Heterogeneous MNC Subsidiaries and Technological Spillovers: Explaining Positive and Negative Effects in India

One of the most intriguing aspects of the recent empirical literature on FDI-related spillover effects is the increasing identification of mixed results. A few studies, particularly in advanced countries have found positive effects; however, a more common scenario in recent studies is the prevalence of insignificant or even negative effects. This is despite the fact that theory predicts substantial positive effects in association with a supposed technological superiority of MNCs relative to domestic firms, particularly in the context of less advanced countries. In this paper, by distinguishing subsidiaries according to their orientation to carry out creative vs. exploitation activities in the host economy, they are able to distinguish situations with positive and negative spillover effects, and we explain why they may be emerging. [Working Paper 53/2010] URL: [http://www.mse.ac.in/pub/working%20paper%2053.pdf]