This study is conceived within the 'eclectic' paradigm of Kindleberger, Dunning and others. It shows that transnational affiliates in India may not be intrinsically better performers than indigenous firms, but that their niche is altogether different; which perhaps helps them to earn at higher rates of profit. It also attempts to uphold the 'eclectic' paradigm by showing that the industry pattern of foreign direct investment, and licensing intensities, in the private corporate sector, are as expected. A rather close adherence to this mainstream paradigm severely limits the scope of the study, and also makes the results, even when they are clothed with much statistical rigour, rather tenuous. The book addresses itself to the behavioural and other differences between transnational affiliated and local firms and is timely. It is a revised version of the author's doctoral dissertation. After a brief discussion of government policy towards Foreign Direct Investment (FDI)-since independence up to 1987- and a summary presentation of the overall and sectoral shares of FDI, it goes on to: (I) Explain the inter-industry variation in FDI and in licensing of technology from abroad, in the process testing the 'eclectic' paradigm; (2) Identify the characteristics that discriminate between TNC affiliates and Indian firms; (3) Explain the higher profitability of TNC affiliates in terms of their strategic difference; (4) Explain the export propensities of the two groups of firms. The review also brings out the limitations in this study that arise due to an uncritical adherence to the 'eclectic' paradigm. There is little justification provided for the acceptance of the paradigm. It must also be mentioned that the author seems to be simultaneously testing the paradigm and using it as well.
Multinational Affiliates In India: Why Are They Different From Indian Firms?
Author : Sebastian Morris