Foreign Direct Investment Spillovers: Evidence from the British Retail Sector


  • The authors acknowledge EPSRC’s financial support for this work (Grant Number EP/D01350X/1). Thanks are due to participants at the International Industrial Organization conference, EARIE Conference, RES Conference and seminar participants at Birmingham, Keele, Office of National Statistics (ONS) and Valencia, as well as to an anonymous referee for their valuable comments. Remaining errors are under our own responsibility. This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen’s Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data.


This paper discusses the impact of foreign-ownership presence on the productivity performance of British-owned domestic retailers. In particular, we analyse the existence of productivity spillovers, in the form of knowledge transfer, by using establishment-level data from the Annual Respondents Database over the period 1997–2003. The results confirm the presence of such spillovers and highlight their positive and significant impact on the productivity of domestic firms, although these spillovers are mostly confined to the region in which foreign subsidiaries locate. There is also evidence that the productivity benefit from regional foreign direct investment spillovers increases with the absorptive capacity of domestic retailers.