Japanese Foreign Direct Investment in India: An Institutional Theory Approach

This article charts the history of Japanese corporate engagement with India. While there has been a profound historic relationship between the two nations, economic interaction is commonly portrayed in the context of geographical and psychic distance. As institutions set the rules of corporate engagement, we analyse the evolving regulatory and policy regime for foreign direct investment (FDI) in post-independence India and the corporate strategies of Japanese multinational enterprises (MNEs) in response to this institutional change. Using a firm-level dataset we show that the trajectory of Japanese investment in India broadly follows that of other nationalities of foreign firms. Differentiated responses to institutional changes are detected by industry. Our analysis reveals important instances of Japanese firm flexibility and pragmatism vis-á-vis the rapidly growing Indian market.