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Foreign Manufacturing, Regional Agglomeration and Technical Efficiency in UK Industries: A Stochastic Production Frontier Approach

Author

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  • Nigel Driffield
  • Max Munday

Abstract

The paper examines howfar foreign manufacturing investment in UK industries, together with the spatial agglomeration of those industries, affect technical efficiency. The paper links research on the estimation of technical efficiency,with those literatures demonstrating the economies associated with foreign direct investment and spatial agglomeration. The methodology involves estimation of a stochastic production frontier with random components associated with industry technical inefficiency, and a standard error. The paper also explores whether the degree of foreign involvement has a greater impact on technical efficiency where the domestic industry sector is characterized by comparatively high productivity and spatial agglomeration. The policy implications of the analysis are discussed. Cet article cherche a examiner jusqu'a quel point l'investissement industriel au Royaume-Uni, conjointement avec l'agglomeration geographique des industries en question, a une incidence sur l'efficacite technique. L'article relie la recherche sur l'estimation de l'efficacite technique a la documentation qui demontrent les economies dues a l'investissement direct etranger et a l'agglomeration geographique. La methodologie necessite une estimation de la frontiere de la production stochastique, avec des composantes aleatoires associees au manque d'organisation industrielle technique, et une erreur-type. L'article cherche aussiaexaminer si, oui ou non, le taux d'investissement etranger a plus d'incidence sur l'efficacite technique la ou l'industrie nationale se caracterise par une productivite et une agglomeration geographique relativement elevees. Les retombees de cette analyse pour la politique se voient discuter. Dieser Aufsatz untersucht, wie Investierungen auslandischer Hersteller in der Industrie des Vereinigten Konigreichs sich bei gleichzeitiger raumlicher Ballung dieser Industrien auf technische Leistung auswirken. Der Aufsatz verbindet Untersuchungen der Schatzung technischer Leistung mit Veroffentlichungen, welche sich mit der Darstellung von Wirtschaften beschaftigen, die mit Direktinvestierungen des Auslands und raumlicher Ballung in Verbindung gebracht werden. Bei dieser Methodik werden Schatzungen der stochastischen Herstellungsgrenze mit Zufallskomponenten einbezogen, die mit technischer Inkompetenz der Industrie in Verbindung gebracht werden, sowie einem Standardfehler. Daruberhinaus untersucht der Aufsatz auch, ob das Ausmass auslandischer Mitarbeit sich starker auf technische Leistung auswirkt wo der einheimische Industriesektor sich durch verhaltnismassig hohe Leistung und raumliche Ballung auszeichnet. Es werden Implikationen der Analyse fur Zielsetzungen diskutiert.

Suggested Citation

  • Nigel Driffield & Max Munday, 2001. "Foreign Manufacturing, Regional Agglomeration and Technical Efficiency in UK Industries: A Stochastic Production Frontier Approach," Regional Studies, Taylor & Francis Journals, vol. 35(5), pages 391-399.
  • Handle: RePEc:taf:regstd:v:35:y:2001:i:5:p:391-399 DOI: 10.1080/713693833
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    References listed on IDEAS

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    1. John Lovering, 1999. "Theory Led by Policy: The Inadequacies of the 'New Regionalism' (Illustrated from the Case of Wales)," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 23(2), pages 379-395, June.
    2. Kevin Thomas, 2000. "Creating Regional Cultures of Innovation? The Regional Innovation Strategies in England and Scotland," Regional Studies, Taylor & Francis Journals, vol. 34(2), pages 190-198.
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    Cited by:

    1. Monastiriotis, Vassilis, 2014. "Origin of FDI and domestic productivity spillovers: does European FDI have a 'productivity advantage' in the ENP countries?," LSE Research Online Documents on Economics 55267, London School of Economics and Political Science, LSE Library.
    2. Ertugrul Deliktas & Mehmet Balcilar, 2005. "A Comparative Analysis of Productivity Growth, Catch-Up, and Convergence in Transition Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 6-28, January.
    3. Chen, George Shih-Ku, 2009. "Agglomeration economies and the location of Taiwanese investment in China," MPRA Paper 13896, University Library of Munich, Germany.
    4. Fındık, Derya & Tansel, Aysit, 2013. "Intangible investment and technical efficiency: The case of software-intensive manufacturing firms in Turkey," MPRA Paper 66165, University Library of Munich, Germany, revised 05 Aug 2014.
    5. A. Özlem Önder & Ertug¬Rul Deliktas & Aykut Lenger, 2003. "Efficiency in the Manufacturing Industry of Selected Provinces in Turkey : A Stochastic Frontier Analysis," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 39(2), pages 98-113, March.
    6. Nuno Crespo & Maria Paula Fontoura & Isabel Proença, 2009. "FDI spillovers at regional level: Evidence from Portugal," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 591-607, August.
    7. repec:spr:anresc:v:58:y:2017:i:3:d:10.1007_s00168-017-0808-7 is not listed on IDEAS
    8. Elina Berghäll, 2008. "Revealing Agglomeration Economies with Stochastic Frontier Modelling in the Finnish ICT Industry," Discussion Papers 435, Government Institute for Economic Research Finland (VATT).
    9. Dimitratos, Pavlos & Liouka, Ioanna & Young, Stephen, 2009. "Regional location of multinational corporation subsidiaries and economic development contribution: Evidence from the UK," Journal of World Business, Elsevier, vol. 44(2), pages 180-191, April.
    10. Monastiriotis, Vassilis, 2016. "Institutional proximity and the size and geography of FDI spillovers: do European firms generate more favourable productivity spillovers in the EU neighbourhood?," LSE Research Online Documents on Economics 66141, London School of Economics and Political Science, LSE Library.
    11. Ertugrul Deliktas & Mehmet Balcilar, 2005. "A Comparative Analysis of Productivity Growth, Catch-Up, and Convergence in Transition Economies," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 41(1), pages 6-28, January.
    12. Nuno CRESPO & Isabel PROENÇA & Maria Paula FONTOURA, 2012. "The Spatial Dimension in FDI Spillovers: Evidence at the Regional Level from Portugal," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, pages 115-130.
    13. Derya Findik & Aysit Tansel, 2015. "​ Intangible Investment and Technical Efficiency: The Case of Software-Intensive Manufacturing Firms in Turkey," Working Papers 2015/11, Turkish Economic Association.
    14. A. N. Rambaldi & Iyer & K., 2004. "Measuring Spillovers from Alternative Forms of Foreign Investment," Econometric Society 2004 Australasian Meetings 149, Econometric Society.
    15. Akihiro Otsuka & Mika Goto, 2015. "Agglomeration economies in Japanese industries: the Solow residual approach," The Annals of Regional Science, Springer;Western Regional Science Association, pages 401-416.
    16. Krishna G. Iyer & Alicia N. Rambaldi & Kam Ki Tang, 2005. "Measuring Efficiency externalities from Trade and Alternative Forms of Foreign Investment," CEPA Working Papers Series WP042005, School of Economics, University of Queensland, Australia.
    17. Krishna G. Iyer & Alicia N. Rambaldi & Kam Ki Tang, 2008. "Efficiency externalities of trade and alternative forms of foreign investment in OECD countries," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 749-766.

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