ABSTRACT
Foreign direct investment (FDI) is now widely perceived as an important resource for expediting the industrial development of developing countries. FDI flows as a bundle of capital, technology, skills, and sometimes even market access. Therefore, most developing countries welcome the multinational enterprises (MNEs) that are usually associated with FDI. India’s case is typical in this context. After following a somewhat restrictive policy toward FDI, India liberalized its FDI policy regime considerably in 1991. This liberalization has been accompanied by increasing inflows of foreign direct investment as well as changes in the sectoral composition, sources, and entry modes of FDI. In recent years multinational enterprises have increasingly recognized India’s locational advantages in knowledge-based industries. To exploit these advantages, MNEs are concentrating their investments in software development and in global R&D centers.
