Abstract: Foreign-owned enterprises have long played a particularly important role in the British economy, particularly in manufacturing. Concentrated in high-growth sectors, they were widely viewed as having superior attributes to domestic incumbents regarding a broad range of managerial competencies which, policy-makers hoped, might diffuse to British firms. This chapter reviews the role and impact of overseas multinationals in Britain over the 20th century, in the context of changing perceptions regarding Britain's relative competitiveness. In the era of Britain's relative economic decline, the success of overseas multinationals on UK soil appeared to challenge simplistic neoclassical explanations of slow British growth — framed in terms of unsuitable factor costs or market conditions for mass production. While multinationals generally failed to achieve the productivity performance of their parent plants (a phenomenon typical of multinationals the world over) they nevertheless performed markedly better than British firms which — according to such arguments — had production techniques more suited to British conditions. Yet, while the British economy has improved its relative performance over the past twenty five years, analyses of the net impacts of inward investment have become much more pessimistic. The chapter seeks to explain this apparent decline in the magnitude of positive ‘spin offs’ from inward investment, during a period when Britain has enjoyed renewed vitality and the technological (and, perhaps, managerial) gap between UK industries and international best practice has narrowed.

Keywords: multinationals, foreign direct investment, ownership advantages, technological diffusion,