Multinational enterprises, service outsourcing and regional structural change

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Tuesday, January 30th, 2018

Tuesday, January 30, 201810:00AM - 12:00PM208N, North House, Room 208N, 1 Devonshire Place
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IPL Speaker Series - Frontiers of Research in Global Innovation


The presentation will start by providing a broad-brushed picture of the geography of foreign direct investment (FDI) to and from the European regions by function (i.e. Headquarters, Innovative activities, Sales, Production activities, Logistic & Distribution), looking at trends for the period 2003-2014. This simple exercise will allows us to shed some initial light on Multinational Enterprises’ (MNE) location choices of their different kinds of operations across subnational space, identifying regional trajectories both in the core and in the periphery of Europe (Crescenzi and Iammarino, 2017; Comotti, Crescenzi and Iammarino, 2017, in progress).

The presentation will then examine the structural transformation of regional industrial bases within the UK by focusing on the role played by inward manufacturing FDI in facilitating shifts towards service activities (Ascani and Iammarino, 2017, in progress). From a conceptual perspective, this research brings together different strands of literature, including studies on the impact of FDI on recipient regions, research on structural change, as well as contributions on the identification of local multipliers. From an empirical standpoint, the paper considers a specific demand-side channel for structural change: namely, the forward linkages established by foreign MNEs operating in manufacturing industries with local service providers. The paper uses data at plant level in the UK as reported in the Annual Census of Production Respondents Database (ARD), a business-level database collected by the UK Office of National Statistics. We estimate the multiplicative effects that FDI in manufacturing has on the creation of new service jobs in a region. In order to produce reliable estimates of such a regional multiplier, our methodology relies on the adoption of an instrumental variable approach. Our findings confirm that foreign MNEs do establish prominent demand linkages with service providers, and that FDI in manufacturing is accompanied by notable multiplicative effects in service employment within UK travel-to-work-areas. This effect is strongly concentrated in tertiary activities that produce intermediate services, rather than final demand services. Furthermore, while the composition of this effect tends to be homogeneous in terms of the knowledge content of service activities, it becomes highly heterogeneous once the degree of concentration of tertiary activities across space is considered.

Some implications for policy and directions for future research will conclude the presentation.


Sole Fernandez
(416) 946-8912


Simona Iammarino
London School of Economics and Political Science, Department of Geography and Environment

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