Determinants of foreign direct investment: employment status and potential of food processing industry in India
International Journal of Emerging Markets
ISSN: 1746-8809
Article publication date: 14 July 2022
Issue publication date: 21 February 2024
Abstract
Purpose
The paper underpins an advanced domestic manufacturing that comes with some advanced employment specialization status of individual industries as the key determinant of foreign direct investment (FDI) and considers how FDI in the food processing industry in India relates to this focal point.
Design/methodology/approach
This paper investigates how inward FDI inflows relate to domestic investment and revival in the industry using Auto Regressive Distributed lags (ARDL) model over the period 2000–2017. The model allows for different specifications to study whether FDI is responsible for the revival or the prior revival induces the FDI.
Findings
The results show the lack of proper advanced specialized employment status of the food processing industry. FDI in food processing is mainly guided by exports and imports opportunities and FDI plays no role in the revival of advanced growth in the industry. This finding explains why FDI in the industry is predominantly service sector oriented.
Originality/value
The paper underlines (1) the proper conceptualization of human capital as an important determinant of FDI; (2) reinterpretation of Kaldor's technical progress function that uncovers how employment dynamics embedded in intermediate goods specializations play a key role in supporting a higher pace of investment (and FDI); (3) labor costs' importance should involve not only the wage rate but also the advantages that a specialized employment base and (4) FDI in manufacturing demands a greater policy focus on developing domestic bases of intermediate goods specializations.
Keywords
Acknowledgements
The present paper, at various stages, has benefited a lot from the comments, criticisms, and suggestions of three esteemed (anonymous) referees. Senior Editor Prof. Elia Stefano has been kind enough with encouraging words throughout the revisions while noting down the chief areas of concern. The author is indebted to all of them with the usual disclaimer.
Funding: The author did not receive any financial support from any organization for the submitted work.
Citation
Padhi, S.P. (2024), "Determinants of foreign direct investment: employment status and potential of food processing industry in India", International Journal of Emerging Markets, Vol. 19 No. 3, pp. 605-623. https://doi.org/10.1108/IJOEM-09-2021-1481
Publisher
:Emerald Publishing Limited
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