Firm Heterogeneity and the Activity of Japanese Manufacturing Multinationals in India

Hiroyuki Nishiyama, Azusa Fujimori and Takahiro Sato
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Azusa Fujimori: Faculty of Management, Osaka Seikei University, Japan

No DP2019-06, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper anatomizes the linkage between country/region characteristics and Japanese MNE activity in India from both theoretical and empirical sides. We construct a North-South firm-heterogeneity model with FDI and exchange rate. We use this model to make three contributions: First, we theoretically reveal how country characteristics affect the average sales of the firm in the host country. Secondly, we make clear the state-level characteristics on three main industrialized areas in India using the data from some valuable databases. Thirdly, we estimate determinant factors of average sales of each Japanese affiliate firms in India focusing on regional characteristics derived in the theoretical part using firm-level data. We also construct several proxy variables of determinant factors of average sales in state-level and put into estimated regression equation. This empirical analysis targets at the 1990s and 2000s. Over this period, India enjoyed steady economic growth and it can be linked with increase of FDI inflow and technological spillover from MNEs. We find out that some regional characteristics such as level of human-capital or transportation cost in each state and also exchange rate have a significant effect on average sales of each Japanese affiliate firms in India.

Keywords: Firm heterogeneity; foreign direct investment; India; Japanese multinational enterprises (search for similar items in EconPapers)
JEL-codes: F10 F12 F23 L25 O53 R30 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2019-03
New Economics Papers: this item is included in nep-cse, nep-int and nep-sbm
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