Industrial performance, agglomeration, and foreign manufacturing investment in the UK

This paper examines the relationship between the comparative advantage of UK industries, and new inward investment into these industries. The paper demonstrates that the extent of foreign manufacturing investment in an industry, and the spatial agglomeration of that industry, are significant determinants of industry comparative advantage, thus providing evidence of agglomeration benefits to both domestic and foreign firms. The paper then shows that industry comparative advantage itself, toegther with a series of industry specific characteristics, are important determinants of new foreigh manufacturing investment, thus providing evidence of the dynamic benefits of foreign direct investment in the UK economy.

FDI and the labour market: a review of the evidence and policy implications

This paper presents a series of results concerning the labour-market impact of inward foreign direct investment (FDI) in the UK. The paper demonstrates that one of the crucial impacts of FDI is to increase wage inequality and the use of relatively more skilled labour in the domestic firms. This result is found to be a combination of two effects. First, the entry by a multinational enterprise (MNE) increases the demand for skilled workers in an industry or region, thus increasing wage inequality. Second, technology spillovers occur from foreign to domestic firms. As a result of these spillovers, relative demand for skilled workers increases in the domestic firms, further contributing to aggregate wage inequality and skill upgrading. The paper also considers how FDI impacts upon skill shares by productivity differentials between foreign and domestic firms. Finally, the policy implications of this are discussed, from the perspective of regional development, and the likely effectiveness of attracting FDI to reduce structural unemployment.

Foreign direct investment and local input linkages in Malaysia

This article examines variations in local input linkages in foreign transnational corporations in Malaysia. The extent to which transnational corporations foster such linkages, particularly in a developing host economy, has become an important issue for policy makers and others concerned with the long-term benefits associated with foreign direct investment. This article employs a unique data set, covering inward investors in the electrical and electronics industry, and analyzes in detail the determinants of variations in local input uses. The article develops a model of local input linkages, based on a transaction-cost framework using firm-specific factors, such as nationality of ownership, the age of the plant and its technology, and the extent to which firms employ locally recruited managers and engineers. In addition, the impacts of various policy measures on local input levels are discussed, and also the importance of the original motivation for investing in Malaysia. The article demonstrates that policy initiatives that target particular outcomes, such as stimulating exports or technology transfer, will result in a greater beneficial impact on the host country economy than more generic subsidies.

What determines innovation activity in Chinese state-owned enterprises? The role of foreign direct investment

We investigate whether inward foreign direct investment (FDI), either at the firm or industry level, has any impact on product innovation by Chinese state-owned enterprises (SOEs). We use a comprehensive firm-level panel data set of some 20,000 SOEs during 1999-2005. Our results show that foreign capital participation at the firm level is associated with higher innovative activity. Inward FDI in the sector, by contrast, has a negative effect on innovative activity in SOEs on average. However, there is a positive effect of sector-level FDI on SOEs that export, invest in human capital, or undertake R&D. © 2008 Elsevier Ltd. All rights reserved.

Foreign direct investment, access to finance, and innovation activity in Chinese enterprises

A recent, comprehensive database is used to investigate the link between inward foreign direct investment (FDI) and innovation activity in China. The results of the analysis suggest that private and collectively owned firms with foreign capital participation and those with good access to domestic bank loans innovate more than other firms do. Among enterprises not owned by the state, inward FDI at the sectoral level is positively associated with domestic innovative activity only among firms that engage in their own research and development or that have good access to domestic finance. At the sector level the effect of inward FDI into technology transfer is distinguished from the effect on domestic credit opportunities. FDI affecting credit is of little significance for state-owned enterprises and is independent of their access to finance. In contrast, better access to credit is an important channel through which FDI affects the innovation of domestic private and collectively owned enterprises.

Technology sourcing versus technology exploitation:An analysis of US foreign direct investment flows

The traditional paradigm of foreign direct investment (FDI) suggests that FDI is undertaken principally to exploit some firm-specific advantage in a foreign country which provides a locational advantage to the investor. However, recent theoretical work suggests a model of FDI in which the motivation is not to exploit existing technological advantages in a foreign country, but to access such technology and transfer it from the host economy to the investing multinational corporation via spillover effects. This paper tests the technology sourcing versus technology exploiting hypotheses for a panel of sectoral FDI flows between the United States and major OECD nations over a 15 year period. The research makes use of Patel and Vega's (Research Policy, 28, 145-55, 1999) taxonomy of sectors which are likely a priori to exhibit technology sourcing and exploiting behaviour respectively. While there is evidence that FDI flows into the United States are attracted to R and D intensive sectors, very little support is found for the technology sourcing hypothesis either for inward or outward FDI flows. The results suggest that, in aggregate, firm-specific 'ownership' effects remain powerful determinants of FDI flows.

Linking FDI motivation and host economy productivity effects:conceptual and empirical analysis

We develop a taxonomy that relates foreign direct investment (FDI) motivation (technology- and cost-based) to its anticipated effects on host countries domestic productivity. We then empirically examine the effects of FDI into the United Kingdom on domestic productivity, and find that different types of FDI have markedly different productivity spillover effects, which are consistent with the conceptual analysis. The UK gains substantially only from inward FDI motivated by a strong technology-based ownership advantage. As theory predicts, inward FDI motivated by technology-sourcing considerations leads to no productivity spillovers.

Macro determinants of FDI inflows to Japan:an analysis of source country characteristics

This paper examines the source country determinants of FDI into Japan. The paper highlights certain methodological and theoretical weaknesses in the previous literature and offers some explanations for hitherto ambiguous results. Specifically, the paper highlights the importance of panel data analysis, and the identification of fixed effects in the analysis rather than simply pooling the data. Indeed, we argue that many of the results reported elsewhere are a feature of this mis-specification. To this end, pooled, fixed effects and random effects estimates are compared. The results suggest that FDI into Japan is inversely related to trade flows, such that trade and FDI are substitutes. Moreover, the results also suggest that FDI increases with home country political and economic stability. The paper also shows that previously reported results, regarding the importance of exchange rates, relative borrowing costs and labour costs in explaining FDI flows, are sensitive to the econometric specification and estimation approach. The paper also discusses the importance of these results within a policy context. In recent years Japan has sought to attract FDI, though many firms still complain of barriers to inward investment penetration in Japan. The results show that cultural and geographic distance are only of marginal importance in explaining FDI, and that the results are consistent with the market-seeking explanation of FDI. As such, the attitude to risk in the source country is strongly related to the size of FDI flows to Japan. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing Ltd.

Technology transfer to China:a study of strategy in 20 EU industrial companies

Foreign direct investment has been important in China's economic development since the early 1980s. In recent years, the volume of inward FDI into China, according to some estimates, has been second only to that into the USA. The Chinese government has emphasised the need for FDI to be coupled with the transfer of more advanced technologies to China. For foreign companies, technology transfer raises the risk of losing their technology based competitive advantage to potential competitor firms. This risk may be exacerbated by insufficient legal protection of intellectual property rights in China. After briefly reviewing the development of Chinese official policy on technology transfer, this paper considers the strategy adopted by EU companies regarding the transfer of technology; in particular in advanced technology sectors. The research on which the paper is based included an analysis of information gathered from 20 leading EU companies with investments in China and operating in high-technology sectors. Information was gathered from senior company managers based in both China and Europe during the second half of 1998. The main findings include a measure of reluctance on the part of EU companies to transfer their core technologies to China and to base R&D capability there. At the same time, the companies appear aware that this policy may be unsustainable in the longer-term in the face of Chinese official policy and a desire to expand their operations in China. While they attempt to protect their existing technological knowledge, most of them accept that there will be technology "leakage" and therefore the most effective strategy is to maintain their technological lead through R&D.

The impact of foreign direct investment on labour productivity in the Chinese electronics industry

Foreign direct investment (FDI) may have a positive impact on labour productivity in recipient industries through direct introduction of capital, technology and management skills and indirectly through spillover effects on domestic firms. This study uses a model intended to examine the overall effects of inward FDI in the Chinese electronics industry. Official data are used for 41 sub-sectors of the industry in 1996 and 1997 having differing levels of FDI. Labour productivity is modelled as dependent on the degree of foreign presence in the industry and other variables, namely capital intensity, human capital and firm size for scale factors. The econometric results suggest that foreign presence in the industry is associated with higher labour productivity. © 2001 Elsevier Science Ltd.

Interactions within heterogeneous systems of uncontrolled rectifiers for aircraft electrical power systems

There is an increase in the use of multi-pulse, rectifier-fed motor-drive equipment on board more-electric aircraft. Motor drives with feedback control appear as constant power loads to the rectifiers, which can cause instability of the DC filter capacitor voltage at the output of the rectifier. This problem can be exacerbated by interactions between rectifiers that share a common source impedance. In order that such a system can be analysed, there is a need for average, dynamic models of systems of rectifiers. In this study, an efficient, compact method for deriving the approximate, linear, large-signal, average models of two heterogeneous systems of rectifiers, which are fed from a common source impedance, is presented. The models give insight into significant interaction effects that occur between the converters, and that arise through the shared source impedance. First, a 6-pulse and doubly wound, transformer-fed, 12-pulse rectifier system is considered, followed by a 6-pulse and autotransformer-fed, 12-pulse rectifier system. The system models are validated against detailed simulations and laboratory prototypes, and key characteristics of the two system types are compared.

Mach edges: local features predicted by 3rd derivative spatial filtering

Edges are key points of information in visual scenes. One important class of models supposes that edges correspond to the steepest parts of the luminance profile, implying that they can be found as peaks and troughs in the response of a gradient (1st derivative) filter, or as zero-crossings in the 2nd derivative (ZCs). We tested those ideas using a stimulus that has no local peaks of gradient and no ZCs, at any scale. The stimulus profile is analogous to the Mach ramp, but it is the luminance gradient (not the absolute luminance) that increases as a linear ramp between two plateaux; the luminance profile is a blurred triangle-wave. For all image-blurs tested, observers marked edges at or close to the corner points in the gradient profile, even though these were not gradient maxima. These Mach edges correspond to peaks and troughs in the 3rd derivative. Thus Mach edges are inconsistent with many standard edge-detection schemes, but are nicely predicted by a recent model that finds edge points with a 2-stage sequence of 1st then 2nd derivative operators, each followed by a half-wave rectifier.

Blurred edges look faint, and faint edges look sharp:The effect of a gradient threshold in a multi-scale edge coding model

A multi-scale model of edge coding based on normalized Gaussian derivative filters successfully predicts perceived scale (blur) for a wide variety of edge profiles [Georgeson, M. A., May, K. A., Freeman, T. C. A., & Hesse, G. S. (in press). From filters to features: Scale-space analysis of edge and blur coding in human vision. Journal of Vision]. Our model spatially differentiates the luminance profile, half-wave rectifies the 1st derivative, and then differentiates twice more, to give the 3rd derivative of all regions with a positive gradient. This process is implemented by a set of Gaussian derivative filters with a range of scales. Peaks in the inverted normalized 3rd derivative across space and scale indicate the positions and scales of the edges. The edge contrast can be estimated from the height of the peak. The model provides a veridical estimate of the scale and contrast of edges that have a Gaussian integral profile. Therefore, since scale and contrast are independent stimulus parameters, the model predicts that the perceived value of either of these parameters should be unaffected by changes in the other. This prediction was found to be incorrect: reducing the contrast of an edge made it look sharper, and increasing its scale led to a decrease in the perceived contrast. Our model can account for these effects when the simple half-wave rectifier after the 1st derivative is replaced by a smoothed threshold function described by two parameters. For each subject, one pair of parameters provided a satisfactory fit to the data from all the experiments presented here and in the accompanying paper [May, K. A. & Georgeson, M. A. (2007). Added luminance ramp alters perceived edge blur and contrast: A critical test for derivative-based models of edge coding. Vision Research, 47, 1721-1731]. Thus, when we allow for the visual system's insensitivity to very shallow luminance gradients, our multi-scale model can be extended to edge coding over a wide range of contrasts and blurs. © 2007 Elsevier Ltd. All rights reserved.

Added luminance ramp alters perceived edge blur and contrast:A critical test for derivative-based models of edge coding

In many models of edge analysis in biological vision, the initial stage is a linear 2nd derivative operation. Such models predict that adding a linear luminance ramp to an edge will have no effect on the edge's appearance, since the ramp has no effect on the 2nd derivative. Our experiments did not support this prediction: adding a negative-going ramp to a positive-going edge (or vice-versa) greatly reduced the perceived blur and contrast of the edge. The effects on a fairly sharp edge were accurately predicted by a nonlinear multi-scale model of edge processing [Georgeson, M. A., May, K. A., Freeman, T. C. A., & Hesse, G. S. (in press). From filters to features: Scale-space analysis of edge and blur coding in human vision. Journal of Vision], in which a half-wave rectifier comes after the 1st derivative filter. But we also found that the ramp affected perceived blur more profoundly when the edge blur was large, and this greater effect was not predicted by the existing model. The model's fit to these data was much improved when the simple half-wave rectifier was replaced by a threshold-like transducer [May, K. A. & Georgeson, M. A. (2007). Blurred edges look faint, and faint edges look sharp: The effect of a gradient threshold in a multi-scale edge coding model. Vision Research, 47, 1705-1720.]. This modified model correctly predicted that the interaction between ramp gradient and edge scale would be much larger for blur perception than for contrast perception. In our model, the ramp narrows an internal representation of the gradient profile, leading to a reduction in perceived blur. This in turn reduces perceived contrast because estimated blur plays a role in the model's estimation of contrast. Interestingly, the model predicts that analogous effects should occur when the width of the window containing the edge is made narrower. This has already been confirmed for blur perception; here, we further support the model by showing a similar effect for contrast perception. © 2007 Elsevier Ltd. All rights reserved.

Perceiving edge contrast

We have shown previously that a template model for edge perception successfully predicts perceived blur for a variety of edge profiles (Georgeson, 2001 Journal of Vision 1 438a; Barbieri-Hesse and Georgeson, 2002 Perception 31 Supplement, 54). This study concerns the perceived contrast of edges. Our model spatially differentiates the luminance profile, half-wave rectifies this first derivative, and then differentiates again to create the edge's 'signature'. The spatial scale of the signature is evaluated by filtering it with a set of Gaussian derivative operators. This process finds the correlation between the signature and each operator kernel at each position. These kernels therefore act as templates, and the position and scale of the best-fitting template indicate the position and blur of the edge. Our previous finding, that reducing edge contrast reduces perceived blur, can be explained by replacing the half-wave rectifier with a smooth, biased rectifier function (May and Georgeson, 2003 Perception 32 388; May and Georgeson, 2003 Perception 32 Supplement, 46). With the half-wave rectifier, the peak template response R to a Gaussian edge with contrast C and scale s is given by: R=Cp-1/4s-3/2. Hence, edge contrast can be estimated from response magnitude and blur: C=Rp1/4s3/2. Use of this equation with the modified rectifier predicts that perceived contrast will decrease with increasing blur, particularly at low contrasts. Contrast-matching experiments supported this prediction. In addition, the model correctly predicts the perceived contrast of Gaussian edges modified either by spatial truncation or by the addition of a ramp.