FDI, Technology Transfer and Spillover: A Case Study of India

As developing countries increasingly open their economies to foreign direct investment (FDI) one of their principal objective has been to achieve technology transfer from foreign firms to host country firms. This study for India shows that this technology transfer is more likely to be achieved by the presence of foreign firms rather than by simple purchase of foreign technology. It is also seen that technology transfer is dependent on the absorptive capacity of firms and the competitive nature of the industry. Finally, this study finds that institutional factors like the degree of competition positively impact the effects of traditional factors like absorptive capacity in determining technology transfer.