Firm Interdependence in Foreign Production: Leading UK Firms in 1986 and 1993

29 Pages Posted: 27 Aug 2001

See all articles by Stephen Pavelin

Stephen Pavelin

University of Bath - School of Management; University of Reading - Department of Economics

Date Written: August 2001

Abstract

This Paper estimates econometric models explaining the foreign production of leading UK firms in 1986 and 1993. The principle questions addressed are: (i) What effect does one UK firm's foreign operations have on the foreign operations of another UK firm? (ii) What effect does the UK operations of a foreign firm have on the foreign operations of UK firms? I employ a dataset describing the manufacturing production of leading UK firms disaggregated by firm, industry, and geographical region. This is used alongside data on the UK production of leading foreign firms, disaggregated by industry and region of origin. Controlling for industry- and country-specific factors, I investigate the role of interdependence between firms' choices concerning foreign production. The evidence points to the role being significant. More widely found are negative interdependencies and those interdependencies between UK rivals (rather than between UK and foreign firms). Indeed, the negative effect of one UK firm's foreign production on other UK firms' foreign production is a result that is robust through time and across all regions.

Keywords: Foreign direct investment, strategic interaction

JEL Classification: F23, L13

Suggested Citation

Pavelin, Stephen, Firm Interdependence in Foreign Production: Leading UK Firms in 1986 and 1993 (August 2001). CEPR Discussion Paper No. 2921. Available at SSRN: https://ssrn.com/abstract=281394

Stephen Pavelin (Contact Author)

University of Bath - School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

University of Reading - Department of Economics ( email )

Reading, RG6 6AA
United Kingdom

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