Export Oriented FDI

Abstract

It is well known that the performance of foreign firms compared to domestic companies is superior with respect to employment, wages, and productivity. In this paper we detail the export behaviour of foreign affiliates in the United Kingdom relative to indigenous firms. Our findings show that foreign firms are more likely to export, and when they do so they are more export intensive and overall contribute disproportionately to total manufacturing exports from the UK. While firm-level advantages explain some of these differences in export behaviour, strategic considerations dominate, where these include the differential in costs, productivity, and market size between the UK and foreign countries. That is, both horizontal and vertical motives can be found for the use of the UK as an export platform by foreign firms.

Keywords: Export platform, foreign direct investment, productivity

JEL Classification: F23, F15