| ID | 089557 |
| Title Proper | Why India is mainly engaged in offshore service activities, while China is disproportionately engaged in manufacturing |
| Language | ENG |
| Author | Lo, Chu-Ping ; Liu, Bih Jane |
| Publication | 2009. |
| Summary / Abstract (Note) | We extend the model of Antràs and Helpman (Antràs, P., Helpman, E., 2004. Global Sourcing. Journal of Political Economy 112(3), 552-580) by incorporating the merits of Zhang and Markusen (Zhang, K.H., Markusen, J.R., 1999. Vertical Multinationals and Host-country Characteristics. Journal of Development Economics 59(2), 233-252.) to demonstrate why China has been so successful in disproportionately attracting foreign offshore manufacturing activities, while India has been engaged mainly in offshore service activities. We argue that the host country's industry-specific technology capabilities make the difference in FDI composition between China and India. In addition to incomplete contract frictions, the host country's technological capabilities, which affect technology transfer costs, are essential to FDI inflows. We also find that, after excluding overseas Chinese investment, India is almost on par with China in terms of the market size it offers to marketing-seeking FDI. |
| `In' analytical Note | China Economic Review Vol. 20, No.2; Jun 2009: p236-245 |
| Journal Source | China Economic Review Vol. 20, No.2; Jun 2009: p236-245 |
| Key Words | India ; China ; Foreign Direct Investment ; Outsourcing ; Offshore ; Technology Transfer |