In my research, I found that there are strong linkages between inward and outward internationalisation. Indian companies can leverage inward internationalisation to upgrade their technological, financial and managerial resources so as to be able to offer products or services that are able to meet the more advanced needs of the international markets. Inward-outward linkages are particularly important in the context of knowledge-intensive firms and countries such as India which were under protectionist policy regime and cut off from the rest of the world until recently.
Indian multinationals have been found to internationalise faster and prefer higher risk entry modes such as acquisitions compared to other modes. Firms could undertake acquisitions overseas for four broad reasons. Some acquire overseas companies to penetrate new markets or maintain existing ones (market seeking motivation). Another motivation could be to acquire factors of production, primarily natural resources (resource seeking). The third broad rationale is efficiency seeking, where companies make investments aimed at increasing efficiency.
Lastly, firms can also make overseas investments to acquire knowledge assets such as brands, patents and relationships with clients (strategic asset seeking). While every acquisition will have some component of all these four motivations, I found that acquisitions by Indian companies are predominantly driven by asset seeking motivations. They have used the overseas acquisition route to move up the value chain by acquiring tangible and intangible assets in a much shorter time than what it takes to build them in-house. Large acquisitions by Tata Motors, Hindalco, Tata Steel and Mahindra & Mahindra exemplify this.