The research shows that the presence of multinationals on UK soil increases significantly the chances of an enterprising new business going bust in its first year.
Ordinarily around one in five new ventures dies within its first year and two in five fail to survive beyond three years. But in dynamic economic sectors — where companies compete on the innovation of their products or services — the likelihood of failure increases substantially as a result of competition from multinationals locating in Britain.
One of new Chancellor Alistair Darling's last initiatives as Secretary of State for Trade and Industry was to set up an action group to identify innovation and share the lessons of Britain's best new enterprises. At the same time the UK is still keen to encourage multinationals firms to locate here and has attracted more foreign direct investment than any other EU country.
GEP's Dr Holger Görg said: “Attracting foreign investment and encouraging enterprise are cornerstones of most governments' economic policy, but little research has been done on whether the two are mutually compatible. Our research raises some difficult questions.
“The chance to attract a big company and hundreds of jobs to the UK may make the demise of a new enterprise seem unimportant, but the impact could be enormous over the longer term.
“The companies being killed off are the Microsofts and Virgins of the future.
“The instant gain of employment and investment by a multinational locating in Britain could be outweighed by its potential to kill off a small start-up that in future could employ a greater number of people.”
Latest figures from UK Trade and Investment show that Britain attracted record levels of global investment last year, the fourth consecutive year the record has been broken. The UK is the largest recipient of foreign direct investment in Europe and second only to the US worldwide. According to GEP, in 1998, 12 per cent of UK employment was in foreign-owned multinational companies. By 2002, the last year of data, this share rose to 17 per cent — a 42 per cent increase over the period.
“This research could have public policy implications and may encourage the government to be more discriminating in terms of the types of multinationals it entices to come to the UK and the level of benefits and perks it offers different overseas companies looking to locate here. Alternatively the government may need to consider how it can support and encourage start-up enterprises that face competition from multinationals,” said Dr Görg.
This is the first in-depth analysis of the link between multinationals and the survival of start-up businesses in the host country. The research was based on data from over 179,000 start-up businesses in the service and manufacturing sectors between 1997 and 2002, compiled by the Inter-Departmental Business Register held at the Office for National Statistics.
Data was also drawn from the Inter-Departmental Business Register (IDBR) database at the UK Office for National Statistics This register captures VAT-registered businesses and covers about 98 per cent of UK business activity.
Martin Stott | EurekAlert!
How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung
Demographic change depresses tax revenues
04.11.2016 | Fraunhofer-Institut für Angewandte Informationstechnik FIT
A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.
Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...
In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.
“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...
The Max Planck Institute for Physics (MPP) is opening up a new research field. A workshop from November 21 - 22, 2016 will mark the start of activities for an innovative axion experiment. Axions are still only purely hypothetical particles. Their detection could solve two fundamental problems in particle physics: What dark matter consists of and why it has not yet been possible to directly observe a CP violation for the strong interaction.
The “MADMAX” project is the MPP’s commitment to axion research. Axions are so far only a theoretical prediction and are difficult to detect: on the one hand,...
Broadband rotational spectroscopy unravels structural reshaping of isolated molecules in the gas phase to accommodate water
In two recent publications in the Journal of Chemical Physics and in the Journal of Physical Chemistry Letters, researchers around Melanie Schnell from the Max...
The efficiency of power electronic systems is not solely dependent on electrical efficiency but also on weight, for example, in mobile systems. When the weight of relevant components and devices in airplanes, for instance, is reduced, fuel savings can be achieved and correspondingly greenhouse gas emissions decreased. New materials and components based on gallium nitride (GaN) can help to reduce weight and increase the efficiency. With these new materials, power electronic switches can be operated at higher switching frequency, resulting in higher power density and lower material costs.
Researchers at the Fraunhofer Institute for Solar Energy Systems ISE together with partners have investigated how these materials can be used to make power...
16.11.2016 | Event News
01.11.2016 | Event News
14.10.2016 | Event News
02.12.2016 | Medical Engineering
02.12.2016 | Agricultural and Forestry Science
02.12.2016 | Physics and Astronomy