From Local Champions to Global Players: Understanding India’s Overseas Investment Story

By Jaya Prakash Pradhan December 5, 2017 1.4K

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Type	Journal article — special-issue introduction (synthesis)
Title	“Guest Editor’s Introduction to the Special Issue: Indian Outward FDI and MNEs”
Author	Jaya Prakash Pradhan (guest editor)
Published	2017 · Transnational Corporations, 24(1), pp. 1–7 · United Nations (UNCTAD)
Draws on	Three empirical studies: manufacturing OFDI, international R&D, pharma
Read	DOI · PDF

This is a plain-language summary of the guest editor’s introduction to the special issue “Indian Outward FDI and MNEs” (Pradhan, Transnational Corporations, 2017) — an essay that ties together three studies in the issue.

In short:

This is an editor’s overview, not a single study: it draws together three pieces of research on how Indian firms went global after the 1990s.
Successful Indian multinationals share a profile — larger, more productive, more technology-intensive than purely domestic firms — and productivity has become a more important driver over time.
Two striking threads run through it: Indian R&D abroad strengthens innovation at home (more so when the R&D is in developed markets), and institutions — finance, governance, policy — were central to pharma’s global rise.

One story, three dimensions

After India opened its economy in the 1990s, its companies didn’t just start selling abroad — they began operating abroad: setting up subsidiaries, acquiring foreign firms, and running research and development overseas. This essay, introducing a special issue Prof. Pradhan guest-edited for the UN’s Transnational Corporations journal, pulls three strands of that story into one frame.

Who goes global

The first strand asks which firms make the leap. The answer is consistent: internationally active Indian manufacturers tend to be larger, more productive, more technology-intensive, and better-paying, with established export experience and steady R&D. But the weighting of those traits has shifted over time — what set a global firm apart in the 1990s isn’t quite what sets one apart today.

In the early years, basic operational efficiency was often enough to compete abroad. By the 2000s, technological capability had become decisive. Today, a firm needs a combination of strengths — and notably, productivity advantages have grown into one of the more important determinants of who invests overseas.

Innovation without borders

The second strand is the most counterintuitive. As Indian companies set up R&D centres abroad — chasing global talent, advanced facilities, and a place in worldwide innovation networks — one might expect that to hollow out research at home. The evidence points the other way: international R&D investment tends to raise the parent firm’s domestic R&D too, with knowledge flowing in both directions between foreign and Indian labs. And the effect is uneven in a telling way — R&D placed in developed markets boosts home innovation more than R&D in developing ones. Going abroad to innovate, it turns out, can make a firm stronger at home.

Pharma’s reinvention

The third strand is the clearest case study of the whole transformation. India’s pharmaceutical industry went from copying medicines in the 1970s to developing new drugs, from a domestic focus to a global presence, and from basic manufacturing to genuine research. What made it possible wasn’t any single firm’s genius but a supporting cast of institutions: strategic government policy, the stability that family ownership offered, access to global capital, deep process-development skills, and smart international partnerships. Institutional arrangements — in finance, governance, and public policy — turn out to be central to the industry’s global competitiveness.

Why it matters

Read together, the three strands carry one message: India’s outward investment was driven by capability and institutions, not cheap labour. That reframes what both firms and governments should do. For firms, it argues for building capabilities deliberately before expanding, treating R&D internationalisation as a strategic tool rather than a cost, and using partnerships to reach new technologies. For policymakers, it argues for actively supporting firms’ international R&D, nurturing innovation ecosystems, and strengthening the links between research done at home and abroad.

Read the academic abstract

This introduction to the special issue examines the evolution and characteristics of Indian outward foreign direct investment (OFDI) following the economic liberalisation of the 1990s. Drawing on three empirical studies, it summarises firm-level determinants of manufacturing OFDI, international R&D investments, and the pharmaceutical industry’s transformation. The research reveals that successful Indian multinational enterprises are larger, more productive, and more technology-intensive than purely domestic firms, and that productivity advantages have become increasingly important determinants of OFDI in recent years. International R&D investments are found to positively affect domestic innovation, with investments in developed markets showing stronger effects than those in developing countries. Institutional arrangements in corporate finance, governance, and public policy have also played crucial roles in shaping the pharmaceutical industry’s global competitiveness. These findings contribute to our understanding of emerging-market multinationals and carry implications for both corporate strategy and public policy, advancing the literature with empirical evidence on the drivers and impacts of Indian firms’ internationalisation.

Cite this article

Pradhan, J. P. (2017). Guest editor’s introduction to the special issue: Indian outward FDI and MNEs. Transnational Corporations, 24(1), 1–7. https://doi.org/10.18356/9d47f6d5-en

DOI → · Read the introduction (PDF) →