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Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab

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Author Info
Rachel Griffith
Stephen Redding
Helen Simpson

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Abstract

This paper examines the relationship between foreign ownership and productivity, paying particular attention totwo issues neglected in the existing literature - the role of multinationals in service sectors and the importanceof R&D activity conducted by foreign multinationals. We review existing theoretical and empirical work, whichlargely focuses on manufacturing, before presenting new evidence using establishment-level data on production,service and R&D activity for the United Kingdom. We find that multinationals play an important role in servicesectors and that entry of foreign multinationals by takeover is more prevalent than greenfield investment. Wefind that British multinationals have lower levels of labour productivity than foreign multinationals, but thedifference is less stark in the service sector than in the production sector, and that British multinationals havelower levels of investment and intermediate use per employee. We also find that foreign-owned multinationalsconduct a substantial amount of UK R&D. We discuss the implications of these and other findings for the policydebate on incentives to influence multinational firms' location choices.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0649.

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Date of creation: Sep 2004
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Handle: RePEc:cep:cepdps:dp0649

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Related research
Keywords: Foreign Investment; Productivity; Knowledge Spillovers;

Other versions of this item:

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
L80 - Industrial Organization - - Industry Studies: Services - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  7. Richard Harris & Catherine Robinson, 2003. "Foreign Ownership and Productivity in the United Kingdom Estimates for U.K. Manufacturing Using the ARD," Review of Industrial Organization, Springer, vol. 22(3), pages 207-223, May. [Downloadable!] (restricted)
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  10. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany. [Downloadable!]
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  11. Rachel Griffith & Stephen Redding & John Van Reenen, 2004. "Mapping the Two Faces of R&D: Productivity Growth in a Panel of OECD Industries," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 883-895, December. [Downloadable!] (restricted)
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  13. Stephen Nickell & Stephen Redding & Joanna Swaffield, 2008. "The Uneven Pace of Deindustrialisation in the OECD," The World Economy, Blackwell Publishing, vol. 31(9), pages 1154-1184, 09. [Downloadable!] (restricted)
  14. Rachel Griffith & Stephen Redding & John Van Reenen, 2003. "R&D and Absorptive Capacity: Theory and Empirical Evidence," Scandinavian Journal of Economics, Blackwell Publishing, vol. 105(1), pages 99-118, 03. [Downloadable!] (restricted)
  15. Sourafel Girma, 2005. "Absorptive Capacity and Productivity Spillovers from FDI: A Threshold Regression Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 281-306, 06. [Downloadable!] (restricted)
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  16. Gorg, Holger & Strobl, Eric, 2001. "Multinational Companies and Productivity Spillovers: A Meta-analysis," Economic Journal, Royal Economic Society, vol. 111(475), pages F723-39, November. [Downloadable!] (restricted)
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  24. Rachel Griffith & Stephen Redding & Helen Simpson, 2003. "Productivity Convergence and Foreign Ownership at the Establishment Level," CEP Discussion Papers dp0573, Centre for Economic Performance, LSE. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Damijan, Jože P. & Kostevc, Crt, 2007. "Knowledge Transfer, Innovation and Growth," Papers DYNREG06, Economic and Social Research Institute (ESRI). [Downloadable!]
  2. Helen Simpson, 2007. "Investment abroad and adjustment at home: evidence from UK multinational firms," IFS Working Papers W07/07, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  3. Priit Vahter & Jaan Masso, 2006. "Home versus Host Country Effects of FDI: Searching for New Evidence of Productivity Spillovers," William Davidson Institute Working Papers Series 820, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  4. Hylke Vandenbussche & Chang Tan, 2005. "The Taxation of Multinationals: Firm Level Evidence for Belgium," LICOS Discussion Papers 16005, LICOS - Centre for Institutions and Economic Performance, K.U.Leuven. [Downloadable!]
  5. Carol Corrado & Paul Lengermann & Larry Slifman, 2007. "The contribution of multinational corporations to U.S. productivity growth, 1977-2000," Finance and Economics Discussion Series 2007-21, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  6. Kox, Henk L.M. & Lejour, Arjan, 2006. "Dynamic effects of European services liberalisation: more to be gained," MPRA Paper 3751, University Library of Munich, Germany. [Downloadable!]
  7. Martin Falk & Rahel Falk, 2006. "Do Foreign-Owned Firms Have a Lower Innovation Intensity Than Domestic Firms?," WIFO Working Papers 275, WIFO. [Downloadable!]
  8. James H. Love & Stephen Roper & Jun Du, 2007. "Innovation, Ownership and Profitability," DRUID Working Papers 07-10, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
    Other versions:
  9. Joel Stiebale & Frank Reize, 2008. "The Impact of FDI on Innovation in Target Firms," Ruhr Economic Papers 0050, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen. [Downloadable!]
  10. Hoekman, Bernard & Smarzynska Javorcik, Beata, 2004. "Policies facilitating firm adjustment to globalization," Policy Research Working Paper Series 3441, The World Bank. [Downloadable!]
    Other versions:
  11. Marc Schiffbauer & Iulia Siedschlag & Frances Ruane, 2009. "Do Foreign Mergers and Acquisitions Boost Firm Productivity?," Papers WP305, Economic and Social Research Institute (ESRI). [Downloadable!]
  12. Hugo Rojas-Romagosa, 2006. "Productivity Effects of FDI Inflows: A Literature Review," CPB Memoranda 170, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  13. Baldwin, John R. & Gu, Wulong, 2005. "Global Links: Multinationals, Foreign Ownership and Productivity Growth in Canadian Manufacturing," The Canadian Economy in Transition 2005009e, Statistics Canada, Economic Analysis Division. [Downloadable!]
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