Exports, Outward FDI and Technology Upgrading: Firm Level Evidence from India

This paper evaluates the individual and combined effects of exporting and outward foreign direct investments (OFDI) on firms’ technology investments at home using firm-level data from the pharmaceutical industry in India. The analysis accounts for unobserved firm heterogeneity and the endogeneity of the choice of foreign market participation, and shows that exporting has been an important channel through which Indian multinational expansion has encouraged greater domestic technological activity. However, all else constant, higher levels of OFDI have rather acted as substitutes for such technological efforts.