Impact of Outward FDI on Firms’ Productivity in the Steel Industry: Evidence from India


  • Sukanya Ram NMKRV College for Women, Bangalore.



Productivity, Steel industry, Indian manufacturing firms, Outward Foreign Direct Investment (FDI)


This paper examines the impact of Outward FDI (OFDI) on productivity and analyses its substantial effect on home countries' steel firms. For the analysis, the study classifies the steel companies into a treatment group and a control group. To analyse India's FDI investment objective and its impact on productivity, the study ranks economies into low- and middle-income, high- and middle-income, and tax havens to analyse productivity growth. The data for the analysis come from Prowess, a World Bank database. The data of outward FDI from Indian companies is compiled from the UNCTAD database. The study suggests that research on FDI does not focus on the impact on the issuing party, particularly FDI from low- and middle-income countries. The study analyses the effects of FDI with special reference to the Indian steel industry.

Author Biography

Sukanya Ram, NMKRV College for Women, Bangalore.

Department of Commerce, NMKRV College for Women, Bangalore, Karnataka, India.


Ahmad, F., Draz, M. U. and Yang, S.-C. (2016), "A novel study on OFDI and home country exports: implications for the ASEAN region", Journal of Chinese Economic and Foreign Trade Studies, Vol. 9 No. 2, pp. 131-145.

Al-sadiq, A. J. (2013). Outward Foreign Direct Investment and Domestic Investment: The Case of Developing Countries. IMF Working Papers, 13(52), 1. doi:10.5089/9781475517934.001.

Andersen, P. S. (1998). Foreign Direct Investment and Employment in the Industrial Countries. SSRN Electronic Journal. DOI:10.2139/ssrn.850066.

Bai, J. (2009). "The effect of the reverse technology spillover of Chinese outward direct investment on TFP: an empirical analysis". World Economy Study, Vol. 8 No. 10, pp. 65-69+89 (in Chinese).

Blomstrom, M. K. (2000). FDI in the restructuring of the Japanese economy. NBER Working Paper No. 7693, 1050 Massachusetts Avenue, Cambridge.

Blonigen, B. (2005). A review of the empirical literature on FDI determinants. Atlantic Economic, Journal, Vol. 33 No. 4, pp. 383-403.

Braconier, H. E. (2001). In search of FDI-transmitted R&D spillovers: a study based on Swedish data. Review of World Economics, Vol. 137 No. 4, pp. 644-665.

Buckley, P. J. (2012). Host-home country linkages and host-home country-specific advantages and determinants of foreign acquisitions by Indian firms. International Business Review, 21(5):878 { 890.

Chawla, K. A. (2015). Determinants of FDI: a literature review. The International Journal of Business & Management, Vol. 3 No. 3, pp. 227-250.

Chen, T.G., Lin, G., & Yabe, M. (2019). Impact of outward FDI on firms' productivity over the food industry: evidence from China. China Agricultural Economic Review, Vol. 11 No. 4, pp. 655-671.

Chen, K.-M., & Yang, S.-F. (2013). Impact of outward foreign direct investment on domestic R&D activity: Evidence from Taiwan’s multinational enterprises in low-wage countries. Asian Economic Journal, 27(1), 17-38.

Chen, W & Tang, H. (2014). The Dragon Is Flying West: Micro-level Evidence of Chinese Outward Direct Investment. Asian Development Review, Vol. 31, No. 2, pp. 109-140.

Chowdhury, M. B. (2011). India's Outward Foreign Direct Investment: Closed Doors to Open Souk. Munich Personal RePEc Archive.

CMIE Prowess dx. (n.d.). Prowess dx is a delivery of the Prowess database that is mainly.

Damijan, J. K. (2008). From innovation to exporting or vice versa? A causal link between innovation activity and exporting in Slovenian microdata. LICOS Discussion Paper No. 204, Catholic University of Leuven.

De Beule, F. &., (2012). Locational determinants of outward foreign direct investment: An analysis of Chinese and Indian greenfield investments. Transnational Corporations, 21(1), 1-34. DOI:10.18356/66d08267-en.

Desai, M. A. (2005). Foreign Direct Investment and the Domestic Capital Stock. American Economic Review, 95(2), 33-38. DOI:10.1257/000282805774670185.

Dhyne, E. A. (2014). Outward foreign direct investment and domestic performance: in search of a causal link". NBB Working Paper No. 272, National Bank of Belgium.

Driffield, N. A. (2003). Foreign direct investment, technology sourcing, and reverse spillovers. The Manchester School, Vol. 71 No. 6, pp. 659-672.

Du, W. A. (2015). Relationship between OFDI and quality of export products: a variable weight estimation based on propensity score matching. Journal of International Trade, Vol. 8 No. 12, pp. 112-122 (in Chinese).

Duran, J. J. (2005). The investment development path of newly developed countries. International Journal of the Economics of Business, 12(1), 123-137. DOI:10.1080/1357151042000323076.

Feldstein, M. (1995). The Effects of Outbound Foreign Direct Investment on the Domestic Capital Stock. DOI:10.3386/w4668.

Girma, S. K. (2005). Exports versus fdi: An empirical test. Review of World Economics (Weltwirtschaftliches Archiv), , 141(2):193{218.

Goldstein, A. (2008). Emerging Economies’ Transnational Corporations: The Case of Tata. Transnational Corporations 17(3):85–108.

Goldstein, A. (2008). Multinational Companies from Emerging Economies: Composition, Conceptualisation and Direction in the Global Economy. London: Palgrave Macmillan.

Helpman, E. M. (2004). Export versus FDI with heterogeneous firms. American Economic Review, Vol. 94 No. 1, pp. 300-316.

Herzer, D. (2008). The long-run relationship between outward FDI and domestic output: Evidence from panel data. Economics Letters, 100(1), 146-149. DOI:10.1016/j.econlet.2007.12.004.

Herzer, D. (2011). The long-run effect of outward FDI on domestic output in developing countries. Applied Economics Letters, 18(14), 1355-1358. DOI:10.1080/13504851.2010.537620.

Hijzen, A. T. (2007). The effects of multinational production on domestic performance: evidence from Japanese firms. Discussion Papers Series No. 07-E-006, The Research Institute of Economy, Trade, and Industry, Tokyo.

Hsu, W. G. (2011). The effects of outward FDI on home‐country productivity. Journal of Chinese Economic and Foreign Trade Studies, 4(2), 99-116. DOI:10.1108/17544401111143445.

Huang Y, Z. Y. (2017). How does outward foreign direct investment enhance firm productivity? A heterogeneous empirical analysis from Chinese manufacturing[J]. China Economic Review, 2017, 44:1-15.

Huang, C. H. (2011). Outward FDI and Productivity: Panel Granger-causality Evidence for Taiwan Manufacturing Firms. The Empirical Economics Letters, (December 2011) ISSN 1681 8997, 10(2).

Huijie, G. (2018). Outward foreign direct investment and employment in Japan's manufacturing industry. Journal of Economic Structures, volume 7, Article number: 27.

Hymer, S (1960). The efficiency (contradictions) of multinational corporations: The International Operations of National Firms: a Study of Direct Foreign Investment, volume 60, p. 441 - 448.

Imbriani, C. P. (2011). Outward foreign direct investment and domestic performance: the Italian manufacturing and services sectors. Atlantic Economic Journal, Vol. 39 No. 4, pp. 369-381.

Ito, T. &. (2000). The Role of Foreign Direct Investment in East. Asian Economic Development. DOI:10.7208/chicago/9780226387048.001.0001.

Jiang, G. (2014). Outward FDI of Chinese industrial enterprises and the progress of enterprise productivity. The Journal of World Economy, Vol. 9 No. 9, pp. 53-76 (in Chinese).

Jiang, G. (2014). The 'export effect' of foreign direct investment by Chinese enterprises. Economic Research Journal, Vol. 49 No. 5, pp. 160-173 (in Chinese).

Jin, S. G. (2017). Benefit or damage? The productivity effects of FDI in the Chinese food industry. Food Policy, Vol. 68 No. 4, pp. 1-9.

Jing, G. A. (2016). Has OFDI promoted the quality of the export product in China? Journal of International Trade, Vol. 8 No. 12, pp. 131-142 (in Chinese).

Keller, W. A. (2004). Multinational enterprises, international trade, and productivity growth: firm-level evidence from the United States. NBER Working Paper No. 9504, 1050 Massachusetts Avenue, Cambridge.

Kimura, F. A. (2006). Exports, FDI, and productivity: dynamic evidence from Japanese firms. Review of World Economics, Vol. 142 No. 4, pp. 695-719.

Kokko, A. (2006). The home country effects of FDI in developed economies. (EIJS Working Paper No. 225). . Stockholm: The European Institute of Japanese Studies. Retrieved from

Kumar, N. (2008). Internationalization of Indian Enterprises: Patterns, Strategies, Ownership Advantages, and Implications. Asian Economic Policy Review, 3(2), 242-261. DOI:10.1111/j.1748-3131.2008.00109.x.

Levinsohn, J. A. (2003). Estimating production functions using inputs to control for unobservables. Review of Economic Studies, 70(2):317{341.

Li, F. (2012). The industrial upgrading effect of home countries' outward foreign direct investment: an empirical study from the provincial panel of China. Journal of International Trade, Vol. 6 No. 10, pp. 124-134 (in Chinese).

Lin, G., Chen, T.-g., & Yabe, M. (2019). Impact of outward FDI on firms' productivity over the food industry: evidence from China. China Agricultural Economic Review, Emerald Publishing Limited.

Lipsey, R. E. (1981). Foreign Production and Exports in Manufacturing Industries. The Review of Economics and Statistics, 63(4), 488. DOI:10.2307/1935843.

Lipsey, R. E. (1984). Foreign Production and Exports of Individual Firms. The Review of Economics and Statistics, 66(2), 304. DOI:10.2307/1925832.

Liu, H. &. Lu, J. (2011). The home‐employment effect of FDI from developing countries: in the case of China. Journal of Chinese Economic and Foreign Trade Studies, 4(3), 173-182. DOI:10.1108/17544401111178212.

Masso, J. R. (2013). Foreign direct investment and innovation in Estonia. Baltic Journal of Management, 8(2), 231-248. DOI:10.1108/17465261311310036.

Mao, Q. L., and J. Y. Xu. 2014. “Effects of China’s Outward FDI on Employees’ Income: An Empirical Study Based on Propensity Score Matching.” Journal of International Trade 11.

Mishra, S. &. Kumar, R. (2016). Impact of Outward FDI on Macroeconomic Variables of Home-Country (INDIA). Pacific Business Review International, 8(9).

Mucchielli, J. A. (2002). Intra-firm trade and foreign investment: an empirical analysis of French firms. Lipsey, R. and Mucchielli, J.L. (Eds), Multinational Firms and Impacts on Employment, Trade, and Technology, 43-83.

Narayanan, K. &. (2010). Technology sourcing and outward FDI: A study of the IT industry in India. Technovation, 31(4), 177-184.

Navaretti, G. B. (2006). How Does Investing in Cheap Labour Countries Affect Performances at Home? France and Italy. SSRN Electronic Journal. DOI:10.2139/ssrn.918435.

Olley, G. A. (1996). The dynamics of productivity in the telecommunications equipment industry. Econometrica, Vol. 64 No. 6, pp. 1263-1297.

Pradhan, J. P. (2005). Outward Foreign Direct Investment from India: Recent Trends and Patterns. MPRA Paper 12358.

Pradhan, J. P. (2007). How do Indian Multinationals Affect Exports from Home Country? SSRN Electronic Journal. DOI:10.2139/ssrn.1518723.

Pradhan, J. P. (2008). Outward FDI and Knowledge Flow: A Study of the Indian Automotive Sector. ISID Working Paper No: 2008/10 November. Retrieved from (

Ruan, Z., Liu, W., Tan, X., & Xue, T. (2019). Regional Marketisation, OFDI, and Sustainable Employment: Empirical Analysis in China. Sustainability , 11, 4101; DOI:10.3390/su11154101.

Ryuhei, W. A. (2012). Productivity and FDI of Taiwan firms: a review from a nonparametric approach. Discussion Papers No. 12-E -033, The Research Institute of Economy, Trade, and Industry, Tokyo.

Saikia, M., & Borbora, S. (2018). Foreign direct investment of India: an analysis based on 'dynamic or developmental approach'. Transnational Corporations Review, Volume 10, Issue 1.

Shen, J. A. (2016). The effects of OFDI reverse technology spillover in China's information technology industry: a quantile regression study. International Business, Vol. 1 No. 8, pp. 79-87+149 (in Chinese).

Stevens, G. V. (1992). Interactions between domestic and foreign investment. Journal of International Money and Finance, 11(1):40{62.

Syverson, C. (2010). What determines productivity?. NBER Working Papers, Vol. 49 No. 2, pp. 326-365.

Taylor, H. (2017), ‘Uncovering the institutional foundations of specialization patterns in the Indian pharmaceutical industry’, Transnational Corporations, 24(1), pp. 57-79. Tao, C.; Liu, S.; Tian, Y.; Gu X. and Cheng, B., 2019. Effects of China's OFDI on Exports: A Context Analysis with the “21st-Century Maritime Silk Road” Regions. In: Gong, D.; Zhu, H. and Liu, R. (eds.), Selected Topics in Coastal Research: Engineering, Industry, Economy, and Sustainable Development. Journal of Coastal Research, Special Issue No. 94, pp. 903–907. Coconut Creek (Florida), ISSN 0749-0208.

Thomas, R. &.Narayanan (2017). Determinants of outward foreign direct investment: a study of Indian manufacturing firms. Transnational Corporations, 24(1), 9-26. DOI:10.18356/43478432-en.

Tomiura, E. (2007). Foreign Outsourcing, Exporting, and FDI: A Productivity Comparison at the Firm Level. Journal of International Economics, 72, 113-127.

Wells, L. T. (1983). Third world multinationals – The rise of foreign investment from developing countries. Cambridge, MA: MIT Press.

Wen, H. (2017). Does Chinese firm outward FDI relieve overcapacity-an empirical study based on the Chinese industrial enterprise database? Journal of International Trade, Vol. 4 No. 10, pp. 107-117.

Xie, Q. R. (2008). Productivity growth and convergence across China s industrial economy. China Economic Quarterly, Vol. 7 No. 3, pp. 809-826 (in Chinese).

Yang, P. A. (2017). The effect of outward foreign direct investment on the firm's profit rate: evidence from Chinese industrial firms. Journal of Zhongnan University of Economics and Law, Vol. 1 No. 1, pp. 132-139+160 (in Chinese).

Yang, R. (2015). Study on the total factor productivity of Chinese manufacturing enterprises. Economic Research Journal, Vol. 50 No. 2, pp. 61-74 (in Chinese).

Yang, S. C. (2013). Outward foreign direct investment and technical efficiency: evidence from Taiwan's manufacturing firms. Journal of Asian Economics, Vol. 27 No. 27, pp. 7-17.

Ye, J. A. (2016). Outward foreign direct investment and reverse technology spillover: an empirical analysis based on company-level microdata. Journal of International Trade, Vol. 1 No. 12, pp. 134-144 (in Chinese).

Zhao, W. L. (2010). The contribution of outward direct investment to productivity changes within China, 1991–2007. Journal of International Management, 16(2), 121-130. DOI:10.1016/j.intman.2010.03.003. Zhou, Chao, 2020. "The effects of outward FDI and export on firm productivity in emerging markets: Evidence from matching approach," Economics Letters, Elsevier, vol. 195(C).




How to Cite

Ram, S. (2022). Impact of Outward FDI on Firms’ Productivity in the Steel Industry: Evidence from India. Ushus Journal of Business Management, 21(1), 45 - 65.