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Inward investment and technical progress in the United Kingdom manufacturing sector

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Abstract

This paper investigates the impact of inward investment by foreign-owned companies on technical progress, and hence labour productivity, in the UK manufacturing sector. Using an industry-level panel data set we find that foreign-owned firms have a significant positive effect on the level of technical efficiency in domestic firms. There is evidence of significant intra-industry and inter-industry spilovers from inward investment. These findings remain robust even when other factors such as imports and domestic R&D expenditures are allowed for. Inward investment appears much more important source of technical progress than foreign trade. We also find that the impact of inward investment varies according to the nationality of the investing firm.

Suggested Citation

  • Nigel Pain, 2000. "Inward investment and technical progress in the United Kingdom manufacturing sector," National Institute of Economic and Social Research (NIESR) Discussion Papers 175, National Institute of Economic and Social Research.
  • Handle: RePEc:nsr:niesrd:167
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    1. Taylor, Karl & Driffield, Nigel, 2005. "Wage inequality and the role of multinationals: evidence from UK panel data," Labour Economics, Elsevier, vol. 12(2), pages 223-249, April.
    2. Nigel Driffield & Max Munday & Annette Roberts, 2002. "Foreign Direct Investment, Transactions Linkages, and the Performance of the Domestic Sector," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 335-351.
    3. repec:kap:iaecre:v:13:y:2007:i:3:p:268-284 is not listed on IDEAS
    4. Miao Wang, 2010. "Foreign direct investment and domestic investment in the host country: evidence from panel study," Applied Economics, Taylor & Francis Journals, vol. 42(29), pages 3711-3721.
    5. Ford, Timothy C. & Rork, Jonathan C., 2010. "Why buy what you can get for free? The effect of foreign direct investment on state patent rates," Journal of Urban Economics, Elsevier, vol. 68(1), pages 72-81, July.
    6. Leeb, Hannes & P tscher, Benedikt M., 2008. "Can One Estimate The Unconditional Distribution Of Post-Model-Selection Estimators?," Econometric Theory, Cambridge University Press, vol. 24(02), pages 338-376, April.
    7. Cadarso, Maria Angeles & Gomez, Nuria & Lopez, Luis Antonio & Tobarra, Maria Angeles, 2008. "The EU enlargement and the impact of outsourcing on industrial employment in Spain, 1993-2003," Structural Change and Economic Dynamics, Elsevier, vol. 19(1), pages 95-108, March.
    8. Apostolos Thomadakis, 2012. "Contagion or Flight-to-Quality Phenomena in Stock and Bond Returns," School of Economics Discussion Papers 0612, School of Economics, University of Surrey.
    9. Ellis, Colin & Simon Price, 2003. "UK Business Investment: Long-Run Elasticities and Short-Run Dynamics," Royal Economic Society Annual Conference 2003 73, Royal Economic Society.
    10. Christian Bellak, 2004. "How Domestic and Foreign Firms Differ and Why Does it Matter?," Journal of Economic Surveys, Wiley Blackwell, vol. 18(4), pages 483-514, September.
    11. Mico Apostolov, 2016. "Cobb–Douglas production function on FDI in Southeast Europe," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-28, December.
    12. LEE, Keun & CHOO, Kineung & Yoon, Minho, 2013. "Comparing the Productivity Impacts of Knowledge Spillovers from Network and Arm’s Length Industries:Findings from Business Groups in Korea," IIR Working Paper 13-15, Institute of Innovation Research, Hitotsubashi University.
    13. Rashmi Banga, 2007. "Impact of Liberalisation on Wages and Employment in Indian Manufacturing Industries," Working Papers id:989, eSocialSciences.
    14. Sourafel Girma & David Greenaway & Katharine Wakelin, 2013. "Who Benefits from Foreign Direct Investment in the UK?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(5), pages 560-574, November.
    15. repec:kap:jinten:v:15:y:2017:i:4:d:10.1007_s10843-017-0205-4 is not listed on IDEAS
    16. GÓMEZ , Nuria & TOBARRA, María-Ángeles & LÓPEZ, Luis-Antonio, 2014. "Employment Opportunities In Spain: Gender Differences By Education And Ict Usage," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 14(3), pages 105-130.
    17. Mico APOSTOLOV, 2016. "Ownership And Control Structures A Case Study," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 8(2), pages 23-37, June.
    18. Soma Roy & Rajat Acharyya, 2009. "Innovation Under The Threat Of Direct Foreign Investment," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 34(1), pages 81-98, June.
    19. C. Dembour, 2008. "Competition for Business Location: A Survey," Journal of Industry, Competition and Trade, Springer, vol. 8(2), pages 89-111, June.
    20. Philippe Gugler & Serge Brunner, 2007. "FDI Effects on National Competitiveness: A Cluster Approach," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 13(3), pages 268-284, August.
    21. Georgios Fotopoulos & Helen Louri, 2004. "Firm Growth and FDI: Are Multinationals Stimulating Local Industrial Development?," Journal of Industry, Competition and Trade, Springer, vol. 4(3), pages 163-189, September.
    22. Raquel Ortega-Argilés, 2013. "R&D, knowledge, economic growth and the transatlantic productivity gap," Chapters,in: Handbook of Industry Studies and Economic Geography, chapter 11, pages 271-302 Edward Elgar Publishing.
    23. Rashmi Banga, 2007. "Liberalisation and Wage Inequality In India," Working Papers id:805, eSocialSciences.
    24. Guest Editors & Ana Teresa Tavares & Stephen Young, 2005. "FDI and multinationals: patterns, impacts and policies," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(1), pages 3-16.
    25. Frances Ruane & Ali Ugur, 2002. "Foreign Direct Investment And Productivity Spillovers In The Irish Manufacturing Industry: Evidence From Firm Level Panel Data," Trinity Economics Papers 20026, Trinity College Dublin, Department of Economics.

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