Internationalisation drivers of Indian firms

Abstract

This article analyses the factors that have contributed to the growth of India's foreign direct investment abroad. It argues that firms that have ventured abroad possess unique advantages grounded in India's recent history of industrialisation and the emphasis placed on tertiary education. Location factors, including the relatively small size of the domestic markets for skill-intensive goods, poor infrastructure facilities and the perennial problems associated with Indian bureaucracy, may have also influenced the decision of Indian firms to go abroad, but these are not major factors. Much more important is the relatively low efficiency wage, a result of growth in labour productivity rather than low relative wage rates.