Main Article Content

Krishan SINGH
Research Scholar, Centre for Economic Studies, Central University of Punjab, Bathinda, India
India
Dr. Sandeep Kaur BHATIA
Assistant Professor, Centre for Economic Studies, Central University of Punjab, Bathinda, India
India
Vol 26 No 3 (2017), Articles, pages 19-32
DOI: https://doi.org/10.15304/rge.26.3.4457
Submitted: 03-12-2017 Accepted: 03-12-2017 Published: 03-12-2017
Copyright How to Cite

Abstract

The economic reforms of 1991 resulted in an increased inflow of FDI into the
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.
Cited by

Article Details

References

Acs, Z. J., and Audretsch, D. B. (1988) Innovation in Large and Small Firms: An Empirical Analysis.” The American Economic Review 78(4),678-690. Retrieved December 9,2012, from http://www.jstor.org/stable/1811167?seq=1#page_scan_tab_contents.

Adamou, A., and S., Subash (2008) The Impact of R&D and Foreign Direct Investment in Emerging Developing Countries: Evidence from Indian Manufacturing Industries. Working Paper- 37 Chennai, India. Retrieved December9,2012, from https://ideas.repec.org/p/eab/develo/22492.html.

Aggarwal, A.( 2000) Deregulation, Technology Imports and In-house R&D efforts: An Analysis of the Indian Experience.” Research Policy: 7,1081-1093.

Basant, R., and Fikkert, B. (1996) The Effects of R&D, Foreign Technology Purchase and Domestic and International Spillovers on Productivity in Indian Firms. The Review of Economics and Statistics 78(2),187-199.

Basant, Rakesh (2011) Intellectual property protection, regulation and innovation in developing economies: the case of the Indian pharmaceutical industry.” Innovation and Development 1(2): 115-133. https://doi.org/10.1080/2157930x.2011.551050

Battelle. (2013) India’s Emerging competitiveness as destination of Global R&D, Global R&D Summit 2013 - Destination of India. FCCI Knowledge Paper. Retrieved May 7,2014,from http://ficci.in/spdocument/20284/FICCI-Battelle-Knowledge-PaperGlobal-R&D-Summit-2013%5b1%5d.pdf.

Behera, S. R., Dua, P., and Goldar, B. (2012) Foreign Direct Investment and Technology Spillover: Evidence Across Indian Manufacturing Industries.” Delhi School of Economics, Delhi. Working Paper- 207. Retrieved F EBRUARY18,2013 ,from http://www.cdedse.org/pdf/work207.pdf.

Bohra, A. S. (2011) Foreign Direct Investment in India Service Sector: A Study of Post Liberalization.” IJER. MAR - APR : 10-18. Retrieved December 9,2012,from http://www.ijeronline.com/documents/volumes/Vol2issue2/ijer20110202(2).pdf

Branstetter, L. G. (2001) Are Knowledge Spillovers International or International in Scope? Micro econometric Evidence from the U.S. and Japan. Journal of International Economics 53: 53-79.

Chang, I., and Wall, H. (2005) Controlling for heterogeneity in Gravity Model of Trade Integration. Federal Reserve Bank of St. Louis Review 87(1): 49-63.

Cheung, K. Y., and Lin, P. (2004) Spillover Effects of FDI on Innovation in China: Evidence from the Provincial Data. China Economic Review 15 (1),25-44.

Chuang, Y. C., and Lin, C. M. (2007) Foreign Direct Investment, R&D and Spillover Efficiency: Evidence from Taiwan's Manufacturing Firms. The Journal of Development Studies 35(4),117-137.

Cohen, W. M., and Levinthal, D. A. (1989) Innovation and Learning: the Two Faces of R&D.The Economic Journal 99(397),569-596.

Datt, G., and Mahajan, A. (2013) Indian Economy. Chand & Company Pvt. Ltd. New Delhi.

Dayar, E., and Pamuku, M. T. (2011) Analysis of Foreign Ownership, R&D and Spillovers in Developing Countries: Evidence from Turkey. Economic Research Forum 5-27. Retrieved December9,2012,from https://scholar.google.co.in/citations?view_op=view_citation&hl=en&user=uly2ARQAAAAJ&citation_for_view=uly2ARQAAAAJ:YOwf2qJgpHMC.

Deloitte. (2011) Research & Development Expenditure: A Concept Paper.Retrieved July 7 , 2014 from www.deloitte.com/in.

DIPP. (2012) Consolidated FDI Policy: Ministry of Commerce & Industry. Government of India. New Delhi.

DIPP. (2012)FDI Data Retrieved June29, 2013,from www.dipp.nic.in: http://dipp.nic.in/English/Publications/FDI_Statistics/2012/india_FDI_December2012.pdf.

Economic Survey. (2007) Eleventh Five Year Plan. SAGE. India Pvt. Ltd. New Delhi. Retrieved December19,2012,from http://indiabudget.nic.in/es200708/esmain.html.

Ghosh, M., and Roy, S. S. (2011) FDI, Firm Heterogeneity and Export: An Examination of Evidence in India. Bethune College, Kolkata India.

GOI. (2011) Faster, Sustainable and More Inclusive Growth: An Approach to the Twelfth Five Year Plan. Planning Commission. New Delhi. Retrieved December19,2012,fromhttp://planningcommission.gov.in/plans/planrel/12appdrft/appraoch_12plan.pdf.

GOI. (2012) Economic Survey 2012-13. Ministry of Finance, Department of Economic Affairs. Oxford University Press. New Delhi. Retrieved June 29,2013,from http://indiabudget.nic.in/budget2013-2014/survey.asp.

GOI. (2012) Twelfth Five Year Plan.SAGE. India Pvt. Ltd. New Delhi. Guimon, J. (2008) Government Strategies to Attract R&D- Intensive FDI. Journal of Development Economics: 137-142.

Gujrati, D. N. (2003) Basic Econometrics. McGraw-Hill. U.S. West Point 4: 604-712

Gupta, V., Gollakota, K., and Srinivasan, R. (2013) Business Policy and Strategic Management: Concept & Applications.Journal of International Development 64,33-18.

Gustavsson, P., and Poldahl, A. (2003) Determinants of Firm R&D: Evidence from Swedish Firm Level Data. FIEF. Working Paper- 190. Retrieved December9,2012,from http://econpapers.repec.org/paper/hhsfiefwp/0190.htm

Hall, B. H., and Mairesse, J. (1995) Exploring the Relationship Between R&D and Productivity in French Manufacturing Firms. NBER. Combridge. Working Paper - 3956.

JCIG. (2013) White paper on Stimulation of Investment of Private sector into Research and Development in India. GOI. Ministry of Science and Technology. Department of Science and Technology. Retrieved December9,2012,from http://dst.gov.in/sites/default/files/white-paper_0_0.pdf

Joseph, T.J. (2005), Foreign Ownership and Export Spillovers in Indian Manufacturing Industry under Liberalization, chapter 10 in the WORLD SUSTAINABLE DEVELOPMENT OUTLOOK 2005, Global Competitiveness: A Common Goal in a Digital Society, edited by Allam Ahmed and published by Emerald Group Publishing Limited, the U.K., 151-163.

Joseph, T., and Reddy, V. N. (2009) FDI Spillovers and export Performance of Indian Manufacturing Firms after Liberalization. Economic and Political Weekly 44(52), 97105.

Karpaty, P., and Lundberg, L. (2002) Foreign Direct Investment and Productivity Spillovers in Swedish Manufacturing. Orebro University and FIEF: 117-123.MORE DETAILS NEEDED.

Kathuria, V. (2000) Productivity Spillover from Technology Transfer to Indian Manufacturing Firms.” Journal of International Development 12 (1): 343-369.

Kathuria, V. (2002) Liberalization, FDI, and Productivity Spillovers-An Analysis of Indian Manufacturing Firms. Oxford Economic Papers, 54,688-718.

Kathuria, V. (2008) The Impact of FDI Inflows on R&D Investment by Medium and HighTech Firms in India in the Post-Reform Period. Transnational Corporation 17 (2),4666. http://unctad.org/en/Docs/diaeia20082a3_en.pdf

Kumar, N. (1987) Technology Imports and Local R&D in Indian Manufacturing. The Developing Economies 25(3): 220-233.

Kumar, N. (2001) Determinants of Location of Overseas R&D Activity of Multinational Enterprises: The Case of US and Japanese Corporations.Research Policy 159-174. doi: https://doi.org/10.1016/S0048-7333(99)00102-X.

Kumar, N., & Pradhan, J. P. (2003) Export Performance of Indian Enterprises in Knowledge Based Industries: Recent Trends, Patterns and Implications.” Discussion Papers- 42 RISDC, New Delhi. Retrieved December 19,2013,from http://www.ris.org.in/images/RIS_images/pdf/dp42_pap.pdf.

Maira, A. (2013) Focus on Manufacturing Sector.The Hindu. Delhi. Retrieved December 29,2013,from http://www.thehindu.com/opinion/op-ed/focus-on-manufacturingsector/article5072468.ece.

Mansfield, E. 1(962) Entry, Gibrat's Law and the Growth of Firm. The American Review 52(5): 1023-1151.

Monte, A. D., and Papagni, E. (2003) R&D and the Growth of Firms: Empirical Analysis of a Panel of Italian Firms.Research Policy 32 (1),1003-1014.

Mrinalini, N., Nath, P., and Sandhya, G. (2013) Foreign Direct Investment in R&D in India. Current Science 47(13),73-78.

Nursamsu, S., and Hastiadi, F. F. (2013) Analysis of International R&D Spillover from International Trade and Foreign Direct Investment Channel: Evidence from Asian Newly industrialized Countries. Economics and Business. University of Indonesia. Working Paper No.- 3/13:10.

Parameswaran, M. (2009) International Trade, R&D Spillovers and Productivity: Evidence from Indian Manufacturing Industry. The Journal of Development Studies 45(8),12491266.

Pradhan, J. P., and Abraham, V. (2005) Attracting Export-Oriented FDI: Can India Win the Race? Working Paper-156. Ahmadabad. Retrieved November 27,2012,from http://www.esocialsciences.org/Download/repecDownload.aspx?fname=Document12022006240.128277.pdf&fcategory=Articles&AId=382&fref=repec

Pradhan, J. P., (2011) Regional heterogeneity and firms R&D in India. Innovation and Development 1(2),259-282. doi: https://doi.org/10.1080/2157930X.2011.614797.

Rahman, M. (2005) The Determinants of Bangladesh's Trade: Evidence from the Generalized Gravity Model.Working Paper ECON: 2005-3.

Rajalingam, P. (2011) Impact of Globalization on Indian Economy. Serials Publications: 23134.

Rasiah, Rajah, and Kumar, Ashish. (2008) Foreign Ownership, Technological Intensities and Economic Performance of Automotive Parts Firms in India. Asia Pacific Business Review 14(1), 85-102.

Sajid, A. and Sun, S. (2013) Foreign Entry and Firm R&D. Journal of R&D Management 43 (4),303-317.

Sajid, A. and Sun, S. (2013) Entry of foreign firms and the R&D behavior: a panel data study of domestic and foreign firms in China’s manufacturing sector. Econommics of Innovation and New Technology 23(8),739-757. doi: https://doi.org/10.1080/10438599.2014.887179.

Sasidharan, S., and Kathuria, V. (2008) Foreign Direct Investment and R&D: Substitutes or Complements - A Case of Manufacturing after 1991 Reforms. Working Paper- 4/08. United Nations Industrial Development Organisation (UNIDO). Vienna.

Sasidharan, S., and Kathuria, V. (2011) Foreign Direct Investment and R&D: Substitutes or Compliments - A Case of Indian Manufacturing after 1991 Reforms. Elsevier 39 (7),1226-1239. doi: https://doi.org/10.1016/j.worlddev.2010.05.012.

Schneider, P. H. (2005) International Trade, Economic Growth and Intellectual Property Right: A Panel Data Study of Developed and Developing Countries. Journal of Development Economics 78 (1),529-547.

Singh, L. (2008) India's Economic Growth and Role of Foreign Direct Investment. Economic and Political Weekly 43(43),124-129.

Sinha, S. S., Kent, D. H., and Shomali, H. (2007) Comparative Analysis of FDI in China and India. Journal of Asia Entrepreneurship and Sustainability 3(2),102-13.

SUN, S. (2013). Foreign Entry and Firm R&D. 39th Australian Conference of Economists, 116.

Verbeek, M. (2004) A Guide to Modern Econometrics.Chichester: Wiley Pub.

Winter, S. G. (1984) Schumpeterian Competition in Alternative Technological Regimes. Journal of Economic Behavior and Organization 5,287-320.

World Bank. (2014). Data Retrieved December9,2012, from www.worldbank.org: http://search.worldbank.org/data?qterm=R%26D&language= EN&op.

Yasuda, T. (2005) Firm Growth, Size, Age and Behavior in Japnese Manufacturing.Small Business 24 (1), 1-15. Retrieved October 19,2013,from http://www.jstor.org/stable/40229405?seq=1#page_scan_tab_contents.