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 is
consistent with Dunning’s Investment Development Path (IDP) sequence using macro data over
the period 1980-2010. We test whether the level of development - proxied by GDP per capita - is
the main factor explaining OFDI, and augment the IDP by studying other major determinants
such as Exports, Inward FDI (IFDI), Human Capital, and R&D using the Cointegration and
Error Correction Model techniques. Our results support the main proposition of the IDP, but
also highlight the importance of other factors. We also find that OFDI Granger-causes R&D,
suggesting a possibility of reverse technology spillover.