Preliminary and Incomplete Foreign Ownership and Technological Convergence at the Micro Level

This paper investigates whether there is convergence in Total Factor Productivity at the establishment level, to the technological frontier. We find evidence of convergence to the frontier, which suggests the existence of technological spillovers. The speed of catch-up does not appear to vary with the extent of foreign presence in the industry. But foreign multinationals do make up a significant proportion of establishments at the technological frontier. This implies that high productivity firms, both domestic and foreign-owned, make a contribution to productivity growth through technology transfer. Acknowledgements: This work was funded by the Gatsby Trust. This report has been produced under contract to the ONS. We are grateful to seminar participants at the Institute for Fiscal Studies, the Royal Economic Society Conference, and the University of Nottingham for helpful comments. Responsibility for any results, opinions, and errors lies with the authors alone. JEL Classification: F23, O33, O47