JCI-WP-2024-03 GVC Upgrading and Outward FDI of Indian Manufacturing Firms
In this paper, we explore the outward foreign direct investment (OFDI) activities on global production value chain of the Indian manufacturing using an unbalanced panel of 4326 firms. Using probit model and correcting for selection concerns using propensity score matching estimator, we find that Indian OFDI increases the probability of the firm participating and higher value-added upgrading, proxied by a firm-level GVC positioning index in regional and global production value chains. This positive effect of OFDI is more robust for firms in the low technology industries and business group affiliates. Our empirical analysis also explores technological spillover as one of the key channels through which effects of OFDI get translated into the GVC activities of the firms. We find OFDI increases the probability of firms upgrading and positioning on a higher GVC activities.
Author(s)
Ketan Reddy
Indian Institute of Technology
Subash Sasidharan
Indian Institute of Technology
The JCI Working Paper series is published to disseminate preliminary research findings and stimulate intellectual discourse on wide-ranging public policy issues, ranging from security to sustainability. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the Jeffrey Cheah Institute on Southeast Asia.
