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

Amendolagine, V. ORCID: https://orcid.org/0000-0002-5699-5233, Piscitello, L. ORCID: https://orcid.org/0000-0002-4817-315X and Rabellotti, R. ORCID: https://orcid.org/0000-0001-7637-3645 (2022) The impact of OFDI in global cities on innovation by Indian multinationals. Applied Economics, 54 (12). pp. 1352-1365. ISSN 1466-4283 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.