Technological Capability as a Determinant of FDI Inflows: Evidence from Developing Asia & India

Amitendu Palit () and Shounkie Nawani ()
Additional contact information
Amitendu Palit: Indian Council for Research on International Economic Relations
Shounkie Nawani: Indian Council for Research on International Economic Relations

Indian Council for Research on International Economic Relations, New Delhi Working Papers from Indian Council for Research on International Economic Relations, New Delhi, India

Abstract: This paper contributes to the empirical literature on determinants of FDI by addressing the question: Why do some developing countries from Asia continue to receive more FDI, while others from the region have fallen behind? It finds R&D-based innovative capacities, and the ability to apply such capacities through modern IT-based techniques, as the two key determinants explaining FDI inflows to developing Asian economies. These traits are found significant for inward FDI in India too with more technology intensive sectors receiving greater FDI. The findings of the paper suggest that in the absence of strong technological foundations and well-developed communications infrastructure, liberal policies alone are not enough for drawing FDI, once initial advantages, like cheap labour, fizzle out. For developing countries like India, strong thrust on R&D and innovative skills is needed for attracting FDI in technology-intensive exports. Therefore, policy actions would have to go further than a broad-based opening up of sectors to FDI, and increasing the limit of such investment in these sectors, for sustained inflows of FDI.

Keywords: FDI inflows; technology and technological capabilities; locational advantages; IT-based communication facilities (search for similar items in EconPapers)
JEL-codes: F21 L86 O3 (search for similar items in EconPapers)
Pages: 37 Pages
Date: 2007-04
New Economics Papers: this item is included in nep-cwa
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.icrier.org/pdf/Working_Paper_193.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ind:icrier:193

Access Statistics for this paper

More papers in Indian Council for Research on International Economic Relations, New Delhi Working Papers from Indian Council for Research on International Economic Relations, New Delhi, India Contact information at EDIRC.
Bibliographic data for series maintained by G.K. Manjunath/A. Reddy ().