Do Domestic Firms Really Benefit From Foreign Direct Investment? the Role of Horizontal and Vertical Spillovers and Absorptive Capacity
Year: 2015
Type: article
Abstract: This paper examines whether the existence of externalities associated with foreign direct investment (FDI) benefits the domestic firms of Indian manufacturing industries. Empirical findings reveal that local firms benefit from vertical foreign presence, whereas the horizontal foreign presence at the industry level could not substantially raise the value addition of labor across Indian industries. The absorptive capacity of domestic firms is highly relevant to reap the benefit from foreign presence, and could act as a precondition for incorporating the benefit of FDI externalities. Higher concentration and a greater size of the domestic market facilitate to raise the productivity spillovers from foreign presence. Furthermore, the FDI-technology spillovers seem to be higher for R&D-and technology-intensive firms.
Source: Journal of Economic Development
Author: Smruti Ranjan Behera
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W1444557545