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Active MNC Subsidiaries and Spillover Effects: The case of Indian Manufacturing Sector Anabel Marin (SPRU,UK) and Subash Sasidharan (Indian Institute of Technology Bombay) Introduction Technological spillover from FDI It questions some of the well established assumptions about the supply- side spillovers derives exclusively from the technological assets created by the parent companies Conventional View of FDI Spillovers The combination of: centrally accumulated technological assets, knowledge that is easily transferable between units of the MNC, and tightly integrated organisational behaviour provides the basis for a ‘pipeline’ that delivers spillovers of superior technology from the MNC parents to domestic firms, without the active intervention of local MNC subsidiaries. Such spillovers are presumed to follow on almost inevitably from the centrally driven technological advantage of the corporation. We refer to this model as a ‘centrally-driven perspective’ of the process of spillover generation. Common explanations for the lack of spillovers: limited capabilities of locally owned firms, or strategy of the MNC (or its industry) Unfortunately … many studies have not found effects associated with the limited absorptive capability of firms to be significant whilst the second type of argument has not, for the most part, been empirically evaluated. A different model… spillover effects are likely to occur as a result of active accumulation and creation of knowledge by subsidiaries (Marin Bell’s argument) Active subsidiaries: importance for Spillovers Subsidiaries’ technological activities may contribute to their absorptive capacity with respect to the knowledge transferred from the parent influence the subsidiaries’ capacity to attract better technological resources from the rest of the MNC become the source of more original innovation What has been said about the subsidiaries’ role? Knowledge which can leak out to local firms Gupta and Govindaraja