Country-level dynamic capabilities and inward FDI: a framework on future policy adaptations applied to post-Brexit UK

Abstract

AbstractThe purpose of this paper is to establish a policy framework for those responsible for maximising the opportunities of inward foreign direct investment (FDI). Our proposed framework intellectualises the need for dynamic capabilities at the country level (national and local) to sense and seize new opportunities from inward FDI, use this knowledge to mobilise resources and, over time, make changes to reconfigure the UK’s location-specific advantages in a post-Brexit marketplace. Using the backdrop of the UK’s decision to exit the European Union in May 2016 (Brexit) alongside other global challenges (the COVID-19-induced supply chain crisis, political unrest, wars, new trade deals), we explore the changing nature of FDI entering the UK. We explain why an adaptive investment promotion strategy means greater and more widespread benefits of inward FDI for the economy. Then, we propose a policy-oriented dynamic framework for how the benefits of FDI can be maximised during political upheaval. In our analysis and discussion, we highlight how changes in foreign firms’ FDI motives can alter the UK’s value proposition, and over time, the nature of a country’s specific advantages.