The impact on domestic productivity of inward investment in the UK

Nigel Driffield

Research output: Contribution to journalArticlepeer-review


One of the basic tenets of UK industrial policy, that attracting inward investment into the UK stimulates domestic productivity growth, is examined. A model of productivity growth is developed for the indigenous sector of UK manufacturing, linking domestic productivity growth to theoretical explanations of inward investment. The paper demonstrates that inward investment does stimulate productivity growth in the domestic sector of around 0.75 per cent per annum. However, this cannot be attributed to investment or output spillovers, but is a result of the productivity advantage exhibited by the foreign firms.
Original languageEnglish
Pages (from-to)103-119
Number of pages17
JournalManchester School
Issue number1
Publication statusPublished - 2001

Bibliographical note

© Blackwell Publishing Ltd and The Victoria University of Manchester, 2001.
The definitive version is available at


  • UK
  • industrial policy
  • inward investment
  • domestic productivity growth
  • manufacturing


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