Business groups and foreign direct investments by developing country firms: An empirical test in India

Drawing on recent theoretical explanations, we develop hypotheses on the relationship between business group affiliation and FDI by developing country firms. We hypothesize a positive relationship between business group affiliation and FDI overall, as well as between business group affiliation and FDI into advanced countries and into developing countries. In addition, we argue that the impact of business group affiliation on FDI varies in strength among business groups based on their size and diversification. We also empirically test the hypotheses in a sample of firms from one large and important developing country, India.