International Venturing by Indian IT Firms: A Motive Analysis

Abstract

n the last decade, emerging economies have begun to account for an increasing flow of global FDI. Not only have countries like India and China become important investment destinations, they are also beginning to account for an increasing flow of outward FDI (OFDI). In the Indian case, while inward FDI doubled between 2004 and 2006, OFDI grew four times in the same period (UNCTAD 2007), led by increasing flows of cross border M&A activity by firms in the IT and pharmaceutical sector. Prior to this outbound FDI from India was insignificant due to the inward looking protectionist regime. A few Indian enterprises were investing abroad in the mid-1960s (Lall 1983, 1986), but outward investment activity became significant only since the onset of economic reforms in 1991. Indian outbound FDI has undergone long term transformations in its character covering industrial structure, geographical composition, ownership controls, entry modes, motivations, and sources of financing. The increase in overseas acquisitions by Indian firms can be seen as their response to globalized competition since 1990s. With liberalization and changes in trade, industry, foreign investment and technology policy regime, previously protected Indian companies