Foreign firms, technology transfer and knowledge spillovers to Indian manufacturing firms: a stochastic frontier analysis

Abstract

This paper uses techniques from a stochastic production frontier (i.e., the best practice technology used in the industry vis-a-vis average practised technology) and panel data literature to test for the spillover hypothesis that 'presence of foreign-owned firms and disembodied technology import in a sector leads to higher productivity growth for domestic firms'. The study uses panel data for 368 medium and largesized Indian manufacturing firms for the period 1975-1976 to 1988-1989. The results indicate that there exists positive spillovers from the presence of foreign-owned firms but the nature and type of spillovers vary depending upon the industries to which the firms' belong. There exist significant positive spillovers for the domestic firms belonging to the 'scientific' subgroup provided the firms themselves possess significant R&D capabilities. However, for the 'non-scientific' subgroup presence of foreign firms itself forces the local firms to be more productive by inducing greater competition. However, the results change marginally when the initial level of productivity (i.e. the technology-gap) is considered.

Foreign Direct Investment and Technology Spillovers: Evidence from the Indian Manufacturing Sector

“…We can observe that horizontal variable is negative and is not statistically significant. Our results about the lack of horizontal spillover are in concordance with the recent studies finding either negative or insignificant results (Aitken and Harrison 1999;Smarynska 2004, Kathuria 2001. The lack of horizontal spillovers can be due to the fact that foreign firms can prevent the leakage of technology to its competitors in the same industry.…”

“…The results of the study indicate a positive spillover for those domestic firms supplying to foreign subsidiaries. However, the lack of significance of the horizontal spillover is in congruence with the results of the other studies carried out for India (Kathuria 2001(Kathuria , 2002 as well as other developing and transition economies (Aitken and Harrison 1999;Djakov and Hoekman 2000;Konings 2001;Narula and Marin 2005). …”

Do spillover benefits grow with rising foreign direct investment? An empirical examination of the case of China

“…More importantly, the coefficient on consistent with previous studies such as Kathuria (2001) who find greater spillover 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 F o r P e e r R e v i e w 17 enterprises to which size of operation is not crucial for business success, compared with firms operating in traditional sectors.…”

“…The form and the strength of the relationship between foreign presence and spillover benefits, however, may be associated with the characteristics of the industries under consideration (Kathuria, 2001). Conventional theory on MNEs and FDI suggests that knowledge-based assets are the key firm-specific advantages held by MNEs, which motivate them to invest across borders.…”

Technological Spillovers from Multinational Companies to Small and Medium Food Companies in Nigeria

“…These include technology licenses, vertical linkages, copying of technology introduced by foreign investors, impact of FDI on host country market structure, especially competitiveness, labour training, and performance of R&D by MNC affiliates in the host country. While the direct approach has been investigated through statistical studies, the indirect approach is investigated through more structurally oriented studies (Kathuria, 1998).…”