Productivity Perspectives
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Productivity Perspectives

Edited by Philip McCann and Tim Vorley

Productivity Perspectives offers a timely and stimulating social science view on the productivity debate, drawing on the work of the ESRC funded Productivity Insights Network. The book examines the drivers and inhibitors of UK productivity growth in the light of international evidence, and the resulting dramatic slowdown and flatlining of productivity growth in the UK. The reasons for this so-called productivity puzzle are not well understood, and this book advances explanations and insights on these issues from different disciplinary and methodological perspectives. It will be of value to all those interested in, and engaging with, the challenge of slowing productivity growth.
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Chapter 4: FDI, capital and investment markets

Richard Harris

Abstract

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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