| Summary: | Abstract:
The present work is an attempt to understand the effects of globalisation on international firms. As it has been established in the literature, the increasing financial integration and flexibility has been rendering the country identity of capital irrelevant and by a natural logic of business economics foreign direct investment (FDI) has become the general form of capital mobility, the firms have been facing new roles in the countries they are expanding in; these are often the developing countries under emerging prosperity through globalisation. An interesting such country is India and a complex channel of interaction among source and host country firms is the well known knowledge spillover effect ( KSE).The present dissertation intends to look into the nature of changes in decision making of the entrepreneurs under such a situation.
The paper for its purpose makes an extensive appraisal of the literature on FDI, KSE and those in India in transformation. This has been done mainly by examining comprehensive surveys existing in the
literature as the literature is vast. It has examined all the major theories of FDI using a few first hand surveys also; the evolution of the famous OLI paradigm is one such issue. The literature surveys on FDI in India and its impact through KSE has been studied.
From the above and an elementary statistical analysis of the relationship between FDI, Growth and Knowledge-oriented corporate activity (R&D) for the recent Indian economy has been carried out.
On the basis of this and existing literature of Management approaches, an optimisation exercise incorporating knowledge-related decision variables have been carried out constructing a simple mathematical model of optimisation of the firm in international business. The results from all these suggest that FDI is positively impacting a developing country like India and hence proactive policy framing is
implied to be advisable.
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