Japanese Foreign Direct Investment in India: An Institutional Theory Approach

Subsidiary Capacity Building in Emerging Markets: How Japanese MNEs Sequence Market Entry and Development Strategies in India

“…In terms of interconnectedness of foreign‐market entry and sequential product innovation, we observe that India's gradual deregulation has indeed acted as an investment catalyst. In line with Buckley et al (), deregulation in both the transport and the pharmaceutical industries has triggered an investment response by each of our sample firms, including adjustments over time (e.g., Benito et al, ). Nevertheless, variations in the response time to changes in the investment environment as well as the willingness to take risks are also notable, which points toward well‐documented intra‐industry effects (see, e.g., Cross & Horn, ).…”

“…In contrast to preconceptions of Japanese ambivalence, all four firms have shown a high awareness and commitment to the Indian market. The 2008 global financial meltdown triggered a further readjustment toward high‐growth markets, including India (Buckley et al, ). At the same time, we observe differences with regard to how firms reduce operational risk.…”

“…Despite its nuanced regional orientation, internal (readjustment in light of the bursting bubble economy in Japan) and external factors (recession of the Indian motorbike market, establishment of subsidiary in China) may have contributed to this slow start. It is important to note that Japanese investment in the immediate post‐1991 period lags behind that of other foreign source countries (Buckley et al, ). Arguably, Firm A seems to represent a more cautious approach to the Indian market.…”

“…The Indian government initiated deregulation policies for the transport and pharmaceutical industries at different points in time (1991, 2005). Japanese firms have been shown to flexibly respond to institutional change (Buckley et al, ), and this temporal dimension enables an exploration of the changing nature and evolution of their local engagement in particular. While the transport‐related firms have been in India for almost 15 years (Firm A) and 30 years (Firm B), respectively, both pharmaceutical companies (Firms C and D) are relative newcomers.…”

“…It is not surprising that traditional perceptions of “offshore manufacturing fringes” have given way to target market considerations, with China, India, and (at least currently, to a lesser extent) Indonesia poised to gain importance as substantial growth engines for Japanese firms (Japan Bank for International Cooperation [JBIC], ). The purchasing power of these large emerging economies will inevitably increase in the not‐too‐distant future (Prahalad & Hammond, ), and Japanese activities in these large Asian economies have expanded substantially in recent years (Buckley, Cross, & Horn, ). In 2012, these countries attracted more than 40% of all Japanese exports to Asia and nearly 60% of Japanese foreign direct investment (FDI) outflows to Asia (with China receiving the lion's share; Japan External Trade Organization [JETRO], n.d.…”