Country Origin of Foreign Direct Investment in Indi an Manufacturing and Its Impact on Productivity of Domestic Firms

The paper investigated the productivity enhancing e ffects of FDI in Indian manufacturing firms, with a particular focus on the differences in FDI i mpact according to the county of origin of FDI. Data on about 7000 manufacturing companies drawn fr om Prowess, covering the period 2000-01 to 2014-15, were used for the analysis. A comparis on of TFP was made between domestic firms and FDI firms. Then, an analysis of the impact of f oreign acquisition of domestic firms on TFP in those firms was undertaken with the help of trea tment effect assessment methods. An analysis of productivity spillover from FDI firms to domesti c firms was undertaken with the help of regression analysis, considering both horizontal an d vertical spillover effects. A comparative analysis of horizontal spillover effects and forwar d linkage vertical spillover effects by the country of origin of FDI was undertaken, making a d istinction between FDI from developed and developing countries and also between FDI from USA/ Europe and that from Asian countries.