The Determinants Shaping Inward FDI in Indian Economy
Keywords:
Foreign direct investment, Multicollinearity, Heteroscedasticity, Autocorrelation, Ordinary Least Square modelAbstract
The study shows various determinants of inward foreign direct investment (FDI) in Indian economy after the Liberalisation, Privatisation and Globalization policy in 1991-92 to 2016-17. Log linear regression model has been used and the method of least squares has been applied to determine the relation. Empirical results revealed that market size and trade openness are important determinants for FDI. Policy regarding allowing foreign investors to acquire shares in Indian company has significant effect on FDI. The study also measure the assumptions of the least square method including stationarity, autocorrelation, multicollinearity, heteroscedasticity indicating that the results are efficient, consistent and unbiased.
References
Asiedu, E. (2002). On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?. World Development, 30(1), 107-119. doi: 10.1016/s0305-750x(01)00100-0
Azam, M., & Lukman, L. (2010). Determinants of Foreign Direct Investment in India, Indonesia and Pakistan: A Quantitative Approach. Journal of Managerial Sciences, 4(1).
Billington, N. (1999). The location of foreign direct investment: an empirical analysis. Applied Economics, 31(1), 65-76. doi: 10.1080/000368499324561
Boateng, A., Hua, X., Nisar, S., & Wu, J. (2015). Examining the determinants of inward FDI: Evidence from Norway. Economic Modelling, 47, 118-127. doi: 10.1016/j.econmod.2015.02.018
Boateng, A., Hua, X., Uddin, M., & Du, M. (2014). Home country macroeconomic factors on outward cross-border mergers and acquisitions: Evidence from the UK. Research In International Business And Finance, 30, 202-216. doi: 10.1016/j.ribaf.2013.08.001
Chakrabarti, A. (2001). The Determinants of Foreign Direct Investments: Sensitivity Analyses of Cross-Country Regressions. Kyklos, 54(1), 89-114. doi: 10.1111/1467-6435.00142
Clegg, J., & Dunning, J. (1991). Explaining International Production. The Economic Journal, 101(409), 1594. doi: 10.2307/2234914
Culem, C. (1988). The locational determinants of direct investments among industrialized countries. European Economic Review, 32(4), 885-904. doi: 10.1016/0014-2921(88)90051-7
DUNNING, J. (1973). The Determinants Of International Production 1. Oxford Economic Papers, 25(3), 289-336. doi: 10.1093/oxfordjournals.oep.a041261
Dunning, J. (1980). Toward an Eclectic Theory of International Production: Some Empirical Tests. Journal of International Business Studies, 11(1), 9-31. doi: 10.1057/palgrave.jibs.8490593
Dunning, J. (1998). Location and the Multinational Enterprise: A Neglected Factor?. Journal of International Business Studies, 29(1), 45-66. doi: 10.1057/palgrave.jibs.8490024
Dunning, J. (2009). Location and the multinational enterprise: A neglected factor?. Journal of International Business Studies, 40(1), 5-19. doi: 10.1057/jibs.2008.74
Fedderke, J., & Romm, A. (2006). Growth impact and determinants of foreign direct investment into South Africa, 1956–2003. Economic Modelling, 23(5), 738-760. doi: 10.1016/j.econmod.2005.10.005
Froot, K., & Stein, J. (1991). Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach. The Quarterly Journal Of Economics, 106(4), 1191-1217. doi: 10.2307/2937961
Gopinath, M., Pick, D., & Vasavada, U. (1999). The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry. American Journal of Agricultural Economics, 81(2), 442. doi: 10.2307/1244593
Huang, N., Shen, Z., Long, S., Wu, M., Shih, H., & Zheng, Q. et al. (1998). The empirical mode decomposition and the Hilbert spectrum for nonlinear and non-stationary time series analysis. Proceedings Of The Royal Society A: Mathematical, Physical And Engineering Sciences, 454(1971), 903-995. doi: 10.1098/rspa.1998.0193
JEON, B., & RHEE, S. (2008). The Determinants of Korea's Foreign Direct Investment from the United States, 1980-2001: An Empirical Investigation of Firm-Level Data. Contemporary Economic Policy, 26(1), 118-131. doi: 10.1111/j.1465-7287.2007.00061.x
Jordaan, J. (2004). Foreign Direct investment and neighbouring influences (Doctoral dissertation). University of Pretoria.
Khachoo, A. Q., & Khan, M. I. (2012). Determinants of FDI inflows to developing countries: a panel data analysis.
Kiymaz, H. (2009). The impact of country risk ratings on U.S. firms in large cross-border acquisitions. Global Finance Journal, 20(3), 235-247. doi: 10.1016/j.gfj.2009.09.001
Kumar, N. (2002). Globalization and the quality of foreign direct investment. Oxford Univ Pr.
Liu, X., Wang, C., & Wei, Y. (2001). Causal links between foreign direct investment and trade in China. China Economic Review, 12(2-3), 190-202. doi: 10.1016/s1043-951x(01)00050-5
Mina, W. (2007). The location determinants of FDI in the GCC countries. Journal of Multinational Financial Management, 17(4), 336-348. doi: 10.1016/j.mulfin.2007.02.002
Moosa, I., & Cardak, B. (2006). The determinants of foreign direct investment: An extreme bounds analysis. Journal of Multinational Financial Management, 16(2), 199-211. doi: 10.1016/j.mulfin.2005.07.002
Schneider, F., & Frey, B. (1985). Economic and political determinants of foreign direct investment. World Development, 13(2), 161-175. doi: 10.1016/0305-750x(85)90002-6
Tolentino, P. (2010). Home country macroeconomic factors and outward FDI of China and India. Journal of International Management, 16(2), 102-120. doi: 10.1016/j.intman.2010.03.002
Uddin, M., & Boateng, A. (2011). Explaining the trends in the UK cross-border mergers & acquisitions: An analysis of macro-economic factors. International Business Review, 20(5), 547-556. doi:10.1016/ j.ibusrev.2010.11.003
Vasconcellos, G., & Kish, R. (1998). Cross-border mergers and acquisitions: the European–US experience. Journal of Multinational Financial Management, 8(4), 431-450. doi: 10.1016/s1042-444x(98)00041-3
Wang, Z., & Swain, N. (1995). The determinants of foreign direct investment in transforming economies: Empirical evidence from Hungary and China. Weltwirtschaftliches Archiv, 131(2), 359-382. doi: 10.1007/bf02707440
Wheeler, D., & Mody, A. (1992). International investment location decisions. Journal of International Economics, 33(1-2), 57-76. doi: 10.1016/0022-1996(92)90050-t
