Globalisation of Technology

In a cross-country bilateral FDI flow setup, we examine macroeconomic determinants of FDI flow to advanced economies (AE) from AE, to AE from developing economies (DE), to DE from AE and to DE from DE. It is observed that determinants vary significantly across these broad groups. Further, we construct composite index based on these macroeconomic determinants and rank the countries within these broad groups of FDI flow to understand macroeconomic enabler in the host country which attract FDI. We also propose a new methodology to circumvent multicollinearity issue which arises as selected determinants of FDI are found to be interrelated.

Outward FDI from India has expanded manifold since the liberalization of policy regime. The phenomenon is expected to improve India’s involvement in international production network. The paper examines the role of outward FDI in the manufacturing sector on production-network-related trade over the period 2008–2014. The impact of bilateral outward FDI on exports of parts and components to FDI-host countries is investigated using within-transformed fixed effects, and fixed-effects Poisson quasi-maximum likelihood method. The results reveal a positive and significant impact of outward FDI on production-network-related trade, suggesting to the crucial role that manufacturing outward FDI can play in expanding the outreach of Indian manufacturing in the global economy. Towards this end, promotion of outward FDI in the manufacturing sector needs to be accompanied by policy coordination with respect to inward FDI and trade facilitation in order to integrate manufacturing facilities in India with production hubs in the international production network for deriving benefits of global value chains.

Regardless of the stage of development of economy, foreign direct investment and trade are prominent channels of business cycle co-movements. In view of sustainability concerns, carbon emissions have been in focus for shaping international policy on trade and FDI. We analyze the linkages between FDI, trade and carbon emissions relative to the business cycle co-movements using a panel comprising of 25 pairs of Asian economies. Adopting econometric techniques such as the three-stage least squares and Bayesian inferences, the results indicate that both FDI and trade are important channels of international business cycle transmission. It emerges that correlation of manufacturing sector emission between countries is negatively related to business cycle co-movement and trade, but positively related to FDI. Therefore, FDI is horizontal and tends to complement trade. We conclude reduction in CO₂ emissions from manufacturing sector acts as the stabilizing agent on the business cycle co-movement, while FDI induces pollution in these economies.

Using a panel dataset on Indian manufacturing firms from 1994 to 2010, the present paper examines the productivity spillovers from the foreign direct investment (FDI) through various channels of horizontal and vertical linkages. In addition, the study also focuses on the influence of domestic firms’ initial capabilities in absorbing FDI-induced technological benefits. Firm productivity has been measured by using the semi-parametric Levinsohn–Petrin methodology. Using the fixed-effect panel model to estimate spillover models, the initial results show that the productivity growth of Indian firms is adversely affected by various horizontal spillover channels, while the vertical linkages are found insignificant. Interestingly, the second part of the study reveals that only the domestic firms with some initial technological capabilities (proxied by initial three years’ R&D activities), low technology gap with the foreign firms in the initial periods and high complementary capabilities (proxied by initial three years’ average firm size) gain productivity benefits from FDI spillover channels as compared to other firms within the industry. Essentially, the study brings out the importance of domestic firms’ need to encourage internal R&D activities in absorbing technological benefits from foreign presence and their economic activities in the domestic market.

This paper investigates into the factors determining firm-level R&D intensity in Indian manufacturing during post-reforms. In doing so, the differential impact of productivity for Multinational Enterprises vis-a-vis the domestic firms on R&D intensity has been studied. This paper further investigates into the role of imported technology in determining innovative activities of firms. System GMM estimation with firm-level data from 2001 to 2010 suggests that foreign ownership plays a key role in determining firm-level R&D in Indian manufacturing. Interestingly, highly productive foreign firms invest more in R&D activities as against their local counterparts in India. Imported foreign technology significantly reduces R&D intensity of firms which is indicative of the fact that imported foreign technology acts as a substitute of local innovative activities in Indian manufacturing during post-reforms.

This paper looks at the role that intellectual property rights (IPR) protection plays in the decision of multinational corporations (MNCs) to locate their R&D activities abroad, a phenomenon which has been labelled in the literature as innovation offshoring. Do countries with stronger IPRs attract more offshored innovation? Do different types of innovation offshoring respond equally to IPR variations? Using a novel multicountry and multisector database gathering information on the innovation activity of more than 15,000 MNCs from all around the world, I am able to distinguish among two types of innovation offshoring: innovation carried out in nations different from the home country, where the firm undertakes production activities directly or indirectly through a subsidiary (commercial innovation), and research done in countries, where the MNC only collaborates with local firms or inventors, with no on-site production involved (external innovation). In order to better isolate the impact of property rights protection on R&D, my identification strategy takes into consideration IPR’s variation across industries. I find that firms tend to locate commercial innovation in countries with strong IPR protection. This is true especially for long life-cycle industries which rely longer on patents. In contrast, short life-cycle technologies with faster obsolescence rate (e.g. high-tech products) are less responsive to IPR protection. External innovation, on the other hand, is less affected by patent protection, suggesting other motives behind its location decisions.

Often mergers and acquisitions (M&As) are approved by competition regulator(s) based on the likely impact of it on innovation, which is further expected to enhance consumer welfare. During the initial years of M&As activity, the relationship between M&As and technological performance was not a major concern. During those days, the studies were focusing on the trade-off between efficiency generation and market power creation. However, there has been an unprecedented increase in the value and volume of technology-related mergers, acquisitions and alliances during globalization with a view to minimize cost of production and to effectively withstand market competition. Overall, the study observed that cross-border M&As are spending more for royalties and technical know-how, which indirectly indicates the continuing dependence of foreign firms on import of technology compared to in-house R&D creation in the Indian manufacturing sector.

In this paper, we quantify the impact of R&D spillovers along with other firm-specific characteristics, such as the technology imports, firm size and age, in determining the in-house R&D intensity for a selected sample of electronic firms in India. This study, therefore, explores the significance of the R&D-induced technological efforts of electronic firms for the other R&D units operating within similar industry groups during the recent past decade of economic reforms (2002–2014). We construct an unbalanced panel of 63 electronic firms for the time period 2002–14 based on annual firm-level data available in CMIE Prowess database. Our results indicate that the Indian electronic firms benefitting from R&D spillovers within their line of business are spending relatively less on in-house R&D activities. However, for select industry groups within this sector, there also exists complementarity between (own) R&D efforts that are induced by the technological know-how obtained from innovations by others. Firms, therefore, look for spillover effects which are easier to obtain than their own in-house R&D whose results can be achieved in the medium or long term. We could possibly attribute this to the presence of multinationals in this sector and the resultant pressure on competition as driving these firms to spend more on R&D. While the (modern) Indian electronics goods sector predominantly consists of young-and middle-aged firms, but even then age of the firm (implying ‘learning by doing’) turns out to be positively significant. When we consider possible R&D spillovers within the similar industry group together with experience of the firms, it is observed that the relatively older firms are better equipped to benefit from such R&D spillovers and hence are incurring less R&D expenditure per unit of (net) sales. Small and medium firms catering to the huge consumer electronics market are more R&D intensive than their larger counterparts.

Considering a range of both static and dynamic indices to measure magnitude of intra-industry trade (IIT), this paper demonstrates that the liberalization process has led to increase in dominance of India’s trade in products of similar or different technologies. According to OECD classification of industries, we find major share of India’s IIT has evolved from industries of India that are categorized into high, medium-high and medium-low technology groups. Decomposing IIT of these industries into its varied forms, we find that India’s export of low technological products to be more dominant in India’s IIT than export of similar or high technological goods—indicating a downward trend in the terms of trade. Econometric estimates reveal that product differentiation representing consumer’s preference for range of varieties turn out to positively affect trade in both similar and different technologies of the same product. Furthermore, we also find increased competition from imports have resulted in the shift of specialization by industries of India from low technological products (yet dominant) to high and similar technological products. Our result also suggests that the magnitude of total IIT has gained impetus with the shift in productive resources from inefficient to efficient product lines within an industry. However, with disentangling total IIT one observes that much of the explanation behind the result is owed to dominance of India’s export of low technological product. Alongside, we also identify that protectionism in the form of anti-dumping initiations initiated by foreign firms allows them to leapfrog Indian firm’s export of superior technological variant.

Auto component industry is an interesting variant of business that is located in the context of dynamic value chain. While one end of the value chain is the sophisticated-oligopolistic original equipment manufacturers (OEMs), the other end has suppliers who are small and medium enterprises. In the whole length and breadth of this value chain, suppliers include small, medium, and large enterprises. Broadly, these enterprises are of two types: organised and unorganised. Unlike in the case of large multinational enterprises, auto component suppliers, in particular small and medium enterprises (SMEs), are not so well endowed to invest in research development and exhaustive capability building endeavours. However, as elucidated in the extant literature on SMEs, a prudent option for these enterprises is to build and foster absorptive capacities that synergise labour, information technology, and knowledge management. To gauge these themes, we analyse four types of data. First, we examine recent time series of select variables that delineate the basic dynamics of performance and resources of organised auto component industry in India. Second, we lay focus on cross-sectional enterprise data drawn from 2012 to 2013 Annual Survey of Industries. Third, we analyse 67th round, for the year 2009–2010, of National Sample Survey, to examine unorganised auto component industry in India. Fourth, we use field data, collected in 2016, to discuss multidimensional aspects of knowledge management, technology, learning, labour, and outcomes, based on a survey conducted in Pune, Maharashtra, India. We conclude that auto component manufacturers seem to rely more on labour, information technology, and attainments like ISO to perform well in the business. While automation appears to be a catching up trend in the value chain, use of information technology seems to be the game-changer as far as value added is concerned. Drawing cues from patterns and inferences presented in our paper, for enterprises in the auto component value chain, be they are in the organised and unorganised sector, whether they are small or medium, it is important to create synergies between human resources and information and communication technologies to scale up a sustained higher order performance.