MNEs and Export Spillovers: An Analysis of Indian Manufacturing Industries

The attraction of foreign MNEs have been seen mainly from the point of view of the effects related directly to productivity of local firms. Instead a new strand of literature has deepened the issue focusing on the export behaviour of local firms, claiming that FDI may have an impact on exports, even though the link with productivity is left aside. Following this line of reasoning the existing literature primarily focus on the influence of foreign firms on domestic firms’ decision of entering the export market as well as the export intensity. In the present paper, we try to provide some empirical evidence for the export spillover effect examining a case of an emerging economy, namely India for the period 1994-2006. By using a firm level dataset of around 3000 firms belonging to the manufacturing industries, we test for the export spillover hypothesis using a two step modelling strategy (Heckman selection model). In building the spillover variables we disentangle different channels, namely information spillover, technology spillover and a sort of skill spillover effect. We also consider the heterogeneous technological behaviour of local firms considering different types of technological variables that may affect the overall exporting performance. Our findings mainly confirms that the two most important channels for export spillover are relative to the demonstration effect and to the technological spillover effect with regard especially to export intensity. Instead, the decision to export is influenced mainly if we take into account the role played by technological activities of local firms, confirming that R&D is a key variable that help firms to overcome fixed costs that are crucial to start exporting.