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Multinational enterprises, service outsourcing and regional structural change

Ascani, Andrea and Iammarino, Simona (2018) Multinational enterprises, service outsourcing and regional structural change. Cambridge Journal of Economics. ISSN 0309-166X (In Press)

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Abstract

This paper offers a joint analysis of two phenomena characterizing most advanced economies in recent decades: the rise of foreign ownership in manufacturing activities and the pervasiveness of the service economy. The analysis focuses on a specific intersectoral demand-side channel for structural change: the forward linkage established by foreign manufacturing multinational enterprises (MNEs) with service providers through outsourcing in the UK local labour markets. Descriptive evidence shows that service outsourcing by foreign manufacturing plants is notably larger than that of their domestic counterparts. On this basic premise, we estimate the local multiplier effect that foreign manufacturing activity has on service employment. To test our hypotheses, the methodology adopts an instrumental variable approach. Our findings suggest that foreign MNEs in manufacturing can act as a catalyst for regional structural change by stimulating employment in intermediate services via demand linkages. While the composition of this effect seems to be homogeneous in terms of the knowledge content of services, differences are found once the degree of their spatial concentration is accounted for.

Item Type: Article
Official URL: https://academic.oup.com/cje
Additional Information: © 2018 The Authors
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics
Sets: Departments > Geography and Environment
Collections > Economists Online
Date Deposited: 12 Sep 2018 10:43
Last Modified: 12 Sep 2018 13:05
Projects: ES/M008436/1
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/90206

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