Foreign Multinationals and Domestic Enterprises: Comparison of Their Technological and Other Characteristics in the Indian Machinery Industry

Pradeep Keshari

A chapter in Technology, 2016, pp 57-88 from Springer

Abstract: Abstract The paper empirically examines differences in the technological and other characteristics of two ownership groups of firms, foreign multinational enterprises (FMEs) and domestic enterprises (DEs) in the Indian machinery industry (IMI). Analysis is performed with the help of data on a large sample of firms during a period in which FMEs enjoyed level playing field vis a vis DEs and India became the second most attractive destination for inward foreign direct investment (FDI). We apply three alternative techniques for comparison: univariate mean value (of a variable) method, multivariate linear discriminants analysis (LDA) and dichotomous probabilistic logit and probit models. The significant findings of the study are: (i) probabilistic models are most suitable for the study; (ii) FMEs have greater technical efficiency (TE), firm size (SZ), export intensity (XI), intensity to import intermediate goods (IMIG) and intensity to import disembodied technology (IMDT) but the lower advertisement and marketing intensity (AMI) and financial leverage (LEV); (iii) choice of techniques (CAPI), research and development intensity (RDI), gross profit margin (GPM) and market concentration (MC) do not differ significantly between the two ownership groups. The major recommendations of this study are that the current outward orientations of the economy with liberal and transparent FDI policy for IMI need to be continued. This would not only contribute towards the indigenous production of additional and better machinery products with the help of FMEs but also check the influx of import of final goods and improve the efficiency of the IMI. Besides, the domestic suppliers of intermediate goods need to improve the availability and quality of their products for achieving greater linkages with FMEs. To encourage FMEs to spend more on R&D, the Government of India (GoI) needs to take steps to improve R&D infrastructure, regulatory and legal framework and implementation of IPR regime in the country so that the FMEs find India attractive enough to locate their core R&D functions.

Keywords: Foreign multinationals enterprises; Domestic enterprises; FDI; Indian machinery industry; Linear discriminants analysis; Probit/logit models (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-10-1684-4_5

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DOI: 10.1007/978-981-10-1684-4_5

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