ABSTRACT

That foreign direct investment (FDI) largely benefits host economies has almost become a truism in modern economics as multinationals are mostly seen to introduce new technologies and organisational innovations into host countries. Recent research on FDI in British manufacturing concurs, for example, documenting almost 1,000 subsidiaries of foreign firms that had entered UK manufacturing by 1962, and mostly in relatively high-technology sectors. 1 FDI in UK manufacturing has therefore been composed overwhelmingly of relatively high productivity entrants, bringing new techniques and processes, and thus disproportionately responsible for productivity growth in the manufacturing sector overall. The message is clear. Without this inward investment by foreign multinationals witnessed over many decades, British manufacturing's sluggish performance since the late nineteenth century would have been considerably worse. 2