The Direct Contribution of FDI to Productivity Growth in Britain, 1997–2008

Abstract

This paper considers the contribution of foreign‐owned plants and firms to aggregate total factor productivity (TFP) growth in Britain for 1997–2008 using data from the Annual Respondents' Database. The contribution of different sub‐groups is further decomposed to show the role of continuing plants vis‐à‐vis reallocations in output shares. TFP is calculated using system GMM estimation. Taking into account the smaller initial size of the foreign‐owned sector in 1997, foreign‐owned plants contributed relatively more to aggregate productivity growth than UK‐owned plants over the period. This strong performance is mostly the result of reallocations of output shares towards high productivity continuing plants and the opening of high productivity plants.

Can an Ageing Scotland Afford Independence?

“…To avoid increasing the effective labour income tax rate by 2060 total factor productivity (TFP) growth has to be about 0.6 per cent per year. According to Harris and Moffat (2013), between 1997 and 2008 TFP growth in Great Britain was on average equal to 1.6 per cent per year. This means that covering the public expenditures associated with ageing -with no increase in quality or With some market power given by the Armington assumption and a relative production decline due to ageing, the price of the goods produced by Scotland increases relative to the price of the goods produced in RUK and ROW.…”

Foreign multinationals and domestic innovation: Intra-industry effects and firm heterogeneity

“…More univocal are instead the predictions about inter-industry interactions: except for some caveats regarding the net effect on upstream sectors (Javorcik, 2004;Bitzer et al, 2008), general agreement emerges on the central role of backward linkages. The positive impact of foreign enterprises seems in fact to be more pronounced in related industries rather than within the highly competitive industry in which MNEs operate (Harris and Robinson, 2003;Harris and Moffat, 2013).…”

The Decline of British Manufacturing, 1973–2012: The Role of Total Factor Productivity

“…More broadly, we confirm the results of earlier papers (Disney et al ., 2003; Harris and Moffat, 2013a) which emphasise the importance of reallocations of output shares both among surviving plants and most especially the opening of new plants as a source of productivity growth. Policy measures to increase competition and thus facilitate the transfer of resources between firms would therefore improve aggregate productivity.…”

“…Lastly, intangible assets (which can be defined as complimentary knowledge embodied in intellectual assets and thus comprise more than just formal R&D 19 ) are widely recognised as a key driver of enterprise performance and thus productivity (e.g., Corrado et al, 2006Corrado et al, , 2012Van Ark et al, 2009;Dal Borgo et al, 2013) especially by proponents of a 'resource-based' perspective of the firm (e.g., Penrose, 1959;Barney, 1991;Kogut and Zander, 1996;Teece et al, 1998;Harris and Moffat, 2013b). Their increased usage may also have played a role in increasing TFP growth.…”