ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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FDI Spillovers on Technical Efficiency of Indian Manufacturing Firms

The impact of foreign direct investment on technical efficiency of Indian manufacturing firms during two sub-periods, 1994–2001 and 2002–10, is investigated. Using stochastic frontier analysis, this study shows that domestic firms gain efficiency from foreign skill spillovers and backward linkages with foreign firms in the first sub-period. However, evidence from the second sub-period indicates a significant adverse impact of oreign-owned firms on domestic firms. It may be noted that flows of FDI increased mainly in the 2000s. The study also shows that technology gains occur through internal research and development expenditure, and through purchase of imported raw materials and capital goods rather than through purchase of imported drawings and designs.

India’s Domestic Pharmaceutical Firms and Their Contribution to National Innovation System-building

Domestic pharmaceutical firms continue to operate under the influence of the strategy of global integration of the pharmaceutical industry and healthcare. The link between domestic firms and public sector research organisations is the weakest link in the domestic pharmaceutical industry due to misguided policies in competence-building and innovation system-building after India accepted the Trade-Related Aspects of Intellectual Property Rights Agreement in 1995. The government should rethink its strategies to get domestic firms to contribute to system-building activities and prioritise investment into the upgrading of processes of learning and building competence.
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