Sourafel Girma

Who Benefits from Foreign Direct Investment in the UK

The presumed higher productivity of foreign firms and resulting spillovers to domestic firms has led governments to offer financial incentives to foreign firms. We investigate if there is any productivity or wage gap between foreign and domestic firms in the UK and if the presence of foreign firms in a sector raises the productivity of domestic firms. Our results indicate that foreign firms do have higher productivity than domestic firms and they pay higher wages. We find no aggregate evidence of intra-industry spillovers. However, firms with low productivity relative to the sector average, in low-skill low foreign competition sectors gain less from foreign firms. Copyright 2001 by Scottish Economic Society.

The Productivity and Wage Effects of Foreign Acquisition in the United Kingdom

This paper provides a systematic empirical analysis of the impact of foreign ownership on productivity and wages in the United Kingdom. Using a specially constructed database for the period 1989-94, it uses ownership change (acquisition) to control for unobserved differences between plants. It finds that foreign firms pay equivalent employees 3.4% more than domestic firms, though this is wholly attributable to their higher levels of productivity. Firms which are acquired by foreign companies exhibit an increase in labour productivity of 13%. Copyright 2002 by Blackwell Publishing Ltd

The link between immigration and trade: Evidence from the United Kingdom

Immigration and Trade: Evidence from the United Kingdom. — This paper investigates the link between immigration and trade using recent UK data. Immigration from non-Commonwealth countries is shown to have a significant export-enhancing effect. By contrast, immigration from Commonwealth countries is found to have no substantial impact on exports. We conjecture that this could be because immigrants from the UK’s former colonies do not bring with them any new information that can help substantially reduce the transaction cost of trade between their home countries and the host nation. The study also reveals a pro-imports effect of immigration from the non-Commonwealth countries, whereas immigration from the Commonwealth appears to be reducing imports, perhaps reflecting trade-substituting activities by immigrants.

Exports, International Investment, and Plant Performance: Evidence from a Non-Parametric Test

This paper compares the performance of purely domestic plants, domestic exporters and domestic multinationals. For our empirical analysis we utilise a non-parametric approach based on the principle of first order stochastic dominance. Comparing the cumulative distributions of the measures of plant performance across the three types of plants we find that the distributions for multinationals dominate that of domestic exporters and non-exporters, while we do not find clear differences in plant performance between domestic exporters and nonexporters, although the latter finding may be due to the lack of many very small plants in our data set.

The impact of mergers and acquisitions on company employment in the United Kingdom

Abstract This paper provides a systematic empirical analysis of the effects of take-over and merger activity on firm employment in the United Kingdom using a specially constructed database for the period 1967–1996. Our results indicate that significant rationalisations in the use of labour occur as firms reduce joint output and increase efficiency post-merger. These effects are particularly pronounced in the case of related and especially hostile mergers.

Exporting, Linkages and Productivity Spillovers from Foreign Direct Investment

In this paper we analyse productivity spillovers from foreign direct investment using firm level panel data UK manufacturing industries from 1992 to 1999. We investigate spillovers through horizontal, backward and forward linkages, distinguish spillovers from export oriented vs domestic market oriented FDI, and allow for differing effects depending on domestic firms’ export activities. The results suggest that the mechanisms through which spillovers affect domestic firms are very complex and that there are substantial differences in spillover benefits for domestic exporters and non-exporters, and from different types of inward investment.

Does Exporting Lead to Better Performance? A Microeconometric Analysis of Matched Firms

Exporting involves sunk costs, so some firms export while others do not. This proposition derives from a number of models of firm behaviour and has been exposed to microeconometric analysis. Evidence from the latter suggests that exporting firms are generally more productive than non-exporters; they self-select in that they are more productive before they enter export markets; but entry does not make them any more productive. This paper investigates exporting and firm performance for a large panel of UK manufacturing firms applying, for the first time, matching techniques. We find that exporters are more productive and they do self-select. In contrast to other evidence, however, we also find that exporting further increases firm productivity.

R&D and Exporting: A Comparison of British and Irish Firms

This paper investigates the two-way relationship between R&D and export activity. In particular, we concern ourselves with the question whether R&D stimulates exports and, perhaps more importantly, whether export activity leads to increasing innovative activity in terms of R&D (learning-by-exporting). We use two unique firm level databases for Great Britain and the Republic of Ireland and compare the results for these two countries. We find that previous exporting experience enhances the innovative capability of Irish firms. Conversely, no strong learning-by-exporting effects are found for British firms. Arguably part of the differences between Ireland and Britain are attributable to different, cross-country exporting patterns where Irish firms have a greater interface with OECD markets.

Export Market Exit and Performance Dynamics: A Causality Analysis of Matched Firms

As a result of the rapid growth of microeconometric studies of exporting firms, we now know quite a lot about the performance dynamics of firms that enter export markets. We know much less about what happens to performance when firms exit. We apply a difference-in-differences methodology based on matched firms to analyse the performance dynamics firms in UK manufacturing that exited export markets during the period 1991-1997. We find that, on average, exit from foreign markets has a negative albeit weak effect on total factor productivity. But this is confined to the year of exit as we fail to detect any discernible productivity effect due to exit in subsequent years. By contrast exit is found to have a deleterious effect on both employment and output dynamics. The effect on output is sizeable and quite persistent, suggesting that domestic demand was not able to make up for the loss in foreign market shares.

Multinationals' Productivity Advantage: Scale or Technology

The first aim of this paper is to decompose the productivity advantage of foreign multinationals into two components: the technology and scale effect. The second aim is to analyse the causal relationship between foreign ownership and these two components of productivity growth. We do so by analyzing the effects of an acquisition of a domestic establishment by a foreign multinational enterprise, using a combined propensity score matching and difference-in-differences estimation. Our empirical analysis is based on plant level data for the UK. From our econometric investigation four broad patterns emerge: (i) any positive impact of ownership change is predominantly due to change in technical efficiency, not scale effects (ii) the pre-acquisition TFP level of the erstwhile domestic plants play a role - positive or negative - in mediating the rate of technology transfer from the MNE parent companies, (iii) the productivity growth effects are not confined to the year of acquisition, and tend to persist through time.