The Impact of Foreign Direct Investment on Profitability of Domestic Firms in the UK

Deng, Xiang (2007) The Impact of Foreign Direct Investment on Profitability of Domestic Firms in the UK. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

With the advent of globalization, there has been an increasing trend for the development of FDI since the mid-1980s. The host country can not only benefit from FDI as a source of external capital, but also can benefit through the technology transfer and technological spillover effects. In the previous literature, some researchers concentrate on studying the effects of FDI on the economic performance indicators, while others focus on examining the impacts of FDI on the firms.

In this dissertation, the impacts of FDI on profitability of domestic firms in the UK will be examined by using panel approach, which can assess the relative importance of cross-sectional and time-series factors. The data are mainly from the UK manufacturing industry firm-level data for the period 1994-2003. In addition, the following hypotheses are also examined:

H1: The share of foreign-owned firms in total industry domestic output will affect the profitability of domestic firms.

H2: The share of foreign-owned firms in total industry export will impact domestic firms' profitability.

H3: the export activity of the foreign firms will affect the profitability of domestic firms

The findings of this study can be concluded as follows. Firstly, with the increasing of the share of foreign-owned firms' output in the total domestic industry output, the domestic firms' profitability declined. Secondly, the share of foreign firms in total industry export increases will enhance the profitability of domestic firms. Thirdly, the increasing industry concentration can spur domestic firms' profitability. Fourthly, with firms' market shares increasing, the firms' profitability will enhance accordingly. Finally, the exporter activity does not affect domestic firms' profitability.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 08 Apr 2008
Last Modified: 23 Oct 2016 14:57
URI: http://eprints.nottingham.ac.uk/id/eprint/21589

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