The investment development path theory: evidence from India

Abstract

Purpose -The purpose of this paper is to focus, at the country-specific level, on India's recent outward foreign direct investment (OFDI) surge, and more broadly test the investment development path (IDP) hypothesis for India. Design/methodology/approach -A combination of descriptive and empirical analysis has been used to ascertain the relevance of the IDP theory for India. The theoretical background of this paper is the IDP hypothesis, which states that the net outward investment position (NOIP) of a country depends on its level of development. The hypothesis is tested with a time series data set from 1991 to 2006. Findings -This paper highlights that while India's sharp rise in investments since 1991 has followed the gross domestic product driven development, its NOIP fails to exactly match the stylized IDP model. Research limitations/implications -This paper undertakes a macro level analysis and has not tested the hypothesis at the sectoral or bilateral levels. Practical implications -The paper identifies some peculiar features of Indian OFDI that cannot be explained by the IDP model per se. Hence modifications are required for a fuller understanding of India's investment position. Originality/value -This paper addresses an under researched topic of Indian OFDI.

Home Country Determinants of Outward FDI from Developing Countries

“…There is a burgeoning literature that tests the IDP hypothesis (see Boudier-Bensebaa, 2008;Verma and Brennan, 2011 and the references therein) and several criticisms have been raised against the basic hypothesis. The basic IDP hypothesis makes outward FDI dependent solely on a country's level of economic development, measured by GDP per capita and hence restrictive in nature as it takes for granted that underlying economic forces work in a certain fashion.…”

An Empirical Analysis of Significant Factors influencing Entrepreneurial Behavior in the Information Technology Industry

“…In 1968, around 98% of the India's computer equipment requirements were imported, as a result there was no competition between transnational corporations and the Indian manufacturing companies ( (Sarma and Krishna, 2010). In 1990's, the Indian Government liberalized the economy, which paved the way for the participation of more and more private organizations and increased foreign direct investment (FDI) (Verma and Brennan, 2011). The entrepreneurs with positive entrepreneurial behavior possess high risk bearing capability in times of contingency (Brown and Thornton, 2013).…”

Emerging-economy firms' FDI motivations: the case of Indian pharmaceutical MNEs in Ireland

“…The rapid growth of the Indian economy in the last decade has bolstered the confidence of domestic enterprises to go across borders with relatively bold and aggressive investment methods in the early stages of their outward internationalisation. Outward FDI from India has increased substantially particularly over the past decade (Verma and Brennan, 2011a). Importantly, the pharmaceutical industry is one of the main drivers of India's recent high export-led growth (Verma and Brennan, 2011b).…”