Abstract: Inward Investment in Scotland, 1945-2005

Duncan M. Ross

Abstract

Scotland in the immediate postwar years suffered from its Victorian industrial inheritance and, given the low wages and lack of dynamism in the domestic economy, inward investment was one of the key strategies for diversification and transformation. This policy was highly successful, and Scotland came to dominate the UK in terms of FDI. American companies—and particularly those in the electronics sector—came to Scotland in large numbers in the 1950s and 1960s. These investments were sought—and policy incentives predicated—on the belief that there would be significant demonstration and learning effects, with important supply chain and spillover benefits. The peak of foreign employment in Scotland was reached in the mid-1970s, however, and it became clear that the extent of embeddedness was limited. Management and R&D jobs were scarce, and the investments could be easily moved as part of a larger production strategy. These factors became apparent at the moment when unemployment began to grow even more rapidly, and policy in the 1980s exaggerated Scotland's reliance on transient, low-skill assembly jobs. The shift in production patterns from the late 1990s has meant a second wave of closures and retreats. A change in strategy—focused on indigenous skills and domestic growth—came in 2001 with the creation of the Scottish Parliament.