FDI, MNC R&D Centres, and India’s Regional Entrepreneurial Landscape

Abstract

This paper contributes to the research on spatial determinants of entrepreneurship in developing countries. In particular, we consider the impact of multinational corporations (MNCs) and their R&D subsidiaries, along with regional innovation policy measures on the regional startup ecosystem in India. Furthermore, the study examines the impact of economic factors and policy measures on the growth of entrepreneurial ventures and startups, particularly in developing and emerging countries. The study employs a pooled Negative Binomial Regression model (Anscombe, 1949) for the analysis at the state level for 2016-2022. In our case, a negative binomial model is appropriate since ordinary least squares regression produces biased and inefficient estimates for non-negative count dependent variable measured by the number of startups in Indian regions with over-dispersed data (Greene, 2008). The findings suggest that the number of MNCs and MNC R&D centres significantly contribute to regional startups in India. This study sheds light on the inefficiencies of the state governments’ startup policies as well as regional differences between prosperous and aspiring states, which need to be narrowed.