Locational Determinants of Overseas Acquisitions: Evidence from Indian Pharmaceutical Industry

Abstract

The rising prominence of emerging market multinationals has become a salient aspect of the global economy. Among these new emerging multinationals, the Indian Pharmaceutical Companies (IPCs) have drawn the attention of the academia for their catch-up internationalization strategies and rapid advancements in their production capabilities and innovative abilities.

This study attempts to identify the most important locational determinants of the host countries which determine the investment destinations of IPCs. The variables under study measure the macro environment such as the prevalence of favorable economic, political, institutional and cultural environments in the host countries. These macro environment proxies may become attractive pull factors for firms to locate their economic activities abroad. The study estimated the model using panel data regression for thirteen annual observations from 2000-12 and found that strategic resource-seeking motivations are the most important locational determinant of Indian pharmaceutical acquisitions. Interestingly, we found Indian Pharmaceutical Companies to be resilient to the weak institutional environment.

Keywords: Emerging Multinationals (MNEs), Internationalization, Indian Pharmaceutical MNEs, Outward Foreign Direct Investment (OFDI), FDI Location Choice, Panel Data Analysis

JEL Classification: F14, F23, R12, R30