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The wider effects of inward foreign direct investment in manufacturing on UK industry

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  • Jonathan Potter
  • Barry Moore
  • Rod Spires

Abstract

This paper examines the wider effects of inward foreign direct investment (FDI) to the UK on improving the practices and competitiveness of domestic industry. Surveyed domestic suppliers, competitors, and customers to foreign investors reported extensive positive impacts on their practices, focused particularly on reductions in X-inefficiencies, and on their competitiveness, although in the case of competitors benefits had to be balanced against adverse effects. Knowledge transfers through personal contacts and the demonstration effect, were important to the transmission of impacts, but a number of other channels were also important, including additional supplier sales, improved customer inputs, and the competitive spur. Regional policymakers should take these wider benefits into account in the design of policies for attracting and embedding foreign investment. However, whilst there was no evidence that foreign firms in assisted regions had fewer benefits than those in core regions, there was a lot of leakage outside of the areas attracting foreign firms, suggesting that policies to promote spillovers should not be developed entirely in a local or regional framework. Copyright 2002, Oxford University Press.

Suggested Citation

  • Jonathan Potter & Barry Moore & Rod Spires, 2002. "The wider effects of inward foreign direct investment in manufacturing on UK industry," Journal of Economic Geography, Oxford University Press, vol. 2(3), pages 279-310, July.
    • Handle: RePEc:oup:jecgeo:v:2:y:2002:i:3:p:279-310
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    Cited by:

    1. Richard Perkins & Eric Neumayer, 2004. "The international diffusion of new technologies: a multi-technology analysis of latecomer advantage and global economic integration," Development and Comp Systems 0407001, University Library of Munich, Germany, revised 08 Dec 2004.
    2. Jordaan, Jacob A., 2011. "FDI, Local Sourcing, and Supportive Linkages with Domestic Suppliers: The Case of Monterrey, Mexico," World Development, Elsevier, vol. 39(4), pages 620-632, April.
    3. Jacob A Jordaan, 2017. "Producer firms, technology diffusion and spillovers to local suppliers: Examining the effects of Foreign Direct Investment and the technology gap," Environment and Planning A, , vol. 49(12), pages 2718-2738, December.
    4. Apanisile Olumuyiwa Tolulope & Okunlola Charles Olalekan, 2017. "Growth Effect of Export Promotion on Non-oil Output in Sub-Saharan Africa (1970–2014)," Emerging Economy Studies, International Management Institute, vol. 3(2), pages 139-155, November.
    5. Tieli Li & Miao Fu & Xiaolan Fu, 2013. "Regional technology development path in an open developing economy: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 45(11), pages 1405-1418, April.
    6. Richard Harris, 2009. "Spillover and Backward Linkage Effects of FDI: Empirical Evidence for the UK," SERC Discussion Papers 0016, Centre for Economic Performance, LSE.
    7. Ari-Veikko Anttiroiko & Markus Laine & Henrik Lönnqvist, 2016. "Metropolitan strategies for global innovation networking: the case of Helsinki," International Journal of Innovation and Regional Development, Inderscience Enterprises Ltd, vol. 7(1), pages 20-35.
    8. Maha Mohamed Alsebai Mohamed & Pingfeng Liu & Guihua Nie, 2021. "Are Technological Innovation and Foreign Direct Investment a Way to Boost Economic Growth? An Egyptian Case Study Using the Autoregressive Distributed Lag (ARDL) Model," Sustainability, MDPI, vol. 13(6), pages 1-28, March.

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