Spillover And Backward Linkage Effects Of FDI: Empirical Evidence For The UK

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Executive Summary

Recent work (including that of the author) on the impact of FDI has been based on micro-level (i.e. firms, establishments or plants) data, since this allows much greater control when examining such issues as whether FDI plants are more productive or innovative; whether there are spillovers to indigenous plants from FDI; and whether foreign-owned plants can facilitate the building-up of clusters. The traditional approach (which is still prevalent in the literature) considers whether those industries and/or regions with the greatest concentrations of FDI experience higher productivity, growth, spillovers and clustering affects, but such analysis does not tackle the issue of cause-and-effect and therefore amounts to little more than observing correlations between the growth of FDI in an industry/region and the overall growth of the industry/region.

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