Impact of Vertical FDI Spillovers on the Productivity and Export Performance of Indian Manufacturing Firms

Abstract

The structural transformation in the global economy in terms of changes in market orientation opened up a new paradigm in the treatment of private capital and capital accumulation in theoretical and empirical discussions Private capital flows have the potential to provide essential financing for developing countries for newlineeconomic growth Discussions on foreign capital and growth originate from preclassical views Basically the issue of foreign capital originated from the mercantilist investment trade mechanism which was enhanced through protection of domestic newlineproducers and making exports competitive In spite of the rise in savings potentials in export surplus countries a large proportion of savings could not be invested due to poor investment opportunities The classical political economists went beyond the newlineintuitive thoughts of mercantilists and they focused on the causal relations of the economic phenomena Gradually the neoliberal policies had been effective since the 18th century The neoclassical doctrine regarded the issue of capital mobility as newlinethe significant determinant of economic growth The emerging capital mobility in terms of foreign direct investment FDI has led to the resurgence of neoclassical orthodoxy International capital movements had been the main component of neoclassical newlinegrowth theory and policy With the advent of endogenous newlinegrowth theories FDI could be regarded as the recourse of new technology and high skilled labour Consequently FDI has been integrated into theories of economic growth as the gainsfromFDI approach