Abstract
In this paper we analyze the determinants of outward FDI (OFDI) with reference to Indian manufacturing firms. Mainly we examine the impact of firm-specific characteristics such as productivity, exports, imports of technology, and research and development (R&D) intensity on the OFDI of firms for the period from 1998 to 2009. We use dynamic random-effects Probit and Tobit models to examine the determinants of OFDI. The results support the theoretical argument that more highly productive firms undertake OFDI as a mode of internationalization. The study reveals a complementary relationship between OFDI and exports by Indian firms. R&D investment and imports of technology in the form of capital goods play important roles in both the probability of undertaking OFDI and the share of OFDI.
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