Productivity Impacts and Spillovers from Foreign Ownership in the United Kingdom

Abstract

In this paper, we measure the indirect impact of FDI on the total factor productivity of domestic plants in a number of UK manufacturing industries, 1974–95, using a standard production-function-based approach. We use data from the UK ARD and information derived from UK input-output tables. Our results indicate that the competition and ‘absorption capacity’ effect at times outweighs potential benefits, leading to negative spillovers. We also find that inter-industry spillovers are generally more prevalent than intra-industry spillovers. We conclude that the nature of spillovers is such that measurement techniques traditionally adopted fail to explain adequately their complex and diverse nature.

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