Download Foreign Direct Investment in the Black Country Top 200

Foreign Direct Investment in the West
Midlands
Sustaining Competitiveness in the
West Midlands
Dr Mark Cook
Reader in International Business
University of Wolverhampton
Importance of FDI
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Provides new jobs
Safeguards existing jobs
Brings new skills
Brings new technology
Provides capital
Improves productivity
Improves national and regional competitiveness
Improves the supply chain
Enhances regional and national export performance
The drivers of FDI?
• The search for markets, both regional, national and supranational
• The search for resources, now regarded as natural resources
• To improve company efficiency, lowering cost
• Agglomeration economies, going to where there are a cluster
of similar firms
• Institutional factors
How can we measure some of the variables
that lie within the broad categories listed above?
• Let’s take education. Could be measured by, for example:
• Education levels of the workforce, people with 5 or more good GCSE’s?
• Those with A levels?
• Those with degrees?
• Those with higher degrees?
• Those undertaking training?
• Quality of this training?
Market entry and measurement of FDI
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Greenfield
Brown field/Merger and Acquisition
Joint Venture
Expansionary
Measured by:
New jobs, safeguarded jobs, capital
Market entry and measurement of FDI
• At this stage we might want to consider:
• Are the determinants of the various types of FDI the same or
different?
• Are the factors that determine FDI into the West Midlands the
same as those for other regions?
• Are the determinants of manufacturing the same or similar to
those that might influence non-manufacturing FDI?
FDI in the West Mids – (Black country
Observatory)
2001-02
2004-05
2006-07
2007-08
2010-11
West Mids
projects
97
67
103
114
67
New jobs
created
4777
4073
2505
4650
1623
Jobs
safeguarded
10736
2144
12101
25480
1405
FDI regional comparisons, 2005-2009
(Source FDI Markets)
Region
Regional share of all
FDI projects
Manufacturing share
Knowledge intensive
Business services
South East
51.7%
10.1%
38.1%
71.7%
Scotland
8.3%
12.5%
13.6%
5.5%
North West
7.5%
11.9%
3.1%
6.2%
West Midlands
5.6%
9.8%
4.7%
3.6%
Northern Ireland
5.1%
8.0%
14.8%
2.4%
South West
4.23%
5.2%
2.7%
1.7%
Wales
4.1%
11.6%
4.3%
1.7%
Yorks. and
Humberside
3.9%
10.4%
3.1%
2.6%
North East
3.9%
11.6%
3.5%
1.7%
East Midlands
3.7%
5.5%
3.5%
2.2%
East Anglia
2.8%
3.4%
8.6%
0.7%
Source countries for West Mids.
FDI (2001- 2011)
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Europe dominated FDI in the West Mids. region
US ownership was 38.6%
Japan 6.2%
Only 8.3% came from Emerging markets – mostly China and
India
• At present, therefore, there is some evidence of emerging
market FDI or BRIC activity, more noticeable after 2000
Empirical results for the determinants of
West Midlands FDI
• Using number of projects as the dependent variable, what
factors determine West Midlands FDI?
• 1. Regional FDI of the previous year
• 2.The percentage of regional 16 year olds in education and
government training
• 3. Regional preferential assistance.
• (Fallon and Cook, 2009)
Empirical results for the determinants of
West Midlands FDI
• Are there difference between the determinants of
manufacturing and non-manufacturing FDI?
• Manufacturing FDI is determined by annual regional
expenditure on roads, regional percentage of 16 year olds in
education/training, regional preferential assistance
Empirical results for the West
Midlands
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Non-manufacturing FDI determined by:
Previous year’s FDI
Regional preferential assistance
Fallon and Cook (2013)
What does the Picture of FDI within the
West Midlands tell us?
• FDI is important in developing new jobs in the region and
safeguarding existing jobs.
• This investment can improve the West Midland’s competitive
position, improving supply-chain linkages, raising productivity,
forcing some local firms to improve. But, can drive-out some local
firms, may be footloose (importance of retention schemes/after
care) and may not bring all the jobs anticipated.
What might we want to know about West
Midlands FDI?
• Does FDI change the nature of the products and services
and enhance regional and national export activity?
• Does FDI may provide more higher value added jobs and
therefore lead to the retention of better qualified
people/graduates within the region.
FDI in the future
• Will the source country and sector of inbound FDI in the West
Midlands change?
• Can FDI lead to the development of new areas of production?
• To what extent does West Midland’s FDI lead to jobs for those living
in the West Midlands?
• What are the policy Implications in terms of targeting countries and
the different forms of FDI and entry routes?
• Is FDI from some source countries better?
References
• Fallon, G. & Cook, M. (2010) Explaining the manufacturing and
non-manufacturing FDI performance in the UK regions,
Tijdsschrift Journal, Forthcoming (2013).
• Fallon, G & Cook, M (2009) Exploring the regional distribution
of inbound FDI in the United Kingdom in theory and practice evidence from a five regional study, Regional Studies, January,
e form (Actual article in print in Vol. 44, No 1 2010)