Foreign direct investment (FDI), where investors in one country makes an investment into companies in another nation, has significant benefits.
For the host country receiving the investment, there is a wealth of evidence that FDI can increase productivity and employment and lead to broader development benefits.
However, there are also downsides to FDI. While a local economy may receive boosts to productivity or innovation, profits from FDI are often funnelled back across the border to the investing nation. There is also evidence that FDI can encourage the erosion of local regulatory standards.
There is a lack of research about the nature and impact of FDI in relation to the Creative Industries. As PEC research has repeatedly highlighted, the Creative Industries are one of the fastest growing sectors of the UK economy, while also having specific unique features that need to be understood by policy makers. These features, such as the Creative Industries having a higher than average proportion of intangible assets and a reliance on intellectual property rights to generate value, means that the impact of FDI on the sector will be very different compared to other areas of the economy.
This paper will start the process of building that missing evidence base. It firstly provides an overview of the nature of FDI in the Creative Industries, and then goes on to suggest some of the key questions that will need to be answered to advance this crucial research and policy agenda. This discussion paper will be valuable for anyone who wants to get a basic picture of FDI and the Creative Industries, including the geographic spread of FDI in the UK, the main international sources of FDI, and the Creative Industries sub-sectors that currently receive the highest level of FDI.