Industrial policy, FDI and employment: Still 'missing a strategy'

David Bailey*, Nigel Driffield

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper contrasts the effects of trade, inward FDI and technological development upon the demand for skilled and unskilled workers in the UK. By focussing on industry level data panel data on smaller firms, the paper also contrasts these effects with those generated by large scale domestic investment. The analysis is placed within the broader context of shifts in British industrial policy, which has seen significant shifts from sectoral to horizontal measures and towards stressing the importance of SMEs, clusters and new technology, all delivered at the regional scale. This, however, is contrasted with continued elements of British and EU regional policy which have emphasised the attraction of inward investment in order to alleviate regional unemployment. The results suggest that such policies are not naturally compatible; that while both trade and FDI benefit skilled workers, they have adverse effects on the demand for unskilled labour in the UK. At the very least this suggests the need for a range of policies to tackle various targets (including in this case unemployment and social inclusion) and the need to integrate these into a coherent industrial strategy at various levels of governance, whether regional and/or national. This has important implications for the form of any 'new' industrial policy.

Original languageEnglish
Pages (from-to)189-211
Number of pages23
JournalJournal of Industry, Competition and Trade
Issue number3-4
Early online date26 Dec 2006
Publication statusPublished - Dec 2007

Bibliographical note

The final publication is available at Springer via

Funding: ESRC (RES-000-22-0468)


  • employment
  • FDI
  • industrial policy
  • regional policy


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