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PS-3.01: Trade, foreign direct investments, value chains and innovation network 3
10:30am - 12:00pm
Session Chair: Mohammed Isa Shuaibu, Ahmadu Bello University Zaria Kaduna Nigeria Discussant: Eunkyung Park, Aalborg University
Location:Savoy Room-1 (Homann)
Characteristics of Indian Firm's Investing Abroad: A Firm Level Analysis
Centre for Development Studies, India
Over the last two decades Indian multinational enterprises have started investing abroad mainly on account of the policy shift from restrictive practices to liberalized trade and investment policies. Recent economic data reveals that India’s outward foreign direct investment (OFDI) is biased towards tax heavens and other developed countries. The major players were the private sector firms. In this setting it would be of immense relevance to identify the characteristics of the Indian firms’ investment abroad. In order to identify the important characteristics of Indian firms investing abroad, the study has used the panel data on manufacturing firms (from PROWESS database of CMIE) from 2000-01 to 2009-10. By using probit model, the study found that several firm specific characteristics such as age of the firm, size of the firm, R&D intensity, labour productivity, advertising intensity and profitability of the firm are observed to be the significant factors for a firm’s decision to invest abroad. One interesting findings that to be noted in the analysis is that export intensity of the firm became an irrelevant factor for firms’ outward investment.
Understanding Innovation trajectory of Technology driven Foreign Direct Investments by Emerging Multinational Enterprises: the Indian ICT experience
Rajesh Ram Mishra
International Institute of Information Technology Bangalore, India
Emerging market multinational enterprises (EMNEs) from countries such as Brazil, China and India are increasingly using Technology driven Foreign Direct Investment (TFDI) to enhance their innovation capabilities and to move up the value chain through establishment of R&D centers in developed countries. This phenomenon of increased TFDI by EMNEs with limited competitive resources has attracted research interest recently, and is explained as an outcome of the imbalance between the resources a firm possesses and those it lacks. Post TFDI, EMNEs aim to achieve a new state of equilibrium with enhanced innovation capabilities through acquisition of Intellectual Properties (IP) and technical competencies. The paper posits a typology of outcomes from TFDI which will determine the new equilibrium. Based on a study of TFDI in Europe by Indian EMNEs in the Information and Communication Technologies (ICT) sector, the paper also offers insights into the factors affecting the outcomes. The paper also argues that the perceived advantages of TFDI, as a means of overcoming imbalances, are limited by the new imbalances that come up between the subsidiary and headquarters. Interviews with key employees of EMNEs from the ICT sector in India are used to identify the key imbalances that influence the innovation trajectory of the EMNEs post TFDI.
Possibilities of Mexican SMEs insertion in the aerospace value chain, the Baja California case
Foreign Direct Investment (FDI) in Mexico has focused on a select number of states, which may be due to agglomeration economies in a regional level mainly in border states. In the aeronautics case, it also obeys the industry’s distinctive trends, such as higher levels of decentralization activities in different parts of the world, due to changes towards outsourced processes rather than centralized ones. This offers opportunities for emerging countries such as Mexico, by taking advantage of the productive capacities and the industrial tradition of the regions.
The State of Baja California holds natural, material and human resources that have made feasible the arrival of foreign companies, not only in the aerospace, but also in sectors such as electronics and food, because it offers advantages for the installation of multinational companies in terms of skilled workers with extensive experience in maquila, strategic location with the United States, the benefits of the North America Free Trade Agreement (NAFTA), and technological infrastructure work, which opens new opportunities for the local industry.
However, so far there is few data on the inclusion of local businesses, even though the state’s government has granted specialty niches to boost the aeronautics sector such as: supplier certifications, advanced technical capabilities and advanced materials. But they also recognize the existence of weaknesses in the region such as a weak supply chain, insufficient response to global technological trends, and low incorporation of cutting-edge technology. Therefore, this study aims to provide information about Baja California companies participating in the aeronautics industry, the questions are raised in three directions. 1) What are the characteristics of Mexican aerospace companies in the state of Baja California? 2) To which links in the global production chain are they attached? And 3) what activities do they carry out and what are the opportunities to continue diversifying activities?