. Behera, R.J., Dua, P. & Goldar (2012). Foreign direct investment and technology spillover: Evidence across Indian manufacturing industries. Working Paper No. 207. Center for Development Economics, Department of Economics Delhi School of Economics. Retrieved from htttp://www.cdedse.org/pdf/work207.pdf.
7. Bin, Q., Yang, S., Xin, P., Kirkulak, B. (2009). FDI technology spillover and the productivity growth of China’s manufacturing sector. Frontiers of Economics in China, 4(2), 209–22.
8. Blomstrom, M. & Kokko, A. (1998). Multinational corporations and spillovers. Journal of Economic Surveys, 12(2), 1-31.
9. Burns, P. R. & Burns, R (2009). Business research methods and statistics using SPSS, chapter-24. UK: SAGE Publications Ltd. Retrieved from http://www.uk.sagepub.com (Retrieved on September 21, 2012).
10. Central Statistical Organisation (2008). National industrial classification 2008. Retrieved from http://mospi.nic.in/Mospi_New/site/inner.aspx?status=2 & menu_id=129.
11. Field, A. (2000). Discovering statistics using SPSS for windows, London; Sage publications, reprinted 2003.
12. Fu, X. & Gong Y. (2009). International and intranational technological spillovers and productivity growth in China. Asian Economic Papers, 8(2), 1-23.
13. Gachino, G. (2007). Foreign direct investment and firm level productivity-a panel data analysis. UNU-Merit Working Paper Series-2007-016, 45.
14. Gachino, G. (2007). Technological spillovers from multinational presence towards a conceptual framework. UNU-MERIT Working Papers-2007-017, 43.
15. Girma, S., Gorg, H. & Pisu, M. (2008).Exporting, linkages and productivity spillovers from foreign direct investment. Canadian Journal of Economics, 41(1), 320-340.
16. Globerman, S. (1979). Foreign direct investment and 'spillover' efficiency benefits in Canadian manufacturing industries. The Canadian Journal of Economics, 12(1), 42-56.
17. Gujarati, D.N. (2008). Basic econometrics ( 4^th ed. ). New Delhi: Tata McGraw Hill Publishing Company Limited.
18. Harris, R., & Robinson C. (2004). Productivity impacts and spillovers from foreign Ownership in the United Kingdom. National Institute Economic Review, 187(1), 58-75.
19. Hosmer, D.W. & Lemeshow, S. (1989). Applied Logistic Regression, Canada: Wiley.
20. Iqbal, B.A., & Turay, A.M. (2016). FDI inflows to telecom sector of India: A critique. FOCUS: Journal of International Business, 3(2), 1-10.
21. Javorcik, B. S. (2004). Does FDI increase the productivity of domestic firms? In search of spillovers through backward linkage. The American Economic Review, 94(3), 605-27.
22. Joseph, T. J. (2007). Spillovers from FDI and absorptive capacity of firms: Evidence from Indian manufacturing industry after liberalisation. IIMB Management Review, 19(2), 119-130.
23. Kathuria, V. (2001). Foreign firms, technology transfer and knowledge spillovers to Indian manufacturing firms: a stochastic frontier analysis. Applied Economics, 33(5), 625-642.
24. Kathuria V. (2002). Liberalisation, FDI, and productivity spillovers - an analysis of Indian manufacturing firms. Oxford Economic Papers, 54(4), 688-718.
25. Kaushal, L, & Kaushal, A. (2015). FDI in retail sector in India: A global perspective. FOCUS: Journal of International Business, 2(2), 121.
26. Malhotra, M. (2013). Spillover effects of foreign direct investment: Evidence from Indian manufacturing industries. Unpublished Ph.D. Thesis, Department of Business Economics, South Campus, University of Delhi.
27. Malik, S. K. (2010). Conditional technology spillovers from foreign direct investment: Evidence from Indian manufacturing industries. Paper presented at IGIDR conference 2010, p. 37.
28. Marcin, K. (2008). How does FDI inflow affect productivity of domestic firms? The role of horizontal and vertical spillovers, absorptive capacity and competition. The Journal of International Trade & Economic Development, 17(1), 155–173.
29. Marin, A. & Sasidharan, S. (2008). The heterogeneity of MNC’ subsidiaries and technology spillovers: Explaining positive and negative effects in emerging economies. UNU-MERIT Working Papers-2008-066, 40p.
30. Murthy, K.V.B. & Malhotra, M. (2016). Developing a framework for spillover effects of FDI: Evidence from Indian manufacturing industries in Ananya Ghosh and Yamini Gupt (Eds.) Contemporary issues in Trade Environment and Policy (pp 27-38). New Delhi, India: Ane Books.
31. Murthy, K.V.B., Saran, D. & Malhotra, M. (2016). Total factor productivity growth in Indian manufacturing industries: Spillover effects of foreign direct investment. Globalisation, Economic Development and Sustainability (pp 1-12). New Delhi, India: Prithvi Prakashan Shivaji College, University of Delhi. (ISBN 978-81-86845-40-2).
32. Murthy, K.V.B., Saran, D. & Malhotra, M. (2017). Determinants of spillover effects of foreign direct investment: A study on the manufacturing industry in India. Emerging issues in Business and Management (242-259). New Delhi: All Clear Publications. (ISBN978-81-931842-9-5).
33. NCAER (2009). FDI in India and its growth linkages, NCAER, New Delhi. Retrieved from http://www.dipp.nic.in/.../fdi_ncaer.p.
34. OECD. (2008). OECD Benchmark Definition of Foreign Direct Investment, (4^thed.). Retrieved from http://www.oecd.org/daf/inv/investmentstatisticsandanalysis/40193734.pdf.
35. Potter, J., Moore, B., & Spires, R. (2002).The wider effects of inward foreign direct investment in manufacturing on U.K. industry. Journal of Economic Geography, 2(3), 279-310.
36. Reserve Bank of India (2011). Handbook of statistics on Indian economy. Retrieved from http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook of Statistics on Indian Economy.
37. Reserve Bank of India (2014). Estimates of productivity growth for Indian economy. Retrieved from https://rbi.org.in/Scripts/PublicationReportDetails.aspx?ID=785. (Retrieved on 25^th September 2015).
38. Sasidharan S. (2006). Foreign direct investment and technology spillovers: evidence from the Indian manufacturing sector. UNU- Merit Working Paper Series, 2006-010, 34.
39. Sen, K. & Kar, S. (2014). A political economy reading of India’s growth experience, 1993-2013. Economic and Political Weekly, 49(50), 40-51.
40. Singh, N. (2016). Outward FDI type and ownership mode: The effect on home country exports. FOCUS: Journal of International Business, 3(2), 11-34.
41. Suyanto, S., Salim, R. A. & Bloch, H. (2009). Does foreign direct investment lead to productivity spillovers? Firm level evidence from Indonesia, World Development, 37(12), 1861-1876. doi:10.1016/j.worlddev.2009.05.009.
42. Todo, Y. & Miyamoto, K. (2006). Knowledge spillovers from foreign direct investment and the role of local R & D activities: Evidence from Indonesia. Economic Development and Cultural Change. Chicago: University of Chicago (174-200).
43. UCLA: Academic Technology Services (Statistical Consulting Group). SPSS Data Analysis- Logit Regression. Retrieved from http://www.ats.ucla.edu/stat/spss/dae/logit.htm (Retrieved from 21^st September, 2012).