International Trade and Investment Behaviour of Firms

Abstract

During last four decades the world has been significantly impacted by globalization and rapid technological changes. This in turn had major effects on the global economy. Several developing and socialist economies that earlier followed closed door and import substitution policies started to open their economies to world trade and investments. Some such countries, as India, managed to achieve a degree of economic prosperity over the last few years after opening their economy. The analyses in this book show that there are significant benefits from international trade and investment to emerging economies that possess critical-level initial conditions in technology, infrastructure, and ease of doing business, and have friendly policies. Focusing on Indian firms, the book spans the period from the pre-reform era to the post-reform era, when the market was responding to policy reforms and global market dynamics. It analyses firm-level behaviour with systematic theory and corresponding rigorous econometrics and qualitative information from field study across the country. In the Pre-reforms era, it was mostly small and medium scale firms that contributed to exports while most large firms were inward oriented in search of monopoly profits. This changed significant in the Post-reform era owing increased competitive conditions especially multinational firms. Large firms started to play important role in international trade and investment behaviour by acquiring world class technology and organizational practices.