OFDI between India and the Latin American Region - A Firm Level Motive Analysis

Abstract

India and the Latin America and Caribbean (LAC) region have emerged as major growth drivers of the world economy in the last couple of decades. Trade and investment relations between these regions have traditionally been rather insignificant but have picked up in recent years. Since 2000, Indian companies have invested about $12 billion in the LAC region across various industries. This paper examines the important issue of the motives driving OFDI between the two regions. It uses content analysis to identify the motives of the FDI transactions and the Chi Square test to find out the dominant motives driving investment from India to the LAC region across industries between 2000-2012. The study finds that Indian OFDI into the LAC is market-seeking in nature and thus makes a significant contribution to the literature on FDI in the emerging markets context.

Do Institutional and Macroeconomic Factors Matter in IT companies M&As? Evidence from India

“…Market size has been one of the most significant macroeconomic determinants of M&As. A number of studies have found market size to have a positive impact on M&A (Boateng et al, 2011; Malhotra et al, 2011; Pradhan, 2010; Uddin & Boateng, 2010; Varma & Nayyar, 2015) This is consistent with the logic that large size of market gives opportunity for a company to generate more revenue and profit and hence, provides the incentive to invest in that market. Since the IT sector has a positive spillover effect on the growth of the rest of the domestic economy (Addison & Heshmati, 2003) and IT products and applications increase the productivity and efficiency of companies of other sectors, the revenue of IT companies also depends on the growth of other sectors, and the latter depends on the size of the market.…”

“…However, “corruption” and “regulatory inefficiency” were found to affect FDI inflows positively. Other studies such as Du and Boateng (2012), Varma and Nayyar (2015) and Iarossi (2009) have also examined similar dimensions and found macroeconomic determinants to be significantly affecting M&As.…”

“…There are various studies which have highlighted the importance of country-specific factors in influencing M&As (Aminian et al, 2005; Bhasin & Garg, 2019; Boateng et al, 2011; Du & Boateng, 2012; Kang & Johansson, 2000; Kohli & Mann, 2012; Malhotra et al, 2011; Pradhan, 2010; Reddy, 2015a; Uddin & Boateng, 2010; Varma & Nayyar, 2015). Some of these studies have underscored the importance of market imperfection theory, which states that cross-border acquisitions create higher wealth gains than the domestic ones, as these acquisitions enable the acquiring companies to earn monopoly rents by taking advantage of frictions in various markets.…”

“…Many studies investigated the role of exchange rate on M&As. While some have found the impact of exchange rate to be significant and positive (Aminian et al, 2005; Varma & Nayyar, 2015), others have found that it does not have a significant impact (Boateng et al, 2011; Malhotra et al, 2011; Uddin & Boateng, 2010). Theoretically, real exchange rate has a positive influence on FDI (Goldberg, 2006).…”

“…Inflation is another variable whose influence on M&As has been investigated in the literature, with some studies finding it a key determinant (Reddy, 2015a; Varma & Nayyar, 2015) found it to be a key variable) while others finding it insignificant (Boateng et al, 2011; Uddin & Boateng, 2010). In general, high inflation discourages investments in the host country due to the lack of macroeconomic stability.…”