The Rise of Indian Multinationals Perspectives on Indian Outward Foreign Direct Investment

by Sauvant, Karl P.; Pradhan, Jaya Prakash; Chatterjee, Ayesha; Harley, Brian

• ISBN13: 9780230108448
• ISBN10: 023010844X
• Format: Hardcover
• Copyright: 2010-11-15
• Publisher: Palgrave Macmillan

Summary

The surge in outward foreign direct investment (FDI) by Indian firms in the past ten to fifteen years raises a host of interesting questions. This edited volume is a valuable resource for all scholars interested in India's emerging multinational enterprises. The contributors explore the rapid growth of Indian multinationals and provide valuable insights into the patterns and trends of their outward investments and the factors that led to their emergence in the global FDI market. They also look at their continuously evolving strategies the in global economy and what the outcome has been for their host country in trade, technology, and employment.

Author Biography

Karl P. Sauvant is the Founding Executive Director of the Vale Columbia Center on Sustainable International Investment and Senior Research Scholar and Lecturer in Law at Columbia Law School. Jaya Prakash Pradhan is Associate Professor at Sardar Patel Institute of Economic Social Research (SPIESR), Ahmedabed. Ayesha Chatterjee is a J.D. candidate at Columbia Law School, where she is a Harlan Fiske Stone Scholar and a Public Affairs Editor for the Columbia Journal of Transnational Law. Brian Harley is a graduate of the London School of Economics (LL.B.), Sussex University (M.A.), and Columbia Law School (LL.M., James Kent Scholar).

Table of Contents

List of Figures and Tables	p. xv
List of Contributors	p. xix
Foreword	p. xxiii
Acknowledgments	p. xxvii
Introduction: The Rise of Indian Multinational Enterprises: Revisiting Key Issues	p. 1
Introduction	p. 1
Origin and Growth: A Brief History	p. 4
Why Do Indian Firms Go it Alone Now?	p. 9
Why Do Indian Firms Acquire Overseas Companies?	p. 12
What Explains the Distinct Regional Specialization of Indian Firms?	p. 13
Why do Knowledge-based Industries Dominate Indian Outward Foreign Direct Investment?	p. 14
This Volume and Its Contribution	p. 15
Analytical Perspectives on the Rise of Indian MNEs	p. 15
Industry Analysis of Indian Outward FDI	p. 17
Regional Studies on Indian MNEs	p. 18
Conclusions	p. 19
Notes	p. 20
References	p. 21
In Search of the "Indianness" of Indian Multinational Enterprises: is There Anything Special about the Indian Path to Outward Foreign Direct Investment?	p. 25
Introduction	p. 25
The Rise of Indian Multinational Enterprises	p. 26
Explaining the Indian OFDI Path	p. 30
The Investment Development Path Theory	p. 31
Main Propositions of the IDP Theory	p. 31
Relevance to India	p. 33
The Latecomer Theory	p. 34
Main Propositions of the Latecomer Theory	p. 35
Relevance to India	p. 37
The "India Inc." Country-Specific Theory	p. 39
Country-Specific Explanations for OFDI	p. 40
Relevance to India	p. 40
Summary and Discussion	p. 43
The Speed and Direction of FDI	p. 43
The Role of Home Country Context in Shaping Ownership Advantages	p. 44
Motives for Investment	p. 45
Assessment of Theory	p. 45
Conclusions	p. 48
Notes	p. 48
References	p. 51
Political Factors Behind the Rise of Indian Multinational Enterprises: An Essay in Political Economy	p. 57
Introduction	p. 57
The Debate on Foreign Direct Investment and Multinational Enterprises	p. 58
Conventional MNE Theory	p. 58
The Political Economy Perspective	p. 60
The Rise of Indian Multinational Enterprises: The Role of Home Country Government Activities	p. 63
Creating a Supportive Environment and Institutional Facilities	p. 64
Shaping the Domestic Development of Ownership Advantages	p. 65
Direct Regulation	p. 66
Direct Participation in OFDI	p. 68
Summing Up: The Role of the State in the Outward Investment Process	p. 69
A Theoretical Reinterpretation	p. 70
Conclusions	p. 73
Notes	p. 73
References	p. 75
When a Great Industry Globalizes: Indian Conglomerates Pioneering New Trends in Industrial Globalization	p. 79
Introduction: Not Just Followers; Indian Multinationals are Changing the Global Business Model	p. 79
Indian Multinational Enterprises Out to Conquer the World? Going Global Because of Domestic Challenges as well as Global Opportunities	p. 82
Technology-Focused Geographic Patterns in OFDI Distribution	p. 82
The Imperatives of Globalization and Internal Transformations in the Indian Economy: Financial Advantages and Growing Domestic Competition	p. 84
The Need to Scale up Technology and Build Brand Names	p. 85
Indian Groups on the Global Stage: Firm-Level Bridging of Low National Integration into Global Trade	p. 85
Changing Regime, Changing Business Models: From Licenses to Production Efficiency	p. 87
Integration of Multinational Enterprises into Global Ties the Indian Way: Industry Trajectories, Schematic Models, and Cases of Conglomerate Synergies	p. 89
Towards Models or Diversity?	p. 91
Three Key Business Models for MNEs within the IT Industry	p. 91
Three Key Business Models in the Biotechnology Industry: A Sector Halfway into its Multinationalization	p. 93
Summarizing India's Business Models	p. 95
An Indian Specificity: The Synergetic, Innovative Conglomerate	p. 96
Summing up Industrial Trajectories, Modes of Entry, Technological Emancipation, Value Chains, and Internationalization	p. 97
On Building New Models: From Constraints to Partnership?	p. 99
Overall Global Competition	p. 99
From All-out Competition to Partnerships	p. 100
Partnerships and New Value Chains	p. 101
Partnerships and Technological Innovation	p. 102
Business Recomposition: Globalization and Concentration of Suppliers	p. 103
Conclusions: From Indian Multinational Enterprises to a Mixed Developed-Emerging Model of Capitalism?	p. 104
Notes	p. 107
References	p. 108
Acquisition of Technologies and Multinational Enterprise Growth in the Automotive and the Pharmaceutical Industries: Drivers and Strategies	p. 111
Introduction	p. 111
Theoretical Frameworks on Emerging Market Multinationals	p. 112
The Imbalance and the Springboard Approaches	p. 112
The Linkage, Leverage, and Learning Theory	p. 113
An Alternative Approach: Alliances, Acquisitions, Leverage, and Learning	p. 113
Empirical Evidence on Indian MNEs: Two Case Studies from the Pharmaceutical Industry	p. 116
Nicholas Piramal and Sun Pharmaceutical Industries: Structure and Evolution	p. 118
Competitive Advantages: Technological Innovation	p. 121
Competitive Advantages: Differentiation	p. 125
Competitive Advantages: Financial Resources and Managerial Skills	p. 127
Linkage and Leverage: The External Network	p. 129
The Internationalization Process: Exports	p. 131
Internationalization through OFDI: The Internal Network	p. 132
Conclusions From the Case Studies on Nicholas Piramal and Sun Pharmaceutical Industries	p. 134
Empirical Evidence on Indian Multinational Enterprises: Two Case Studies from the Automotive Industry	p. 136
Mahindra & Mahindra and Bharat Forge: Structure and Evolution	p. 137
Competitive Advantages: Technological Innovation	p. 140
Competitive Advantages: Financial Resources	p. 142
Competitive Advantages: Management Skills and Differentiation	p. 143
Alliances and Leverage: The External Network	p. 145
Internationalization Process: Exports	p. 148
Internationalization Through FDI: Can We Talk about an "Internal Network"?	p. 149
Conclusions from the Case Studies on Mahindra & Mahindra and Bharat Forge	p. 152
Conclusions: From Learning and Acquisition of Capabilities to Multinational Growth	p. 154
A Two-stage Pattern of Multinational Growth	p. 154
Firm-Specific Competitive Advantages	p. 155
Country-Specific Competitive Advantages	p. 156
Specialization, Diversification, and Trajectories	p. 157
Notes	p. 157
References	p. 161
Outward Investment by Indian Pharmaceutical and Software Multinational Enterprises: Are the Factors Different?	p. 167
Introduction	p. 167
Outward Foreign Direct Investment Policy Regime in India: Evolution	p. 168
Policy Evolution Facilitating OFDI in the Software Industry	p. 170
Policy Evolution Facilitating OFDI from the Pharmaceutical Industry	p. 171
Determinants of the Extent of Outward Foreign Direct Investment: An Analytical Framework	p. 172
OFDI from the Pharmaceutical and Software Industries	p. 172
MNE Size (GFA or SIZE)	p. 173
Accumulated Learning and Managerial Skills (AGE)	p. 173
Profitability (PAT or ROA)	p. 173
Empirical Estimations	p. 174
Features and Performance of the Two Selected Industries	p. 174
The Indian Pharmaceutical Industry	p. 174
The Indian Software Industry	p. 176
Outward Foreign Direct Investment by Pharmaceuticals and Software Multinational Enterprises	p. 178
Factors Influencing Outward Foreign Direct Investment: Econometric Results	p. 180
Comparison between MNEs in the Software and Pharmaceutical Industries	p. 180
Econometric Results	p. 180
Conclusions	p. 182
Notes	p. 183
References	p. 184
Indian Companies Investing in the United States: An Inquiry into Recent Patterns and Trends	p. 187
Introduction	p. 187
Pattern of Indian Outward Foreign Direct Investment Flows to the United States	p. 190
Volume of Indian OFDI Flows to the United States	p. 192
Composition of Indian OFDI in the United States by Industry	p. 194
The Age of Indian MNEs Investing in the United States	p. 195
Size Distribution of Indian MNEs Investing in the United States	p. 197
Entry Routes for Indian OFDI into the United States	p. 200
Greenfield OFDI from India	p. 200
The Indian M&A Scenario	p. 200
Factors Driving OFDI from India to the United States	p. 203
Push Factors Driving OFDI from India	p. 204
Changes in Indian OFDI Policies	p. 204
Attitudinal or Behavioral Change among Indian Firms	p. 204
The Impact of OFDI Inflows into India	p. 205
Generation of Corporate Funds	p. 206
Capacity to Raise Funds through Domestic and Foreign Borrowings	p. 206
Pull Factors Driving OFDI from India	p. 207
The IFDI Policy Regime in the United States	p. 207
Size of the Host Country Market	p. 209
Access to New Markets through the United States	p. 210
Low Value of the U.S. Dollar	p. 210
Proximity to Client Base	p. 210
Technology, Knowledge, and R&D	p. 211
Search for Natural Resources	p. 212
Indian OFDI Projects in the United States	p. 212
Agriculture	p. 213
Automotive	p. 213
Banking	p. 213
Chemicals	p. 213
Computer Peripherals	p. 214
Fast-Moving Consumer Goods	p. 214
Food and Beverages	p. 215
Hotels	p. 216
Information Technology	p. 216
Irrigation Components	p. 217
Jewelry	p. 218
Life Sciences	p. 218
Media and Entertainment	p. 219
Metals	p. 219
Packaging	p. 220
Pharmaceuticals	p. 220
Printing/Publishing	p. 221
Telecommunications	p. 221
Textiles	p. 222
Travel	p. 222
Observations from the Case Studies	p. 222
Conclusions	p. 223
Notes	p. 225
References	p. 228
The Emergence of Indian Multinationals: An Empirical Study of Motives, Current Status, and Trends of Indian Investment in Germany	p. 233
Introduction	p. 233
Indian Outward Foreign Direct Investment in Germany	p. 234
Survey of Indian Subsidiaries in Germany	p. 237
Characteristics of Respondents	p. 238
Activities in Germany	p. 239
Characteristics of the Parent MNE	p. 239
Size and Modes of Investment	p. 241
Investment Motives	p. 241
Realization of Investment Objectives	p. 242
Criteria of Location Selection	p. 243
Job Shifts	p. 244
Indian Expatriates	p. 245
Technology Transfer	p. 245
Investment and Operational Challenges in Germany	p. 246
Performance of Indian Subsidiaries in Germany	p. 247
Planned Investments	p. 247
Summary of Survey Results	p. 248
Conclusions	p. 249
Notes	p. 250
References	p. 251
The Surge in Indian Outbound Foreign Direct Investment to Africa: A New Form of South-South Cooperation?	p. 255
Introduction	p. 255
Indian Investment in Africa	p. 256
Why Chinese and Indian MNEs Are Investing in African Host Countries	p. 261
The Benefit to Africa	p. 267
Conclusions	p. 270
Notes	p. 271
References	p. 272
Index	p. 277
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