Rise of service sector outward foreign direct investment from Indian economy: trends, patterns, and determinants

Jaya Prakash Pradhan

MPRA Paper from University Library of Munich, Germany

Abstract: The rise of service sector outward FDI (OFDI) activities has emerged as one of the most important aspects of Indian economy during nineties. The present paper reviews the recent trends and patterns and tries to identify determinants of such investment. As compared to the eighties, the character of service sector OFDI flows has gone through several transformations. In the seventies it is largely a phenomenon led by firms from hotels & restaurants, finance and marketing segments and is being directed at developing regions in overwhelming cases and is mostly minority owned. In contrast, during nineties it is predominantly led by the software segment of the service sector, locationally developed country oriented and is largely majority-owned ventures. The rising trends in the service sector Investment Development Path (IDP) of Indian economy has been found to be related to the stylized aspect of economic growth expressed in terms of structural shift in economic activities. At the firm level the OFDI behavior of service sector firms is observed to be non-linearly related to the firm age and size, both relationships following inverted U-shape curves. Firm’s innovation, export orientation and profitability are also found to be important explanators in the rise of OFDI at the firm level. The import of capital goods however appears to have a negative impact on trans-border expansion of service sector firms.

Keywords: Service Sector; Outward FDI (search for similar items in EconPapers)
JEL-codes: F21 F23 L8 (search for similar items in EconPapers)
Date: 2003-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published in GITAM Journal of Management 1.4(2006): pp. 70-97

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