Is the evolution of India’s Outward FDI consistent with Dunning’s Investment Development Path sequence?

This paper examines whether India’s Outward Foreign Direct Investment (OFDI) pattern isconsistent with Dunning’s Investment Development Path (IDP) sequence using macro data overthe period 1980-2010. We test whether the level of development - proxied by GDP per capita - isthe main factor explaining OFDI, and augment the IDP by studying other major determinantssuch as Exports, Inward FDI (IFDI), Human Capital, and R&D using the Cointegration andError Correction Model techniques. Our results support the main proposition of the IDP, butalso highlight the importance of other factors. We also find that OFDI Granger-causes R&D,suggesting a possibility of reverse technology spillover.