FDI and Firm Competitiveness

As developing countries are increasingly opening up their economies to foreign direct investment, one of the principal objectives has been to enhance competitiveness of domestic firms using their network, technology and organisational skill. This study on India shows that competitiveness is more likely to be achieved with the presence of foreign firms rather than by simple purchase of foreign technology. Absorptive capacity of firms and institutional factors (namely, competition in the industry) induce competitiveness among firms. It is seen that both the degree of competition and the absorptive capacity of firms have strong effects on indirect benefits from FDI in enhancing competitiveness