Spillover Effects of Foreign Direct Investment on Firms' Exports: Evidence From India

Sanjay Kumar Mangla; Chih Hai Yang

doi:10.1111/twec.13719

Spillover Effects of Foreign Direct Investment on Firms' Exports: Evidence From India

Sanjay Kumar Mangla, Chih Hai Yang

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

Owing to economic globalisation, foreign direct investment (FDI) inflows and exports have increased considerably in India. Using a firm-level panel data ranging from 2012 to 2022, this study examines the spillover effect of FDI on Indian firms' export propensity. The empirical results reveal that within-industry FDI generates a substantial export spillover effect that facilitates local firms to undertake exporting, but inter-industry FDI does not have such an effect. Specifically, absorptive capability helps learn exporting knowledge and plays a key role in mediating the spillover effect. Further analyses find that the demonstration effect of FDI applies to manufacturing rather than service sectors. The net spillover effects, measured by the market share and research & development activities of foreign firms, also vary between manufacturing and service sectors in India.

Original language	English
Pages (from-to)	1616-1629
Number of pages	14
Journal	World Economy
Volume	48
Issue number	7
DOIs	https://doi.org/10.1111/twec.13719
State	Published - Jul 2025

Keywords

FDI
India
export
spillover

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1111/twec.13719

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title = "Spillover Effects of Foreign Direct Investment on Firms' Exports: Evidence From India",

abstract = "Owing to economic globalisation, foreign direct investment (FDI) inflows and exports have increased considerably in India. Using a firm-level panel data ranging from 2012 to 2022, this study examines the spillover effect of FDI on Indian firms' export propensity. The empirical results reveal that within-industry FDI generates a substantial export spillover effect that facilitates local firms to undertake exporting, but inter-industry FDI does not have such an effect. Specifically, absorptive capability helps learn exporting knowledge and plays a key role in mediating the spillover effect. Further analyses find that the demonstration effect of FDI applies to manufacturing rather than service sectors. The net spillover effects, measured by the market share and research \& development activities of foreign firms, also vary between manufacturing and service sectors in India.",

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T1 - Spillover Effects of Foreign Direct Investment on Firms' Exports

T2 - Evidence From India

AU - Mangla, Sanjay Kumar

AU - Yang, Chih Hai

PY - 2025/7

Y1 - 2025/7

N2 - Owing to economic globalisation, foreign direct investment (FDI) inflows and exports have increased considerably in India. Using a firm-level panel data ranging from 2012 to 2022, this study examines the spillover effect of FDI on Indian firms' export propensity. The empirical results reveal that within-industry FDI generates a substantial export spillover effect that facilitates local firms to undertake exporting, but inter-industry FDI does not have such an effect. Specifically, absorptive capability helps learn exporting knowledge and plays a key role in mediating the spillover effect. Further analyses find that the demonstration effect of FDI applies to manufacturing rather than service sectors. The net spillover effects, measured by the market share and research & development activities of foreign firms, also vary between manufacturing and service sectors in India.

AB - Owing to economic globalisation, foreign direct investment (FDI) inflows and exports have increased considerably in India. Using a firm-level panel data ranging from 2012 to 2022, this study examines the spillover effect of FDI on Indian firms' export propensity. The empirical results reveal that within-industry FDI generates a substantial export spillover effect that facilitates local firms to undertake exporting, but inter-industry FDI does not have such an effect. Specifically, absorptive capability helps learn exporting knowledge and plays a key role in mediating the spillover effect. Further analyses find that the demonstration effect of FDI applies to manufacturing rather than service sectors. The net spillover effects, measured by the market share and research & development activities of foreign firms, also vary between manufacturing and service sectors in India.

KW - FDI

KW - India

KW - export

KW - spillover

UR - https://www.scopus.com/pages/publications/105004185321

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DO - 10.1111/twec.13719

M3 - 期刊論文

AN - SCOPUS:105004185321

SN - 0378-5920

VL - 48

SP - 1616

EP - 1629

JO - World Economy

JF - World Economy

IS - 7

ER -

Spillover Effects of Foreign Direct Investment on Firms' Exports: Evidence From India

Abstract

Keywords

UN SDGs

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