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Motives as Locational Determinants: A Study of FDI between India and LAC

Sumati Varma (), Niti Bhasin () and Rishika Nayyar ()

Transnational Corporations Review, 2015, vol. 7, issue 3, 335-352

Abstract: This paper addresses the issue of motives as locational determinants of foreign direct investment (FDI) flows from India to the Latin American region. India and the Latin America and Caribbean (LAC) have emerged as important centers of global FDI but have traditionally had insignificant FDI flows between them. The paper is a pioneering study examining motives of the newly emerging FDI relationship between India and the LAC region. The study uses a firm level data base across seven countries and multiple industries in an augmented gravity framework. It contributes to the literature on emerging markets as it concludes that FDI flows from India to the LAC are both asset seeking and asset exploiting, bridging the gap between traditional and modern explanations of FDI. Using a negative binomial regression model the study establishes that FDI flows dominate from the information technology and pharmaceutical industries and are market-seeking for nearshore advantages to the USA and strategic asset seeking for patents and technology.

Keywords: Motives; location; FDI; India; LAC; asset seeking; asset exploiting (search for similar items in EconPapers)
JEL-codes: F21 F23 N76 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:oul:tncr09:v:7:y:2015:i:3:p:335-352