China And India Acquiring Resources In The World

3325 words - 14 pages

Global economy has witnessed a significant change in the last two decades. Developing economies has taken over global business lead. The Outward Foreign Direct Investment (OFDI) has been a phenomenon of developed economies (Banga, 2006). Until 1980’s more than 90% of the FDI came from developed countries (WIR 2005). Greater participation of firms from emerging markets in global trade and their increasing mergers and acquisition in different countries, showed marked increase in OFDI (Arthreye and Kapur 2009). OFDI from emerging economies rose from US$6 billion in 1991 to US$225 billion in 2007 (Hong). Outward FDI from EMNE’s reached US$ 388 billion by 2010 with an increase of ...view middle of the document...

The developed economy share of approved investment of Indian MNE’s increased from around 35 percent in the early 1990s to more than 53 percent by 2002–2006. Much of this diversification has resulted from acquisitions in developed countries rather than Greenfield investment. Developed economies accounted for over 80 percent of the total number of Indian acquisitions during the period 2000–2006 (Athukorala).
There has been a notable increase in services-related FDI, but it shows that the major areas of concentration within manufacturing are pharmaceuticals, automotive, consumer goods, chemicals, and fertilizer (Athukorala).
Most of the Indian outward FDI are in the high-tech and technological intensive industry such as IT and Pharmaceuticals. Indian firms have several prominent foreign acquisitions by Tata Group with successful acquisition with Tetley tea, Infosys and Wipro (Kumar 2008). Indian MNEs striking features are their preference for Mergers and Acquisition in the triad Region such as USA, Japan/Australia and Western Europe (Sauvant, Maschek & Mcallister, 2009). Infosys Technologies Ltd has announced its new affiliate Infosys Consulting in United States. Wipro, Birlasoft and HCL have operation in UK and US. Datamatics technologies had acquired CorPay Solutions (U.S) for $9 million in 2003, and are planning to acquire more in US, Europe and Canada (UNCTAD, 2004). Given the freedom to the Indian firms, they invested in many diversified portfolio. Acquiring technologies from foreign operations and exploiting its synergies with domestic capabilities backed by their managerial capabilities and wider use of English language (R.Nagaraj 2010).
The factors that is responsible for the outward growth of Indian FDIs in the recent years is explained by the Dunning eclectic paradigm (OLI theory). Push factors for OFDI of Indian MNE’s are inexpensive but high-quality manpower, which provides with competitive edge to Indian firms. Investments of Indian firms are largely into IT and Pharmaceutical sectors because of Ownership advantage (O) in these two fields. According to the study of Athukorala (2009), Indian Pharmaceuticals firms developed capabilities in Reengineering drugs due to weak IP regime before 2000. Labor and managerial advantage has been the major source of competitive edge for the Indian IT firms in global spread. She further added that the majority of Indian firms are engaged in a stage of value chain and focuses in which they have home advantage, such as low labor cost, well managing human resources, handling government relations, coping with unreliable suppliers. Infosys and Wipro enjoyed late mover advantage relative to their Western competitors from the beginning because they spread on the base of low cost expansion strategy by achieving economy of scale through low labor cost in India. India’s increased international competitiveness is gained by improved technological and human skills, which is the key factor for rapid...

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