ICRIER Working Paper No. 193

Technological Capability as a Determinant of FDI Inflows: Evidence from Developing Asia & India

April 2007
By
Amitendu Palit
Shounkie Nawani

This paper attempts to explain the country-wise variations in the pattern of FDI flows to developing Asian economies by empirically identifying location-specific features influencing such flows. The paper argues that some countries in the region, which have developed long term sources of comparative advantages in the form of superior technological capabilities and supporting infrastructure have consistently attracted greater volumes of export-oriented FDI. These attributes are also crucial for explaining the steady improvement in FDI flows to India. The paper finds that with production processes becoming increasingly complex and technology-intensive, developing countries like India, must devote greater attention to the development of R&D and frontier technologies, failing which, they might lose out in the race for FDI.

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Author’s contact: apalit@icrier.res.in , snawani@icrier.res.in                                   

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