India's Outward Foreign Direct Investment: Growth Drivers

Abstract

Robust inward and outward flow of direct investments signals ever-increasing integration of an economy with the global world. The emergence of outward foreign direct investment from the developing countries has gathered significant interest from research scholars. Overseas investments encourage economic cooperation between home and the host countries. Over the past two decades India has been in the limelight for its ever rising overseas investments and integration with global world. The study aims to identify country-specific macroeconomic growth drivers that encouraged Indian overseas investments since 1991 till 2015 using Dunning's OLI framework. The results substantiate significant impact of country-specific growth drivers on Indian overseas investments.

Determinants of Outward FDI from Developing Economies: Evidence for a Sample of Latin American Countries

“…When it comes to the countries analyzed, it should be noted that three of the studies analyze diverse groups of developing countries (Kayam, 2009;Alvarez &Torrecillas, 2013 andDas, 2013), while one study focuses on Small Island Developing States (Williams, 2009). Moreover, the majority of the studies in this review analyze Asian countries with two studies focusing on groups of Asian countries (Banga, 2009 andMasron &Shahbudin, 2010) and five studies focusing on individual countries, such as India (Kaushal, 2018 andMukherjee &Nayyar, 2020), Kuwait (Al-Shammari & Behbehani, 2017) and Malaysia (Apoi et al, 2008 andNoor et al, 2014). Finally, there is only one study exclusively focused on Latin American countries (Amal et al, 2009).…”

“…For a more complete review these databases were used to find articles that analyze the home country determinants of outward FDI from developing countries. Using the first four key words and "developing economies" or "developing countries" it was possible to find eight articles relevant for this work (Apoi, Kueh & Puah, 2008;Alvarez & Torrecillas, 2013;Das, 2013;Hill & Jongwanich, 2014;Noor, Nor & Saad, 2014;Al-Shammari & Behbehani, 2017;Kaushal, 2018 andMukherjee &Nayyar, 2020). In addition to the databases mentioned, Google Scholar was also used and four studies relevant to this work were found (Banga, 2009;Kayam, 2009;Masron &Shahbudin, 2010 andWilliams, 2009).…”

“…In order to simplify the analysis of these quantitative studies, the variables from the empirical literature review have been grouped into economic, political/ institutional and social categories (see Table 2), similarly to the categories considered in some studies (e.g., Amal et al, 2009;Kayam, 2009;Williams, 2009). Market size is usually measured by the country's GDP or GDP per capita with several studies finding that it positively impacts OFDI (e.g., Apoi et al, 2008;Amal et al, 2009;Masron & Shahbudin, 2010;Das, 2013;Noor et al, 2014;Kaushal, 2018), explained by the fact that higher income of a country allows companies to build competitive advantages that encourage foreign investment projects. However, Banga (2009) and Mukherjee & Nayyar (2020) do not find a robust impact and Williams (2009), finds that the variable negatively impacts OFDI.…”

“…Regarding inward FDI, usually measured by stock or flows, most studies find that it positively impacts outward FDI (e.g., Amal et al, 2009;Banga, 2009;Kayam, 2009;Masron & Shahbudin, 2010;Alvarez & Torrecillas, 2013;Noor et al, 2014;Kaushal, 2018;Mukherjee & Nayyar, 2020). Following Banga (2009), this happens due to inward FDI being associated with improvement of technological knowledge, competence and competitiveness in the home country, increasing the country's capability to invest abroad.…”

“…Beginning with the level of openness, measured by different proxies such as trade agreements, imports, exports, trade openness and trade flows, several studies find that it positively impacts OFDI (e.g., Apoi et al, 2008;Banga, 2009;Das, 2013;Noor et al, 2014;Kaushal, 2018;Mukherjee & Nayyar, 2020). Apoi et al (2008) consider that an increase in trade openness allows domestic companies to gain the knowledge and capabilities necessary to expand abroad and Banga (2009) states that trade agreements facilitate market access and boost the investment environment.…”