Edited by Philip McCann and Tim Vorley
Chapter 4: FDI, capital and investment markets
This chapter concentrates on what we know and, more importantly, on what is still needed in terms of further work, with regards to issues of investment in determining (total factor and labour) productivity. Thus, inter alia, it covers the importance of inward (and outward) foreign direct investment (FDI), in terms of its impact on UK productivity; as well as exports and imports in driving productivity; and access to finance, including firm investment in physical and intangible capital. FDI and trade allow firms to update production techniques and introduce new and better products, while access to finance and new investments in physical and intangible capital facilitate the incorporation of more ‘knowledge’ and ‘dynamic capabilities’ into the firm. This chapter also covers the particular and important role that geography has in understanding productivity issues, both from the perspective that different areas have different ‘mixes’ of firms with different productivity distributions, affecting average productivity levels in those areas, and that spatial location itself matters because of the potential for agglomeration effects and knowledge ‘spillovers’.
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