US Investment in Scotland: Aspects of the Branch Factory Syndrome (1976)

The costs and benefits of increased direct foreign investment for recipient developed and less developed countries have been discussed widely in the literature in recent years. The impact of inward foreign investment has also been the subject of government investigations in a number of countries, reflecting fears of the potential loss of sovereignty implicit in a branch-factory type economy, and aimed at devising legislation to maximise the net benefits derived from the presence of international corporations.1 While some such studies have referred to the implications of inward investment for regions within host countries, many important regional growth and regional policy aspects have been explored only superficially. The present paper, based on an empirical study of US investment in Scotland, attempts to make a small contribution in this latter context by examining certain characteristics of the functional development of US branch plants. Since plant functions give at least some indication of the authority and decision-making potential delegated to local management, the results to be presented have implications for any assessment of the gains and losses of increasing external control in Scotland, and through this for UK regional policy.