Puzzles and Truths About Indian Outward FDI: Toward a More Relevant and Nuanced Research Agenda on Emerging Market MNEs

AIB Insights, 12(3)

4 Pages Posted: 24 Feb 2012 Last revised: 5 Apr 2015

Date Written: February 25, 2012

Abstract

The rise of new global contender MNEs from large emerging markets (EMs) is leading to significant structural transformation of global industries, international institutions, and global power (re)arrangement. Outward FDI undertaken by these EM multinational enterprises (MNEs) is growing fast as they are on a buying spree of assets and companies abroad. The share of EMs in global FDI outflows increased to 19% in 2008 and further to 25% in 2009 (UNCTAD, 2010). Among relatively large EMs, India’s annual compound growth of 176% during 2000-2008 had been unprecedented, ahead of its counterparts such as China (165%), Brazil (123%), and Russia (151%), although from a relatively lower base (UNCTAD, 2010). India’s outward FDI position is much more active than its comparator economy China, which received about $500 billion in inward FDI before its firms began to substantially invest abroad and maintained its inward FDI five times its outward FDI as late as 2007 – substantial inward FDI and outward FDI of India started almost at the same time and India’s total outward FDI (e.g., $25 billion in 2007) is almost as large as total inward FDI (e.g., $17 billion in 2007) (Ramamurti, 2010). These noticeable, interesting observations have triggered a few major special issues and book volumes focusing on Indian MNEs, notably Transnational Corporations Review (Vol. 3, No. 2), Pradhan (2008), and Sauvant and Pradhan (2010). This article takes steps further and examines two myths and potential explanations about Indian outward FDI that lead us to set up a more relevant and nuanced research agenda on EM MNEs.

Keywords: India, FDI, MNE, Institutions, Emerging Markets

JEL Classification: F21, F23, O53, M1

Suggested Citation

Chen, Victor Zitian, Puzzles and Truths About Indian Outward FDI: Toward a More Relevant and Nuanced Research Agenda on Emerging Market MNEs (February 25, 2012). AIB Insights, 12(3), Available at SSRN: https://ssrn.com/abstract=2001174

Victor Zitian Chen (Contact Author)

Fidelity Investments ( email )

United States

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