Foreign Ownership Rules and Domestic Firm Globalization in India

Abstract

This study examines whether the influence of foreign ownership helps domestic firms in an emerging market economy, India, globalize their operations. The extent of operations globalization is captured as exporting behavior, which is measured as the ratio of export sales to total sales. Foreign ownership is categorized according to the control exercisable at different levels of ownership by foreign shareholders. The degree of control a foreign shareholder employs is determined by the institutional structure of the environment firms operate in. The results show that, after controlling for a variety of firm and environment-specific factors, only when property rights devolve unequivocally to foreign owners do domestic firms display the higher export orientation which is consonant with the process of globalization of their operations.