Regional Growth and Convergence in the UK: the Role of MNE Subsidiaries and Domestic Firms

Bournakis, Ioannis and Papanastassiou, Marina and Pitelis, Christos (2015): Regional Growth and Convergence in the UK: the Role of MNE Subsidiaries and Domestic Firms.

Abstract

This paper explores the relative effects of Multinational Enterprises’ (MNEs) subsidiaries to domestic firms (DOMS) on regional productivity growth in the UK. We combine regional and firm level data to explore the relative importance of three key characteristics of Multinational Enterprises’ subsidiaries: R&D, intangible assets and exports. Our main results indicate that MNE subsidiaries are on average more R&D intensive and have a higher level of investment in intangibles which impact significantly on regional productivity growth. The results are shown not to be symmetric when we take into account the country of origin of MNE subsidiaries, the role of R&D, intangibles and exports depending on the country of origin of the parental MNE. Two key implications can be derived from our findings: (a) DOMS can sometimes be more advantageous for local development; (b) the contribution of MNEs subsidiaries to the regional economy depends on its degree of embeddedness in the local economy. These two findings can provide a large scope for regional policy making.

• Item Type: MPRA Paper
• Language: English
• Keywords: Total Factor Productivity (TFP), Regions, Multinationals, Subsidiaries, Domestic Firms, R&D, Intangibles, Exports
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F23 - Multinational Firms ; International Business; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location

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