This study examines how interfirm heterogeneities in modes of technology acquisition and technology intensities are linked to firm ownership in India using a panel data set of about 2,000 firms listed on the Bombay Stock Exchange for the period 2003–2014 drawn from the Prowess database of the Center for Monitoring Indian Economy. Foreign ownership is categorized according to the level of control exercised by foreign firms as defined under the Companies Act of India. A comparative analysis of domestic and different categories of foreign firms was conducted for two time periods: (i) the global boom period of 2004–2008, and (ii) the post global financial crisis period of 2008–2014. A horizontal cluster analysis of 3-digit, industry-level data shows that foreign firms cluster in high-technology industries. The propensity score matching analysis, however, reveals that in a matched sample of foreign and domestic firms, majority-owned foreign firms spend less on research and development and more on technology transfers than their local counterparts, demonstrating that the level of equity holdings by a foreign firm matters. There is little evidence of the global financial crisis affecting the relocation of research and development activities to India. An alternative assessment based on panel data regression analysis confirms these findings and validates the propensity score matching results.

Using firm-level data, this paper investigates whether foreign direct investment and the presence of multinational enterprises explains India's improved export performance during the postreform period. The recent literature stresses that firm heterogeneity gives some firms an edge over others to self-select into export markets. Apart from ownership, this paper considers firm heterogeneity and other firm-specific factors of export performance. Estimation results show that the impact of foreign ownership on export performance does not significantly differ from that of domestic firms across sectors in Indian manufacturing. Rather, firms build their international competitiveness by importing raw materials and foreign technical know-how, and by investing in research and development. Further, firm heterogeneity, measured in terms of sunk costs, significantly impacts firm-level export intensity. The study also reveals that there are ownership-specific factors that determine firm-level exports.

This study examines the role of financing constraints in explaining outward foreign direct investment (FDI) using unique firm-level panel data on Indian manufacturing during the period 2007–2014. We consider the role of both internal and external finance, and employ instrumental variable probit and Tobit models to examine financing constraints in outward FDI decisions and intensity. We find that internal finance impacts the likelihood of outward FDI. Further, using count data models, we examine financing constraints in determining strategies regarding a firm's number of affiliates abroad. Our findings reveal that firms with greater cash flows and liquidity are likely to have more foreign affiliates.

This paper examines the differential effects, based on the size of the plant, of industry-level foreign direct investment (FDI) on plant-level employment and the wages of skilled and unskilled workers in India's manufacturing sector. On average, there are strong positive differential effects of increased inward-level FDI for large plants relative to small and average-sized plants in terms of employment and the average wages of both skilled and unskilled workers. Small plants experience negative effects from inward FDI, which can be explained by intra-industry reallocation of output from smaller to larger plants. After conducting a regional analysis, I find positive spillovers to small plants in Indian states that receive large and persistent flows of FDI. This suggests that a critical mass of FDI is necessary for small plants to experience positive spillover effects.

This paper attempts to examine the role of environmental governance on foreign direct investment by testing the pollution haven hypothesis for 21 Indian states for the period 2002–2010. To test for the hypothesis, this study computes an abatement expenditure index adjusted for industrial composition at the state level using Annual Survey of Industries plant-level data. The methodology used is based on that proposed by Levinson ( 2001 ). The index compares actual pollution abatement expenditures in a particular state, unadjusted for industrial composition, to predicted abatement expenditures in the same state. (The predictions are based on nationwide abatement expenditures by industry and each state's industrial composition.) If the adjusted index is low for a state, it implies that the state has poor environmental governance, which would be expected to induce foreign firms to invest. However, the results do not find any evidence of the pollution haven hypothesis in the Indian context. Other infrastructure and market-access-related variables are more important in influencing a foreign firm's investment decisions than environmental stringency.