Inward investment evidence review: final report

Scottish Development International’s (SDI) inward investment and talent attraction activities aimed to increase productivity growth and competition, and attract high value jobs and skills from international firms, particularly across the key industries outlined in the Scottish Government's Economic Strategy (GES). The evaluation aimed to assess the nature and characteristics of SDI’s activities, the rationale for SDI’s activities, the nature and extent of market failures that apply, and the effectiveness and value-for-money of SDI’s interventions.

The methodology consisted of a review of SDI evidence, an assessment of Investment Promotion Agency (IPA) comparators and a literature review. The annex report on comparator IPAs includes information on target sectors, overseas offices, the source of investment, investor experience and an overarching critical assessment.

The attraction of foreign direct investment (FDI) can bring benefits to an economy. Market failure in the case of inward investment is evident. The report finds that SDI set out a clear rationale for intervention and performs well in terms of the number of investment projects which are attracted to the country and against comparator areas and regions. SDI adheres to the common goals of an IPA and provides a strong aftercare service. Successful IPAs take account of the characteristics of a country, proactively build a positive image and provide facilitation support to investors. The evaluation notes that evidence on the impact of IPA activity is lacking.

The issue of the impact of the IPAs should be investigated further. The report recommends that additional research and activity is required by SDI to assess its overall performance. SDI should improve its evidence base relating to the impact of its intervention and incorporate these improvements into the developing PEF. There is a need for the development of: an overarching evaluation; monitoring data; top-down impact data; bottom-up impact data; and comparator IPA case studies. In light of the current recession, the report suggests that SDI should reorient inward investment policy ahead of competing IPAs regionally and nationally. SDI's focus is likely to move towards support of foreign owned companies already located in Scotland to improve their chances of survival and retention of employment.