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http://dx.doi.org/10.13106/jafeb.2022.vol9.no8.0109

FDI Spillover Effects on the Productivity of the Indian Pharmaceutical Industry: Panel Data Evidence  

DESAI, Guruprasad (School of Management, Presidency University)
SRINIVASAN, Palamalai (School of Management, Presidency University)
GOWDA, Anil B (School of Management, Presidency University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.9, no.8, 2022 , pp. 109-121 More about this Journal
Abstract
The study empirically examines the horizontal spillover effects of foreign direct investment (FDI) on the productivity of Indian pharmaceutical firms. Robust least squares and the Generalized Method of Moments estimators are applied for the firm-level panel data of Indian pharmaceutical companies whose shares were traded on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The information was collected from the Centre for Monitoring Indian Economy (CMIE) Prowess database from 2015 to 2019. Based on the regularity in data availability, the sample firms are limited to 112 companies, 100 of which are domestic firms and 12 international firms. Firms with more than 10 percent foreign equity are classified as FDI firms, while those with less than that are classified as domestic firms. Estimation results show that foreign ownership does not contribute to the productivity of domestic firms. Due to increased competition, the Indian pharmaceutical companies with foreign equity participation are not more productive than local ones. Moreover, the findings reveal a negative and insignificant horizontal spillover effect from FDI on the productivity of domestic enterprises. The absence of horizontal spillovers may be attributable to foreign enterprises' ability to prevent technological outflow to competitors in the same industry.
Keywords
Foreign Direct Investment; Horizontal Spillover; Productivity; Generalized Method of Moments; Pharmaceutical Industry;
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