The role of diaspora in attracting Indian outward FDI

Abstract

Purpose – This paper aims to examine the Indian migrants' role in attracting outward foreign direct investment (OFDI) from India to their respective host countries. Diasporas play a crucial role in augmenting trade, foreign direct investment and prosperity of a country. They facilitate acquisition and exchange of technical knowhow, market information and physical capital, and are therefore considered as social capital. Design/methodology/approach – This paper employs mixed effect model using data for the period 1999-2008. Findings – This paper finds that the presence of Indian diaspora has a substantial positive effect on the volume of Indian overseas investments in the developed countries. This is particularly the case with Indian OFDI to Asia Pacific, whereas those to Europe appear to be affected by the Indian migrant community only in the presence of bilateral investment treaties (BITs). The author findings highlight the role of Indian diaspora in promoting trade and investment links between India and other Asia Pacific countries. Originality/value – This is the first empirical analysis of the role of Indian overseas community in attracting Indian OFDI.