Outward Foreign Direct Investment and Domestic Innovation Efforts: Evidence from India

• Main Authors: Reddy, Ketan, Sasidharan, Subash, Doytch, Nadia
• Format: text
• Published: Archīum Ateneo 2022
• Subjects: OFDI; R&D; Manufacturing; Business; Economic Policy; Economics; International Business; Macroeconomics; Political Economy; Public Affairs, Public Policy and Public Administration; Social and Behavioral Sciences
• Online Access: https://archium.ateneo.edu/asog-pubs/250; https://doi.org/10.1016/j.jeconbus.2022.106084
• Institution: Ateneo De Manila University

This paper examines the role of outward foreign direct investment (OFDI) by Indian firms on domestic firms' R&D using unique firm-level data for 2008–2018. While correcting for endogeneity arising from the sample selection, we apply panel data models to evaluate the OFDI and domestic R&D nexus. Our empirical analysis highlights the presence of positive impact of OFDI on the firm's decision to undertake R&D activities. Further, we find that irrespective of the mode of OFDI, i.e., both wholly-owned subsidiaries and joint ventures encourages firms to participate in R&D activities. However, only OFDI in the form of wholly-owned subsidiaries increases the R&D intensity of the parent firms' R&D activities.