Professor Driffield: Foreign Direct Investment and the West Midlands

Date posted: January 26, 2023
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Nigel Driffield is a Professor of International Business and Deputy Pro-Vice-Chancellor (Regional Engagement) at the University of Warwick. Prof. Driffield’s work enables a region to understand the motivations behind firms investing in the area, thus supporting the region to understand its competitive position when seeking to attract such investment. Driffield’s research contributes to a better understanding of the beneficial effects of inward investment, most notably in terms of productivity and inclusive growth.

Funded by three substantial ESRC awards, Prof. Driffield’s research has had a strong West Midlands focus and has been built on theoretical and empirical contributions from his substantive work. He held a Leverhulme Professorial Fellowship for research into ‘Foreign direct investment, knowledge flows and local economic development’, which focused on global issues, developing both conceptual approaches to this issue as well as empirical findings. Collectively, the research focused on three main areas:

Research on the regional impacts of foreign direct investments

Many regions are chasing high-tech inward investment. Yet, Prof. Driffield’s research has shown that the perceived gains of this approach, in terms of employment creation and productivity, are overstated, typically because the labour market is not able to supply the skilled workers required. Further research has demonstrated without exploring ownership structures, the research becomes disconnected from analyses of the motivations for Foreign Direct Investment (FDI) and performance.

The Region

The Birmingham city region accounts for over £120bn of GDP (compared with £170bn in Scotland), and about three-quarters of the total West Midlands Combined Authority (WMCA) region. The creation of Local Enterprise Partnerships (LEPs), and subsequently the Mayoral West Midlands Combined Authority in 2016 (tasked with improving economic performance of the area), presented challenges for both governance and strategy development, with very little existing infrastructure.

“Six years ago the Greater Birmingham region was the economic laggard by any measure. The Greater Birmingham region is now an economic hotspot in the UK. The…key to the transformation of the GB economy has been the depth and breadth of our regional economic strategy … Prof Driffield [‘s research] was key to this strategy and through this, we were able to engage with Treasury and build a more constructive relationship with central government.” (Steve Hollis, then Chair, GBSLEP)

Prof. Driffield’s research has resulted in the following impacts in the West Midlands:

Influencing regional strategies to catalyse inward investment and growth

Prof. Driffield’s research has informed both the formation and delivery of regional economic strategies, enabling the region to win record levels of inward investment in the 5 years since its introduction. He was Deputy Chair of the Mayor’s Productivity and Skills Commission (PSC) and membership of the executive for the SEP (2017-). More recently he was on the board of the CW LEP, with responsibility for the covid recovery strategy.

Early evidence demonstrated that a sectoral approach to regional inward investment strategy was effective at driving growth, attracting £150 million of inward investment by 2017. Steve Hollis, then Chair of the GBSLEP, further affirms that Prof. Driffield’s research: “guided our GBSLEP Board [in] implementing policy interventions that have resulted in a marked increase in the GB region’s attractiveness for inward investors … [and that] Professor Driffield has been instrumental in helping to shape the Greater Birmingham Project”.

Additionally, Prof. Driffield’s positioning paper on GBSLEP’s inward investment strategy post-Brexit (formed part of Birmingham’s £1 billion successful bid for local growth funds. The model developed by his research that demonstrated the benefits of developing and communicating the region’s value proposition was locally applied by the WMGC to inform their business case for future funding from the WMCA Investment Committee and contributed to Birmingham’s Economic Review in 2018. The WMCA business case was instrumental in securing a further £2.5m per annum between 2018-2020. Neil Rami, Chief Executive at WMCA, stated: “Your points regarding the role of WMGC in both developing and communication the regions value proposition were well made, with reference to the evidence base, building on your research. Having someone with your experience and insight assisting us on this has been invaluable”.

Supporting devolution and regional economic development

A joint report for PSC and WMGC, informed by Driffield’s body of research, recommended that inward investment should target efforts on job creation, recognising the distinction between technology and more labour-intensive activities and that this could be achieved through the development of ‘sector networks’ to prepare firms for investment and strengthen the relationship between firms and inward investors. This report informed the regional approach, resulting in greater flows of investment and more employment and job creation opportunities. Dr Andy Palmer, then Chair of the PSC (and former CEO of Aston Martin Lagonda), acknowledged that Driffield’s “body of work has formed the evidence base for the Regional Skills Plan and the development of the emerging West Midlands local industrial strategy”. Specifically, the work of the Commission led to the Regional Skills agreement, with £69m of funding from central government outlined in the local industrial strategy. This work continues as the PSC has evolved into the WMCA Productivity and Skills Board, with Driffield appointed for a 3-year term.

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