Foreign Direct Investment and Technology Spillovers: Evidence from The Indian Manufacturing Sector

During the recent period, many countries compete with each other to attract foreign investment. When MNCs invest in a host country, it is assumed that a part of their technology spills to the host country firms. But empirical studies on spillover effects of FDI have failed to find robust empirical results about the possibility of positive spillover effects. This study is an attempt to empirically examine the spillover effects from the entry of foreign firms using firm level data of Indian manufacturing industries for the period 1994-2002.We consider both the horizontal and vertical spillover effects of FDI. Consistent with the findings of the previous studies, we find no evidence of significant horizontal spillover effects. In contrast, we find negative vertical spillovers effects, although it is not statistically significant. [Forum for Global Knowledge Sharing WP 29]