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Inward Investment and Technical Progress in the United Kingdom Manufacturing Sector
Author(s) -
Hubert Florence,
Pain Nigel
Publication year - 2001
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/1467-9485.00190
Subject(s) - foreign direct investment , productivity , investment (military) , panel data , economics , manufacturing sector , inward investment , international economics , manufacturing , international trade , business , labour economics , monetary economics , industrial organization , macroeconomics , marketing , politics , political science , law , econometrics
This paper investigates the impact of direct 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 spillovers 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 to be a much more important source of technical progress than foreign trade.