Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

The literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the sign and extent of these effects varies depending on the technological and factor cost differentials between the recipient and host economies. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored.

Selectivity and timing performance of UK investment trusts

This study examines the selectivity and timing performance of 218 UK investment trusts over the period July 1981 to June 2009. We estimate the Treynor and Mazuy (1966) and Henriksson and Merton (1981) models augmented with the size, value, and momentum factors, either under the OLS method adjusted with the Newey-West procedure or under the GARCH(1,1)-in-mean method following the specification of Glosten et al. (1993; hereafter GJR-GARCH-M). We find that the OLS method provides little evidence in favour of the selectivity and timing ability, consistent with previous studies. Interestingly, the GJR-GARCH-M method reverses this result, showing some relatively strong evidence on favourable selectivity ability, particularly for international funds, as well as favourable timing ability, particularly for domestic funds. We conclude that the GJR-GARCH-M method performs better in evaluating fund performance compared with the OLS method and the non-parametric approach, as it essentially accounts for the time-varying characteristics of factor loadings and hence obtains more reliable results, in particular, when the high frequency data, such as the daily returns, are used in the analysis. Our results are robust to various in-sample and out-of-sample tests and have valuable implications for practitioners in making their asset allocation decisions across different fund styles. © 2012 Elsevier B.V.

Organised for inward investment? Development agencies, local government, and firms in the inward investment process

Inward investment promotion and aftercare remain central aspects of local economic development for English Regional Development Agencies, Scottish and Welsh development bodies, and local authorities in Britain. In many cases, partnership and consultation mechanisms have become integral to attracting inward investment and providing aftercare. Inward investment is thus an important area in which to explore interinstitutional relations between agents operating along diverse spatial boundaries and with different responsibilities. In this paper we analyse the local and regional institutional structures and relations characterising the inward investment process in Britain using new survey data from local authorities, regional bodies, and inward investors. We find that promotional activities have clearly defined structures which are chiefly led by the regional level. Aftercare is characterised by more collaborative arrangements involving both regional bodies and local government. However, many bodies are little used, with competition and tension between partners remaining frequent within English regions, regardless of recent institutional changes designed to reduce such problems. In Scotland and Wales, however, their national institutions are not only widely used, but they create high levels of satisfaction from firms. Hence, England has yet to respond to the effective challenges of Scotland and Wales. The analysis also highlights the limited importance of all national, regional, and local public institutions in attracting inward investors and their subsequent aftercare. The critical inputs to business decisions appear to be driven chiefly by more general supply-side conditions (for example, general skills versus local public packages) and the general attractions of a particular location.

Spillovers from foreign direct investment in Central and Eastern Europe:an index for measuring a country’s potential to benefit from technology spillovers

In the paper, we construct a composite indicator to estimate the potential of four Central and Eastern European countries (the Czech Republic, Hungary, Poland and Slovakia) to benefit from productivity spillovers from foreign direct investment (FDI) in the manufacturing sector. Such transfers of technology are one of the main benefits of FDI for the host country, and should also be one of the main determinants of FDI incentives offered to investing multinationals by governments, but they are difficult to assess ex ante. For our composite index, we use six components to proxy the main channels and determinants of these spillovers. We have tried several weighting and aggregation methods, and we consider our results robust. According to the analysis of our results, between 2003 and 2007 all four countries were able to increase their potential to benefit from such spillovers, although there are large differences between them. The Czech Republic clearly has the most potential to benefit from productivity spillovers, while Poland has the least. The relative positions of Hungary and Slovakia depend to some extent on the exact weighting and aggregation method of the individual components of the index, but the differences are not large. These conclusions have important implications both the investment strategies of multinationals and government FDI policies.