Changing Nature of FDI: Need to Re-examine the Productivity Spillovers

FDI productivity and technology spill over theories were developed during a period when manufacturing sector dominated FDI flows, and European and the US MNEs enjoyed higher productivity levels compared to host country firms. During the last decade the share of manufacturing in FDI flows has declined drastically. Currently the service sector (including non-financial services) dominates the FDI flows. Furthermore, several Asian firms (host country firms) enjoy higher productivity levels compared to MNEs. Despite these developments, scholars continue to use the methodology developed several decades earlier. The sophistication introduced in recent studies is mainly in the estimation procedures and not in the hypothesis. A ‘Brain Storming’ Session on ‘Changing Nature of FDI’ is being held during the 11th Annual Conference of the Knowledge Forum hosted by IIT Madras to re-examine these issues. This short note on the subject is to initiate the discussion. Short notes on the subject may be sent to: fgksindia@gmail.com and to editor@esocialsciences.org until November 2016.