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Liberalisation, MNE and Productivity of Indian Enterprises

In analysing the impact of FDI spillovers on the productivity of Indian enterprises for the postliberalisation years 1993-2000, this study argues in favour of using an unbalanced (full) panel that takes into account the entry and exit of firms. Furthermore, it also advocates the estimation of separate firm level cross section equations for each year to analyse the possible changes in the values of the spillover coefficients over time. The results show the presence of significant spillover effects from FDI. During the initial years of liberalisation, the spillover effects were modest, but increased sharply later on. Firms with better endowments in terms of productivity and technology benefited from liberalisation and MNE presence. Firms with large productivity gaps became victims.

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