The impact of OFDI in global cities on innovation by Indian multinationals

Amendolagine, V., Piscitello, L. and Rabellotti, R. (2022) The impact of OFDI in global cities on innovation by Indian multinationals. Applied Economics, 54 (12). pp. 1352-1365. ISSN 0003-6846 doi: 10.1080/00036846.2021.1976383

Abstract/Summary

We investigate the impact of Outward Foreign Direct Investment (OFDI) on the innovation performance of Indian multinationals by analysing their choice of entry mode (cross-border acquisitions versus greenfield investments) and their international location decisions (i.e. choice to locate in a global city). We rely on an augmented fractional logit estimator for 170 foreign investments in high- and medium-high tech manufacturing sectors in the period 2003 to 2011 and find that: (i) compared to greenfield investments, acquisitions generate more technological opportunities; (ii) location in a global city has a negative impact on the Indian companies’ innovation performance; (iii) the positive effect of acquisition decreases if the investment is focused on a global city. These findings should be informative for both firms and government authorities involved in developing going-global strategies.