This study examines technology diffusion resulting from foreign direct investment in the domestic manufacturing sector in India, by employing unit-level panel data from 2000 to 2007, covering all medium- and large-size manufacturing enterprises. The attempt is to empirically capture evidence of FDI technology spillover effects through two key mechanisms: horizontal spillover and vertical spillover. Vertical spillover effects can be further divided into backward linkages and forward linkages. Technology diffusion can also be the result of both short- and long-term spillover effects.
