Influence of outward-foreign direct investment and technological efforts on exports: Indian auto component firms

Abstract

The Indian automotive industry is a classic example of increasing export competitiveness and of emerging market multinationals. Employing a sample of auto component producer–exporters during 2010–2011, we examine the firm-level determinants of the ‘Level’ at which the firm exports – i.e. the probability of being exporter to original equipment manufacturers (OEMs), and to ‘OEMs/Tier firms’. The factors affecting the total value of exports (including aftermarket exports) are also investigated. We analyse the effects of recent outward foreign direct investment (OFDI) – its intensity, and number of manufacturing-OFDI and of non-manufacturing OFDI enterprises – on these dimensions of exports from Home by the firm. We thereby extend the ‘substitutability vs. complementarity’ hypothesis to the exports ‘Level’. The role of technological and marketing variables like ISO14001 is also assessed. While an increase in OFDI intensity consistently increases the total exports, the empirical evidence on the exports ‘Level’ reflects ‘substitutability’ in case of intense OFDI-internationalization.