WHETHER FDI OR EXPORTS ENHANCE INNOVATION: EVIDENCE FROM INDIAN MANUFACTURING FIRMS, 2001-2012
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Indian economy. However, for the invention of new techniques and skills, there is a great
need to invest on R&D, requires a huge amount of capital, which can be available through
FDI inflows. Technology has been imported in heavy amount after the implementation of
liberalization policies. Therefore, the present study intends to know whether FDI
contributes to the Indian manufacturing sector through R&D or not. The average growth
of the manufacturing sector in India (7.93 per cent) has been found considerably higher
during the second decade of reforms (2001-2012) as compared to first decade reforms
(1991-2000). In the context of this, the present study has tried to examine the trends and
patterns of FDI and R&D in manufacturing firms of India during the second decade of
reforms (2001-12) and also, to analyze the impact of FDI and exports on R&D in
manufacturing firms of India through fixed effect model. The results suggest that R&D has
been significantly impacted by the import of capital goods, foreign equity, disembodied
technology, and export intensity during the second decade of liberalization period. The
present study suggests that greater approvals for foreign capital inflows are required in
India, for enhancing the R&D in the manufacturing sector. There must be an appropriate
coordination between public and private sector, which can improve the R&D expenditure
of manufacturing firms of India.
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