The Dynamics of FDI Location: A Markov Analysis for British Regions

The paper uses the framework of Markov chains to examine convergence in the location ofinward foreign direct investment across the regions of Great Britain over 1985-2005. Ananalysis is undertaken by industry group that disaggregates manufacturing and services. Itfinds convergence in regional FDI shares, both overall and by industry, which supportsagglomeration. As explanations, a weakening of regional policy has led manufacturing FDI tospread-out from 'north' to 'south', but in services there is a shift in FDI location within the'south' from core to contiguous regions, suggesting diseconomies at the core. The paper findsdifferent spatial processes and draws implications for regional policy.