A Firm Level Study on Determinants of Spillover Effects of Foreign Direct Investment in the Manufacturing Industry in India.

Abstract

This paper aims to study whether foreign and domestic firms can be distinguished from each other on the basis of their behaviour in terms of the factors that are considered to be the determinants of spillover effects from foreign firms to domestic firms. For this purpose logistic regression is used at firm level. The results show that this model could very well explain the behaviour of the foreign firms’ vis-a-vis domestic firms. Firms with higher export intensity, import intensity, R & D intensity, technical fees intensity are foreign firms. It is observed that as the predictor variables are added one by one to the model the results improve at every step which shows that these predictor variables explain the group membership to foreign or domestic category very well. On the basis of analysis of five test criteria, five models and individual exponential beta coefficients, it is fairly evident that foreign firms behave differently from domestic firms in terms of spillover effects.