Inward investment and technical progress in the UK

Florence Hubert and Nigel Pain

Chapter 3 in Inward Investment Technological Change and Growth, 2001, pp 66-103 from Palgrave Macmillan

Abstract: Abstract Theories of the multinational firm (Dunning, 1988a) and econometric evidence on the determinants of foreign direct investment (FDI) (Barrell and Pain, 1997, 1999b) both highlight the extent to which the decision to establish foreign subsidiaries is influenced by the need to appropriate the rents accruing from investment in firm-specific knowledge-based assets and practices. Many new theoretical models also view the creation and exploitation of knowledge as the key factors driving the process of economic growth (Aghion and Howitt, 1998; Grossman and Helpman, 1991). Hence foreign-owned firms may help to transmit new ideas and technologies across national borders, particularly to industrialised economies and regional markets with location-specific advantages. This suggests that the location of economic activity could be an important endogenous influence on national growth prospects. In this chapter we present new evidence on the impact of inward investment on technical progress, and hence labour productivity and growth, in a number of different UK industries. We utilise two different data sets and a number of different estimation techniques in an attempt to assess the robustness of our findings.

Keywords: Foreign Direct Investment; Labour Productivity; Total Factor Productivity; Real Wage; Foreign Firm (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-59844-7_3

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DOI: 10.1057/9780230598447_3

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