Spill-over effects of foreign direct investment: an econometric study of Indian firms

Bikash Mishra

MPRA Paper from University Library of Munich, Germany

Abstract: The channel through which the inflows of foreign direct investment (FDI) contribute to economic progress of the host economy like India can both be direct as well as indirect. Such pecuniary benefits resulting in improved productivity of local firms which cannot be fully appropriated by foreign investors are better known in the literature as spill-over effects. The paper is based on the following research question: what are the firm-level direct impact and indirect effects of FDI in India? This question is analysed with reference to a micro-level investigation which tests particularly for inter- and intra-industrial spill-overs from FDI by applying a Panel framework with Levinsohn-Petrin approach. The study envelops a rich firm-level dataset from 22 sectors of Indian Manufacturing industries and over a time period from 2006 to 2010. After controlling for firm-wise and year-wise effects, the paper finds marginal and insignificant direct impact and mixed spill-over effects of FDI inflow on the productivity of local firms.

Keywords: FDI; spill-over effects; panel data; Levinsohn-Petrin approach (search for similar items in EconPapers)
JEL-codes: C33 F21 F23 (search for similar items in EconPapers)
Date: 2011-11
New Economics Papers: this item is included in nep-cse, nep-eff and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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