Foreign Direct Investments from India 1964-1983 (Doctoral Dissertation /Thesis of the Indian Institute of Management, Calcutta) (original) (raw)

Foreign direct investments from India, although not exactly a recent phenomenon, has attracted the attention of scholars only in the recent past. Nevertheless a fairly substantial literature has emerged on the phenomenon of foreign direct investments (FDI) from the LDCs. The published literature on FDI from India has generally lacked systematic empirical basis, mainly due the inadequacy of available information. This study is a departure from previous studies in that it has a fairly rich empirical basis. The author had access to information from the Government not generally available to scholars. It is also the first comprehensive study of the phenomenon. FDI (rather the bulk of the FDI in the form of the so called "joint ventures" abroad) from India, since 1964, is analyzed in many of its important aspects: trends and patterns, the nature of financing, control and ownership of the resulting firms abroad, and their sources of technology. The motivations underlying FDI and the competitiveness of the firms abroad are also analyzed and related to the specific nature of development in the post independence period in India. Much of the evidence presented in support of the hypotheses and conclusions is built up from information pertaining to individual firms abroad. While most questions do start with an examination of the aggregate picture, the attempt is always to take advantage of the detailed firm level information when these were available. Fourteen case studies covering some of the most important Indian firms abroad, both large and small, bring out certain finer points and interrelationships not easily brought out in an analysis based on aggregate information alone. In Chapter I, in a brief survey of the literature, it is argued that popular conceptualizations like the product cycle hypothesis, or the advantage concept of Kindleberger, can only inadequately or only partly, explain FDI in general, not to speak of FDI from the Less Developed Countries (LDCs). Instead, an alternative framework that recognizes the search for markets and resources as the only truly general causal factor in FDI is adopted. In Chapter II, the trends in FDI, their geographical and industrial patterns since 1964, and the dimensions of the phenomenon in relation to other relevant phenomenon inward FDI, FDI from other LDCs and small advanced capitalist countries, and domestic investments is brought out. It is shown that FDI (despite the small size when compared to that from the advanced capitalist countries) has emerged as a significant option for the private corporate sector in India. In Chapter III, the patterns of ownership and control of the firms abroad is established. Some of the firms in India are highly transnationalised, and houses such as the Birlas, Thapar and Jhawar are transnationalised to a level that exceeds 30%, whatever measures one adopts. Although the large business houses dominate the phenomenon, there are very many other firms which have invested abroad. Through a detailed examination of the share holding patterns, directorships, contractual arrangements and other relevant information pertaining to firms abroad, the true degree of control by Indian parents is estimated. Despite the fact that on the average Indian parents directly hold only about 30% of the equity share capital of the firm abroad, through many ways dominant share holding, dispersal of part of the stock through a stock exchange, indirect share holding, collaborations with persons and firms of Indian origin, collaborations with host country governments Indian parents, in over two thirds of the investments abroad, have ensured control. Through other measures such as long term management contracts, the hold of the Indian parent is deepened and formalised. Yet in a number of large firms abroad Indian parents have collaborated with transnational (originating in the advanced capitalist countries) capital in the equity of the firms abroad. Although transnational capital has shared control with the Indian parents in a significant way, there are hardly any cases where the Indian parent plays only the role of a junior partner. In nearly all the cases of collaboration with transnational capital, the Indian party had taken the initiative to set up the firm abroad. FDI is largely a phenomenon of indigenous Indian capital. Firms in India which are joint ventures with foreign capital have also shown the same propensity to go abroad. But foreign controlled companies be they subsidiaries or the so called foreign controlled rupee companies have shown little propensity to invest abroad. In Chapter IV, the sources of technology of the firms abroad is uncovered. A conceptual framework suited to the task on hand and keeping in view the limitations of the source materials is arrived at. The focus is to delineate the role of transnationals from Indian parents and firms as suppliers of technology. Technology is seen as being…