DP2921 | Firm Interdependence In Foreign Production: Leading UK Firms in 1986 and 1993


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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 effects do 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 there being a significant role. More widely found are negative interdependencies (a firm?s foreign production being decreasing in its rivals?) and those 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.