Leicester Business School Multinational corporations ...

Leicester Business School Multinational corporations, sub-national governance and human resources Feedback report for UK participants Phil Almond, Anthony Ferner and Olga Tregaskis March 2012

CONTENTS

acknowledgements

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executIvesummary

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chapter1– IntroductIon

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chapter2– governanceactorsand polIcy-relatedfIndIngs

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chapter3– whatdomultInatIonalswantfrom regIonalgovernanceagencIes?

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chapter4– regIonalhumancapItalnetworks andfdI

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chapter5– summaryfIndIngsfromthe InternatIonalproject

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references

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dmu.ac.uk/research-areas/hrm/hrm-research-cross.jsp

ACKNOwLEdgEMENTS

The final chapter of this report draws on research primarily conducted by our international teams. These are: Patrick Gunnigle, Jonathan Lavelle, and Sinead Monaghan, all University of Limerick; Javier Quintanilla, IESE; Maria Gonzalez Menendez and David Luque Balbona, University of Oviedo; Gregor Murray, University of Montreal; Tod Rutherford; Syracuse.

This study would not have been possible without the cooperation of our interviewees in multinational corporations, local and regional governance bodies and skills bodies. We are most grateful for their time, particularly given our research took place at a time of economic and political crisis. Funding for the research came from an award from the Economic and Social Research Council, award number ES-062-23-1886.

We would also like to thank the participants at the feedback event conducted at De Montfort University on 19 December 2011.

We would like to acknowledge the work of Tomila Lankina, of the Local Governance Research Unit, on this project.

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ExECUTivE SUMMAry

Objectives (Chapter 1) • thisstudyexaminestherelationships betweenmultinationalcorporations(mncs), andsub-nationalgovernanceactors(local andregionaldevelopmentagencies,relevant levelsofgovernment,skillsagenciesand providers,localisedcluster-type organisations,etc) • Itoperatesontheassumptionthat,in coordinatingtheirinternationalactivities, mncsareaffectedbylocalcharacteristics suchaslabourmarketsandindustrial networksaswellasspecificpublicattempts atinvestorattractionandinvestor development,andthatsub-national governanceispotentiallyimportantin shapingthenatureofsuchcharacteristics • thereportthereforeexaminesthenatureof sub-nationalgovernanceintworegionsof englandasitaffectsfdI,whatmnc managersanddirectorswantfromsubnationalgovernance,andthenatureof regionalhumancapitalnetworks.findingsfor parallelstudiesincanada,Irelandandspain arealsobrieflyreported • theprojectisbasedonsemi-structured interviewswithgovernanceactorsandmnc managers/directors,alongsideasocial networkanalysistool

Governance actors and policy-related findings (Chapter 2) • whilethecomparativelyliberalapproachof theukstatehashistoricallybeensuccessful inattractingforeigndirectinvestment(fdI), thispositionisunderincreasingcompetitive threat • long-standingpatternsofinstabilityin englishsub-nationalgovernance,bothin termsofregionaleconomicgovernanceand skillscoordination,havecontinuedand intensifiedoverthelastfewyears.In particular,thedemiseofregional developmentagencies(rdas)andtheir partialreplacementwithlocalenterprise partnerships(leps)camewithintheperiod offieldworkforthisproject • rdasweresignificantactorsindirect relationswithinwardinvestors,aswellasin widereconomiccoordination.Inparticular, theywereimportantas‘brokers’between inwardinvestorsandsometimescomplicated institutionalsystems,particularlyinthearea ofskillsdevelopmentandfunding • rdashadsignificantproblemsrelatingto: thelackofeconomicfunctionalityofregions; uncertainboundariesbetweenlocal,regional andnationalactors,bothrelatingtofdI attractionandmoregenerally;andrelatively weakpoliticallegitimacy.moregenerally,the excessivecomplexityandfragmentationof theskillsgovernancesystem,atregionaland nationallevels,makescoordinationdifficult

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• thecentralisationofinwardinvestment effortsunderanationalcontract,combined withtheeffortsoflepsandlocalauthorities, isseenbyrespondentsascausing substantialrisksofincreasedinterandintraregionalinequalityininvestmentdestinations. Inparticular,smallercitiesandtownsare likelytostruggletoachieveadequate degreesofcoordinationunderthenew arrangements • concernswerealsoraisedaboutthe differencesinregimesbetweenenglish regionsandthevariousdevolved administrations • themodelof“business-led”institutions, favouredbysuccessivenational governments,hasnotsucceededincreating institutionswithadequatecoordinating capacities

Multinationals and sub-national governance agencies (Chapter 3) • mncsfallintodistinctgroups:‘high engagers’thatintensivelyinteractwith local/regionalactors,and‘isolates’whohave littleengagement.thisispartlyrelatedto issuesofbusinessstructureandstrategy, butalsotothepreferencesofindividual managersanddirectors • sub-nationalbodiesperformanumberof functionsonbehalfofexistinginward investors.theseincludeaggregatingthe interestsoffirms,particularlyintheskills domain,andactingasabrokerbetween

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mncsandlabourmarketandeducation institutions,aswellasbetweengovernance actorsatdifferentgeographicallevels coordinationofbidsforreinvestment,of collectiveskillsandtrainingprovision,andof bidsforvariousformsofpublicfunding,were amongthemoreimportantrolesofrdas fromanmncperspective mncsandotherlargefirmsoftenperceive theirskillrequirementsasbeingmore specificthantheyinfactare,suggestinga needforcoordinationordirectbrokerageby governanceactors perceptionsofrdaswereuneven:multi-site operatorstendedtohavemorefavourable viewsofnorthernrdasthanthoseinthe south;managersofsmallsubsidiaryunits typicallyreportedlittleinteraction anumberofseniormanagersinlargemncs wereconcernedatthelossofaregional interlocutorfollowingthedemiseofthe rdas concernswerealsoreportedaboutthe coordinatingcapacitiesofleps,andabout thenewarrangementsforsupportforinward investors governanceactor-mncrelationsemerge dynamicallyoutofnegotiationsandalliances; wheremncactorsthemselvestakeonarole ingovernance,e.g.ofskills,theborderline betweenprivatefirmandgovernanceactor canbecomeindistinct

Regional human capital development networks and FDI (Chapter 4) • socialnetworkanalysisisusedtocapturein visualformthesystemicrelationsbetween actorsinthedomainofregionalhuman capitaldevelopment • analysisofaregionalhumancapital developmentnetworkforanenglishregion showsrelativelyloosetiesbetween governanceactorsandmncsinaddressing skillsissues • Inthesecircumstances,asmallnumberof organisationsplayedanimportantcentral brokeragerole;therdaswereparticularly importantinthis • thenetworkstructurelargelyfollows funding;itappearstooperateasameansof matchingfundingtosmallnumbersofactors, withfewpermanenttiesbeyondtheperiodof funding.aslongasaperceptionof competitionbetweenactorsforlimited resourcesisprevalent,closecollaboration amongnetworkactorsisunlikely

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International findings (Chapter 5) • comparativeresearchhasbeenundertaken intworegionsineachofcanada,Ireland andspain • wheretherearestronglevelsofsub-national governance(canada,spain),thesedo permitadegreeoflocalflexibilitywithinthe overallnationalsystem.thisallowsregional actorstoinstitutionalisepatternsof cooperation,andallows‘sub-nations’to developsomewhatdifferentemphasesin theirpoliticalgovernanceoftheeconomy– forexample,oneregionineachofcanada andspainisrelativelyliberalinitseconomic policies,theothermuchmoreopentosocial democratictypecoordination • Ireland,whilehavinglittlesub-national autonomyandabroadlyliberalapproach, hassupplementeditsstrongnationalfdIorientedstrategywithinstitutionalised informalnetworkingamongrelevantactors, toafargreaterextentthaninengland. • Ingeneral,skillsarereportedlessfrequently asaprobleminallsixinternationalcases thantheyareinengland • ‘appropriate’geographiclevelsof coordinationareprobablymoretiedtolevels atwhichthereisanestablishedcivilsociety thantofunctionalargumentsaboutsizeof population

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ChAPTEr 1: INTRODUCTION

This research on which this report is based examined the relationships between multinational corporations (MNCs), and what we call sub-national governance actors. By sub-national governance actors, we refer to local and regional agencies with direct public responsibility for attracting and retaining FDI and/or for fostering environments favourable to high-quality inward investment. These include local and regional development agencies, the relevant levels and departments of local, regional and national government, skills agencies and providers, and various forms of business alliances, such as localised cluster-type organisations. workonthisresearchprojectstartedwiththe assumptionthat,incoordinatingactivitiesacross geographicallydispersedsites,mncsare affectedbyanumberoflocalcharacteristics. theseinclude: • • • •

labourmarketsandskillsprofiles Innovationsystems widerindustrialandsupplychainnetworks specificpublicattemptsatinvestorattraction andinvestordevelopment(whatwas traditionallyreferredtoas‘aftercare’).

asthecompetitionforfdIbetweenandwithin developedeconomiesbecomesincreasingly intensive,andsuccessincreasinglydependson theabilitytoassumehigherpositionsinglobal valuechains,suchcharacteristicsaffectthe natureofthecommitmentmncsarelikelyto maketohostgeographies. withinthisincreasinglyinternationalcompetition, sub-nationalgovernanceiswidelybelievedtobe important(see,forexample,mackinnonand

phelps,2001;coeetal,2004;maskelland malmberg;1999).ofcourse,manymncs continuetomakelocationdecisionsinorderto gaineasieraccesstolocalandnationalproduct markets.normally,though,highvalue-added investorsaregeographicallyconcentratedon eitherone,orasmallnumberof,siteswithina countrythesizeoftheuk. thismeansthat,whileitisobviouslyimportant thatnationalgovernmentensuresacompetitive environmentforfdI,manypotentialandcurrent inwardinvestorsareconcernedwiththe businessecosystematrelativelylocallevels.this particularlyappliestoskills,giventhatthelabour marketsformostinvestorsremainpredominantly localorregional.forthesamereason,major investmentdecisionsareofparticularimportance tolocalandregionalgovernanceactors,asitisat thislevelthattheemploymenteffectsofsuch decisionsaremostkeenlyfelt.sub-national actorsarethereforelikely,wheretheyhavethe capacitytodoso,toattempttoshapebusiness ecosystemsinordertopromotehighquality investment. yetwhiletheukhastraditionallybeen successfulinattractingfdI,therehavelong beenconcernsabouttheinstitutionswhichmight beexpectedtobeimportantincreatingthesort of‘ecosystem’thatmightbenecessaryinamuch morecompetitiveglobalmarketforfdI.Instability andconfusionastotherolesofdifferentbodies –agenciesresponsibleforregionalandlocal development,skillsagencies,andlocal,regional andnationalgovernment–arelongstanding. wethereforesoughttoexamine: •

therolesofdifferentsub-nationalgovernance actors,bothindirectrelationswithinward investors,andinattemptingtofosterthekind

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ofskillsenvironmentwhichcommentatorssee asimportantfordeliveringhighquality investmentfrompotentiallymobilefirms howtheserelationshipsaffectlocalmnc units’supplyof,anddemandfor,skillsand competencies theextenttowhichforeign-ownedmncs canbesaidtobe‘embedded’insubnationalgeographies,particularlyinways thatmightdrivewiderregionaldevelopment.

thecurrentreportmainlyconcernsouruk research.weconductedresearchintwotop-level regionsofengland(ie,whatatourstartingpoint wererdaregions),oneinthenorth,andonein themidlands.themainresearchinstrumentwas semi-structuredinterviews,bothwiththeprincipal governanceactorsineachregion,andwithsenior managersanddirectorsinkeymncsata regionallevel.wealsointerviewedmanagersina numberofsmallermncunitswhichhadbeen identifiedbylocalorregionalinwardinvestment agenciesas‘successstories’.Intotal51 interviewswereconductedcovering53 respondents(asmallnumberoftheinterviews weregroupinterviews).oftheinterviews,25 wereinthemidlandsregion,18inthenorth,and 8wereextra-regional(typicallyrepresentativesof institutionswithanationalremit).35interviews werecarriedoutwithinstitutionalactors,and16 withmncrespondents.chapters2and3ofthis reportdrawmainlyontheseinterviews,alongside relevantsecondarymaterial.chapter2examines therolesofthevariousgovernanceactors,while chapter3looksathowandwhymncunits engagewiththeirregionalbusinesssystems. chapter4mapssomeoftheserelationships throughsocialnetworkanalysis.chapter5briefly summarisesfindingstodatefromparallel internationalresearchincanada,Irelandand spain.

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ChAPTEr 2: g ov e r n a n c e  acto r s  a n d  p o l I cy - r e l at e d  f I n d I n g s

Introduction and context drawingonourinterviews,thischapterexamines thenatureofrecentattempts,atsub-national levels,toorganisebothdirectpublicsupportfor inwardinvestment,andtoproviderelevant economiccoordination,particularlyinthelabour marketandhumanresourcearenas. theuk,asiswellknown,isaliberalmarket economy(hallandsoskice2001),particularlyin aneucontext.Inotherwords,thecoordination ofeconomicactivityislargelyamatterforthe hierarchiesofprivate-sectorfirms,ontheone hand,andrelativelylightlyregulatedproductand financialmarkets,ontheother.Incomparisonto itseuneighbours,theroleofthestate–national orlocal–orofcivilsocietyactorssuchas businessassociationsortradeunionsinactive economiccoordinationisrelativelylimited. thecountryhaslongbeensuccessfulin attractinginwardinvestment.historically,thishas beenduetotherelativelyopennatureofits economy,andcloselinkstotheunitedstates. fromthe1980s,itwasalso,asanearlymoverin theeuropeanmarketforfdI,abletoattractfirms onthebasisofaccesstotheeuropeansingle market,labourmarketflexibility,weakenedtrade unions,and,atthetime,lowlabourcostswithin thepre-expansioneuropeancommunity.the globalisationandderegulationoffinancealso entrenchedlondon’spositionasaworldcity. theukcontinuestobeanattractivedestination forfdI,formanyoftheabovereasons.however, themarketplacehasbecomemuchmore competitive.thisisnotonlybecauseofthewellknownopeningupoflower-costcountriesboth

insideandoutsidetheeu,butalsobecauseof anincreasedconcentrationonattractinginward investmentinthecoreeucountries,particularly germany.

twoimportantrespectsrelevanttothisresearch, bothofwhichmanifestedthemselvesinthe periodduringwhichthefieldworkwas conducted.

Inthislight,someofthedifficultiesaliberal marketeconomyfacesincoordinatingthe provisionofwhataretosomeextentcollective goods,suchasskillsprovision,potentially becomemoreofabarriertoattractinghigh qualityfdIwiththepotentialtosupportlocaland regionaldevelopment.

first,newlabour,fromitsarrivalinpowerin 1997,hadrelativelymoretendencytocreate institutionsdealingwith‘marketfailures’,ie, situationswheretheprivatesectorisnotseenas capableofconstructinganefficientmarket withoutintervention.second,labourisrelatively moretolerantofregional-levelgovernancethan theconservatives.scottishandwelsh devolutionwereinitiallyseen,byatleastsome ministers,asleadingtoapotentialdemandfor someformofregionalgovernmentinengland.

england,despitebeingonaggregatetherichest countryoftheuk,alsohassubstantialregional disparitiesineconomicperformance.according toeurostat(2007),gdpperinhabitant,as correctedbypurchasingpowerstandards (pps),was197percentoftheeuaveragein london,and124percentinthesoutheast statisticalregion,butbelowtheeuaveragein thethreenorthernregionsandthewest midlands. statepowerinengland,ishighlycentralised,in comparisonwithalmostanyotherdemocracyof comparablesize.Inparticular,‘regional’ governancepolicy(ieanythingabovelocal authoritylevel)islargelyinwestminsterhands, and,giventhemajoritariannatureofthe westminstersystem,vulnerabletochangesin nationalgovernment,asrecenteventshave illustrated.

Change and instability of sub-national policy and institutions newlabourandtheconservatives,while sharingabroadlyliberaleconomicpolicy,differin

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foracombinationofthesereasons,newlabour createdregionaldevelopmentagencies(rdas) coveringtheninegovernmentofficeregionsin 1998.theirroleasinwardinvestmentagencies isexaminedbelow.morebroadly,thesenondepartmentalagencieshadstatutory responsibilitiesforfurtheringeconomic developmentandre-generation,promoting businessefficiencyandcompetitiveness, promotingemployment,enhancingthe developmentandapplicationofskillsrelevantto employment,andcontributingtosustainable development.mostoftheirrolewasasa coordinatingagencybetweenexistingpublic, privateandthirdsectorbodieswithintheirregion, or,usingolderlanguage,as‘enablingauthorities’. theseresponsibilitieswerebroughttogetherin therequirementtoproduceregionaleconomic strategies.

theseagenciesbothdrewtheirfundingfrom, andreportedto,centralgovernment.regional assemblies,madeupmostlyofrepresentativesof localgovernment,alsohadaroleinthescrutiny ofrdas.howeverthesedeclinedininfluence followingtherejectionofadirectlyelected assemblyinareferenduminthenorth-east,and wereeventuallyabolishedbythelabour government. rdasthereforerepresentedafairlycentralised formof‘regionalisation’–theirresponsibilities andtargetswereset,andboardmembers appointed,bynationalgovernment.Boards consistedofindividualsfromtheprivatesector, localauthorityrepresentatives,andother miscellaneousindividualsfromcivilsociety organisations,nominatedandappointedin personalcapacities. rdaswereabolishedbythecurrentcoalition government.asgovernmentofficesforthe regionswerealsoabolished,thislefttheenglish regions(otherthanlondon)withoutany intermediate-levelgovernmentalstructuresto speakof.localenterprisepartnerships(leps), whichcoversmaller,self-determined geographicalareas,werecreatedtofoster strategiccooperationbetweencombinationsof localauthoritiesandtheprivatesector.thesedo nothavestatutoryobligations,meaningthattheir precisescopeofactivityandfocusdiffersfrom placetoplace.despiteasuccessionof announcementsofcentralgovernmentfunds– suchastheregionalgrowthfund-towhich lepscanapply,theirtotalfundingremainsmuch smallerthanthatoftherdas. priorto2011,bothrdasanduktIwere responsiblefortheattractionofnewinward investment.‘leads’couldbegeneratedfrom eithersource,andbothwereinvolvedin investmentmarketingoverseas.rdaswould, whetherdirectlyorthroughcontractedproviders,

alsoprovideanaftercareor‘investor development’serviceforlargeemployersintheir region,includinginwardinvestors.thisincluded sitevisits,attemptstobrokerrelationsbetween inwardinvestorsandotherbodieswithinthe region(egskillsagencies),etc.thelargest inwardinvestorswerealsoaccount-managedon behalfofcentralgovernmentthroughuktI. finally,localauthorities–orsometimes combinationsoflocalauthorities–fundedinward investmentagenciesofvaryingscopeatamore locallevel. thecurrentsituationisthattheattractionof inwardinvestmentisprimarilytheroleofuktI, throughanoutsourcedcontractdeliveredbya consortiumconsistingofpaconsulting,oco consultingandtheBritishchambersof commerce.localauthorities,eitherindividually orincombination,remainfreetoretaintheirown inwardinvestmentagencies.Inprinciple, however,‘leads’areintendedtobeshared betweensuchagenciesanduktI.Intermsof aftercare,thelargestforeigndirectinvestorsare accountmanagedonanationalbasis.In england,therefore,theregionallevelofinward investmentefforthasbeenremoved(the contactordoesmaintainitsownofficesinthe regions,consistingpartlyofformerrda employeestransferredundertuperegulations, buttheregionassuchformsnopartofthe structure). alongsidetheirexperimentinregional government,thelabourgovernment,likeits predecessors,continuedtheukpatternof frequentreformstothevocationaltraining system.forexample,aconcernwith‘lifelong learning’ledtothereplacementoftrainingand enterprisecouncils–localbodiesresponsible forskills,themselvesonlyestablishedinthelate 1980s–withalearningandskillscouncil (2001),responsiblebothforyouthfurther educationandforadultlearning.thisbodyhada

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substantialregionalpresence,workedclosely withrdas,andwasimportanttoemployers seekingfundingfortheupskillingofworkforces. however,ascandalconcerningthemanagement offurthereducationconstructionprojectsledto theabolitionofthisbodyin2009,andits replacementwithaslimmed-down,nationally focussedskillsfundingagency.

Regions and FDI under the RDA regime Inboththeirlocationmarketingandinvestor developmentwork,therdasforboththe regionsweinvestigatedattemptedtofocuson sectorsortechnologiesinwhichtheregionwas seenashavingspecificcapabilities.thiswas sometimesalliedwithtargetingspecific locations,attemptingtogeneratecluster-type effects.similarly,therewasadegreeof‘supplychainmarketing’,ieestablishingpossibilities affordedtopotentialnewinvestorsbythe presenceofforeignmultinationalsorlargeBritish firmsatthetopofsupplychains.particularlyin thenorthernregion,organisedsectoral associations,part-fundedbytherda,actively soughttoattractfirmsintospecificperceived regionalgapsinlargefirms’supplychains,as wellasimprovingtheabilityofindigenousfirms tocompetewithinthem.whilerdaswouldwork withinvestorswhoexplicitlysoughtlocationin theregionforreasonsconcernedwithmarket structure-particularlyindeprivedareas-they generallyattemptedtoconcentrateonsecuring relativelyhighvalue-addedinvestment,givenone ofthemaintargetstheyweremeasuredagainst bynationalgovernmentwasincreasingregional grossvalueadded(gva). Investordevelopmentworkwasanimportant focusofactivity.thisconsisted,atabasiclevel, ofbeing,inthewordsofonemncmanager: ...a kind of umbrella for a lot of the other agencies which are going to help with the activity we’re going to do

alotofsuchworkwasroutine,comprisingsite visits,reportingonissuesraised,dealingwith thesewherepossiblethroughbrokeringrelations withotheragencies,andcompilingrelevantdata bothtoinformregionaleconomicstrategies, andtofeedbacktonationalgovernment.some rdasclaimedtogowellbeyondthis,however. Inthenorthernregion,afunctionalsplitwas madebetweentraditionalaftercare,i.e.dealing withday-to-dayoperationalissues,andmore ‘strategic’work, ...about challenging a company, where are you going to be in five or ten years’ time (inward investment manager) thelatterbeingorganisedthroughasectoral approach.themanagerexplainedthelogicof thisthroughanexample: Hitachi made TVs in North Wales. And one day it closed, and everyone went “Ugh!”, and four, five hundred people closed [sic]. Well if you’d known the sector, you’d have known that cathode-ray tube televisions were on their way out, everybody was buying flat-screens, but nobody actually challenged Hitachi in that factory, how they were adapting to the new technology. Nobody said, where are you going to be in four, five years time, and actually plan to either downscale that plant, so there’s a managed closure, or to look to work with Hitachi to actually bring in new technology. So I think the sector approach does allow you to have those very informed discussions on where those factories are going. theextentofinvestordevelopmentworkdiffered betweenregions,fromattemptstocreatea strategicapproachindicatedabove,to outsourcingthisworkinaminorityofrdas(not thoseunderdirectinvestigationhere),while keepinginitialinvestorattractionin-house.one problem,inaverytarget-drivengovernance structure,wastheintangibilityofinvestor

developmentwork,meaningthisareawasoften deprivedofabottom-lineinintra-rdacontests overresourceallocation.Inthewordsofan inwardinvestmentmanagerinaregionwhichhad outsourced: Inward investment is a very tangible activity, you can see a new company coming in, you can see the 100 jobs associated with all of that...Investor development was much more intangible, you have worked with a company that’s already here, what have you actually done to help them? therewereinstanceswhererdaintervention hadbeencentraltotheattractionofnewor replacementinvestment,andwherethedomain ofskillshadbeenimportantinthis.onelarge project,involvinganautomanufacturerand analysedinmoredetailinchapter3,involved skillsupgradingatbothbasicandmore advancedlevels,notonlywithinthesubsidiary unititself,butalsoacrosslocalsuppliers.this wascloselytailoredtotheneedsofthe subsidiaryincompetingwithoverseasplants, withthetrainingpackagefittedaroundcompany practicesandshiftpatterns.rdaofficerswere alsoco-responsibleforwritingasuccessfuleu fundingbid. however,themncunitabovewasunusualboth foritssize,andthefactthat,forstructural reasons,uksubsidiarymanagershadtobe committedtoparticipatinginbiddingfornew modelsinordertosecuretheviabilityof productionfacilities.theprocesswas,inthis case,alsopredictableenoughforsubsidiary managerstobegintoprepareastrategysome yearsinadvance.theskillsdomainwasalso seenasoneofthefewareasinwhichachieving theparentcompany’saimofarapidmovetofull productionofanewproductlineatminimum costcouldbeinfluenced,asothercostswere largelyfixed.Itisalsoarguablyeasier,inthistype offirm,tomakethecasethatensuringthe

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upskillingoftheworkforceandofsuppliershas widerbenefitstothelocaleconomy,thus deflectingquestionsaboutlargesubsidiestoan individualmnc.regionaldevelopmentbodies,in thiscase,didhelpsecurerelativelywell-paid employment,alongsidelocalskillsactorsand interactionswithnationalgovernmentandtrade unionleaders. elsewhere,therewereanumberofcaseswhere rdasweresignificantactors,eitherdirectlyoras brokers.theseincludedensuringskillssupplyfor newinvestors,orforexistingfirms,by coordinatingskillssupplywithregionalskills actorsandotherlocalfirms.theyalsosometimes actedasbrokersbetweenmncsandhigher educationinstitutions,particularlyaroundspecific projectsaimedatbuildingupalocallabourforce. theyweregenerallyrecognisedasaregional interlocutorinthecaseofthreatsof disinvestment,andasbrokersinmanagingthe redeploymentofworkersmaderedundantby largemncs.Importantly,therdas’roleasa brokerforavailableeufundingmadethem significantactorsintheeyesofmanagersof largesubsidiaryoperations. generally,thereactiontordaswasfairly positiveamongthelargestinvestorsinterviewed, whosawitasusefultohavea‘local’partner. views,though,wereoverwhelminglynegative amongmanagers/directorsofsmallermncunits. Insomecases,mncrespondentswerehighly criticalofrdas,and/orsaidthattheyhadhad littleornointeractionwiththem,evenwhererda intervieweeshadhighlightedinvestor developmentworkwiththem.Itispossiblethatin somecasesthismayhavebeendueto misunderstandingsabouttheremitofrdas,or managers’unrealisticexpectationsaboutwhat supportcouldlegallybeofferedtoindividual firms.

RDAs as broader business system actors asstated,oneofthemaindriversbehindthe creationofrdaswastocorrect‘marketfailures’. Itisimportanttonotethattheinwardinvestment professionalswithinrdasplayedasubstantial roleinthis. Investordevelopmentmanagerspresenteda numberofexampleswheretheiraftercareduties hadledtotheaggregationofskillsdemands, sometimescorrectingverybasicfailuresoffirms tocoordinatecollectively.forexample,onone sitevisitedbyanaftercarerepresentative,one largebiotechmncinthemidlandscomplained aboutstrugglingtofindintermediatelevellab technicians,askillsetforwhichtherewasno appropriateapprenticeshiporsimilar qualification.rdaemployeescontactedother biotechandhealthcarecompanies,foundsimilar problems,andcoordinatedworkshopsbringing togetherhrmanagers.thishelpedtocreatean aggregatepictureoftherelevantskilldemand. theresultwasthedevelopmentofadiplomalevelqualificationwhichisnowavailableforthe industry.asimilarcase,moresurprisinginthat thelargefirmsconcernedwerealllocatedwithin averytightgeographicspace,wasreportedby aneconomicdevelopmentmanagerinthenorth; Now the advantage of, if you like the sector approach is, Company A said to us, with their investment skills was a major issue. They had to upskill...and they wanted to put in certain processes. We said well actually we’ve been talking to Company B, and ...to Company C as well, that have exactly the same issues as you around this, we will look to fund a crosscompany training programme, if those companies support it as well, if they put some funding in it...That actually benefited three or four biomed companies in (the same industrial estate) because they all had the same issues. Now they weren’t talking to each other, but because our sector team was key account

managing three or four of them, we could draw out those common issues.

dealingwitha‘communities’,orsocialinclusion agenda.

thissortofinterestaggregationismoreformally theroleofsectorskillscouncils(sscs)– ‘employerled’,butmostlystate-funded,bodies whichareintendedtobethestrategicskills bodiesrepresentingsectors,establishing qualificationframeworksandinfluencingnational governmentpolicy.thesehaveanationalsectoralscope,butalsohave(scattered)regional representativeswhoseektoaggregateneedsat local/regionallevels.Inwardinvestmentmanagers wouldthereforealsoattempttoactasabridge betweenthemncandtherelevantssc:

perhapsbecauseofthis,rdasdiffered considerablyintheextenttowhichskills directoratescoordinatedwithaninward investmentagenda.Inoneregionunderdirect considerationhere,inwardinvestmentmanagers didnotworkcloselywiththeirskillsdirectorate, preferringtodealdirectlywithregionalskills actorsontheground(e.g.theformerlearning andskillscouncil,sectoralskillscouncils).the sometimeslowevaluationofthecompetenciesof skillsdirectoratesiscapturedbyaquotefroman investmentmanagerinaregionoutsideourdirect remit;

We’ll bring the SSC into them to get a view as to what the specific challenges are for their business and how they can engage with ensuring that future provision meets their need rdas,againtodifferentextents,also encouragedsystematicemployercoordination throughtheestablishmentorre-invigorationof regionalsectoremployeralliances,aimingto developandexploitingregionalexpertise,inorder thatregionalfirmsmetthestandardsoflead firmsinglobalproductionnetworks.Inatleast somecases,theseappeartohavehadsome successinachievingregionalupgradingin supplychains. finally,rdashadskillsdirectorates,with responsibilitiesforcoordinatingrelationshipswith localskillsnetworks,includingjobcentres,skills agencies,universities,localauthorities,etc. theseweretargetedatawiderangeofgoals, includingissuesaroundemployabilityandsocial inclusion,andwhatinwardinvestmentmanagers sawasthe‘smeagenda’,aswellas productivity/investment.overall,fouroutofthe ninerdashadskillsdepartmentswhich structurallyweresituatedwithinthebroadareaof economicdevelopment,whileskillssectionsof theremaindersatmorewithindirectorates

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We do have skills people internally that we would work with, but we would tend to go to real industry experts Inanotherregion,though,theskillsteamwas activelyinvolvedindealingwiththeskillsneeds ofspecificinvestors,aswellashavingwider strategicresponsibilities.thisinteractionwas seenasimportantinsecuringthenewauto investmentreportedabove. Specific problems of RDAs withinthearenasinourremit,itisdifficultto reachclearconclusionsonthedegreeof successofrdas.theyclearlydidhelpto mitigatesomemarketfailures,andtoattractand retaininwardinvestment.however,theyalsohad anumberofspecificproblems,whichare importanttoconsiderbothinapolicydebate, andincontemplatingthewiderissueofthe constructionofcompetitivenesswithinregions underglobalisation. oneproblemwasthelackofeconomic functionalityofregions.theareaswhichthe rdaseventuallycoveredwere,intermsof population,typicallyverylarge,andclearlydidnot coincidewithlocalorcityregionlabourmarkets.

thecitiesandsub-regionswithinthemoftenhad differentskillssetsandeconomicstrengths,with ‘clusters’thatwouldinevitablyattractcertain kindsofinvestment,andhaddifferenteconomic andlabourmarketproblems.furthermore,in spiteofthesizeoftheregions,commutingareas inevitablycutacrossthem.forexample,the scarcityofrelativelywell-paidmanufacturingjobs ledtocommutesof50-70kmbeingcommonin thelargestplantswevisited,meaningfirmshad substantialnumbersofproductionemployees fromoutsidetheirregions.theseproblemswere exacerbatedinareaswithweakregionalidentity. althoughwecannotdemonstratecausality,there arestrongindicationsthatregionalgovernance developedmorestrongly,andwithmore employersupport,innorthernregions– where therewassomecoincidencebetweenrda boundariesandgeographicalidentities– thanin thesouthernhalfofenglandwhere,broadly,any sortofregionalidentitywasveryweak.asone localinwardinvestmentprofessionalnow workingaspartofalepargued: At a regional level the RDAs never managed to convince (large MNCs) to be involved...because they didn’t recognise that artificial geography...where we can influence them to get involved...is by saying most of their workforce...are local people. And I think that’s where we need to engage with them and say well what are your future skills needs...I think they found it difficult with RDAs to get that because...it was never an economic functional area, the needs of (the extreme south of the region) compared to those in (the extreme north) are completely different partlybecauseofthis,therewereproblemsof fragmentationofdelivery.rdas’activity,in inwardinvestmentandinotherareasrelatedto economicdevelopment,includingskills,was supplementedbyworkinlocalauthorities. althoughintheorytheco-constructionof

General problems of coordination

regionaleconomicstrategies,andtheexistence ofsub-regionalpartnershipsundertheaegisof rdas,meantthattheworkofthevariousactors involvedwasco-ordinated,inrealitythiswasnot alwaysthecase.particularly,intra-regional contestsforinvestmentledtoinwardinvestment managersinsomepowerfulsub-regionsseeking toappropriatesomeoftheresponsibilitiesofthe rdas.this,alongsidethecomplexsubcontractingrelationshipsbetweenrdasand sub-regionalbodies,ledtoconfusionamong private-sectormanagersaboutpreciselywhom theyweretalkingto:

rdasthenhadanumberofproblemswhich werebuiltintotheirinstitutionalconstruction. however,mostoftheproblemsofcoordination facedintryingtofosterhigh-skills,highvalueaddedregionaleconomies–boththrough inwardinvestmentandmoregenerally–have littletodowithhowsub-nationaldevelopment agenciesareconstructed.Itisalsonecessaryto considerthemoregeneralinstitutionallandscape withinwhichenglishregionalbusinesssystems operate.

There seem to be all these layers that I’ve never quite got my head round. I think there’s a city one, there’s a (sub-regional) one and then there’s (the RDA) and I can never quite work (it) out (Subsidiary managing director, MNC)

fromourinterviews,themostobviouspointis thatinstitutionalinstability,bothofskills institutions,andmorerecentlyofeconomic developmentagencies,posesseriousproblems tocoordination.thiswasanalmostuniversal complaintfrombothgovernanceandmnc actors:

multiplicityofdeliverywasalsobuiltintothe relationshipbetweenrdasandthenational investmentagencyuktI,whichwerecoresponsibleforattractinginvestment,andforthe largestinvestors,foraftercare.rdamanagers weregenerallycriticalofuktI,claimingthatthe investmentreachingnon-metropolitanregions fromuktIwasgenerallysmall-scaleandlow value-added.uktI’sinwardinvestmentworkwas notregionallytargeted.thismeantthat,inthe eyesofregionsoutsidethesouth-east,the‘easy sell’ofthelondonmarketmeanttargetscould bereachedwithoutbenefitingotherregions sufficiently.therewerealsoconflicts,both aroundcostandthedangersofrepeatingauk ‘message’,overtheextenttowhichregional bodiesshouldhaveofficesortraveloverseasto attractinvestment. finally,theprocessof‘centralisedregionalisation’ throughwhichtherdasweresetup,combined withthewithdrawaloftheideaofdemocratic regionalassemblies,meantthatthepolitical legitimacyofrdaswasrelativelyweak.

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I would like a period of stability, I would like a period whereby we all knew what was available, (and) how to get hold of what was available. And by that I mean cash and training, and qualifications. Qualifications are constantly changing, we have NVQ down to QVC. So I would like a period of stability so we can go in this direction, go on one course and stay there for a while and consolidate...Rather than just change again, let’s get something that we all think is the right thing to do and stick with it for a while.” (Training Manager, auto manufacturer) Because it is, it’s alphabet soup, it’s like make your way through a labyrinth basically. Now if we can hide the wiring and just get the right people in at the right time to do the right things with that company, so much the better. And that’s essentially what we’re trying to do, it’s certainly what I’m trying to do anyway because..it is totally confusing. And when I used to work at an employers’ association and we had member companies, member companies would ring me

up and say what the hell is happening, how the hell do I get to all this, can you help me get through this maze.(Sector Skills Council Regional Business Partner). So it’s so complicated, and there are so many different pots, that people try to make it more efficient by getting these private contractors involved in delivering, but it does hamper that coordination and it does make it challenging at times to really coordinate that recruitment and training provision. (Inward Investment Manager) thisconfusionofinstitutionsandagenciesmade thebrokerageroleofrdainwardinvestment professionalsparticularlyimportant. anotherissueisthatmanymncmanagerstend toemphasisethattheirskillrequirementsare ‘firm-specific’.thisisobviouslylikelytobethe caseinsomespecialistcases.Butgivenfirms areslowtoengageeachotherintheskills sphere,itisatleastpossiblethatsomeskillssets areinfactsomewhatmoregeneral,oratleast related,thanoftenportrayed. sectorskillscouncils,whicharenationally licensedtosendandactuponcoherentdemand signals,arethemselvesunder-resourced, particularlyatregionallevels,meaningthatthey ...lack the granularity at regional and sub-regional level...in order for it to make sense so providers can deal with it (Skills Director, RDA). Insomecases,seniormncmanagersthatsat onregionalboardsclaimedthattherewaslittle activityatthislevel,althoughemployerswith nationalclouthadbeeninvolvedwithsscsin settingnationalqualificationstrategies.while intendedas‘business-led’institutions,theprivate sectorhascontributedmuchlesstotheirfunding thanwastheoriginaltarget(seepayne2008). theyarealsolicensedbygovernmentonafive-

yearlybasis,perhapsmakinglong-term commitmentsdifficult.

accordingtooneinwardinvestment professional:

thispatternof‘business-led’institutions,with targetsservicingtheinterestsofprivatefirms,but fundedlargelybythestateandwithlittleemployer buy-in,issymptomaticofwiderproblemsof coordinationintheuk.sub-nationalinstitutions canonlydolimitedamountstoamelioratethese. therehavebeenreportedcaseswhere,witheu funding,largefirms(nissaninthenortheastis oneexample)havecollaboratedwithanrdato organiseskillsupgradingthatwentbeyondthe immediatesupplychain,butthesearevery isolated.generally,weakemployerassociations oftenmeanthatlittleisdonetorectifyskillssupply anddemandproblemswithoutstate-sponsored intervention.

We had a project...and they were looking at the North West, they were looking at the North East and something in Wales. So (for) the first time we could sit down with them and have a conversation about their investment plans for the UK and we could actually get information, if you’re going to do this in one region how does that impact your investment decision in the other and, you know, what’s the plans, what’s the funding. You couldn’t do that previously because (of being very regionally focussed)”.

The emerging context whatofthenewarrangementsunderthe coalitiongovernment?Itisnotnecessarilyeasy toseparateoutadiscussionofthepotential meritsofthenewinstitutionalset-upfromissues offunding.also,ourresearchcoincidedwitha setofchangeprocessespubliclydescribedby theministerresponsibleas“somewhatmaoist andchaotic”,meaningcommentsatthisstage areinevitablysomewhatspeculative. Ininwardinvestmentterms,thenationalcontract foruktIisstronglybasedaroundtheideaofa “ukfirst”proposition.thereisacontractual targetforthenumberofnewinwardinvestment projectsin“englandoutsidelondon”(i.e.the partsoftheukwithoutasub-ukgovernance structureforeconomicdevelopment).Beneath this,therearenoregionaltargets(indeed, ‘regions’arenotrecognisedwithinthestructure). somerespondentsarguedthattherewere advantagestoamorenationalstructure.these areprimarilyinaligning‘offer’tocorporateneed.

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equally,oneinwardinvestmentmanagerfora largecitywasrelativelyoptimistic,arguing, perhapsreflectingearlierconflicts,thatmuch rdainwardinvestmentworkreplicatedlocallevelefforts. others,however,weremuchlesssanguine.one inwardinvestmentmanagerarguedthatonly threeofthelocalauthoritiesinhisregion“would have any service of any degree of scale and professionalism”.Intherest: ...it would be part of somebody else’s job that does it almost as a part time resource, rather than a dedicated high profile inward investment team Indeed,anumberofintervieweesinlocaland sub-regionalauthoritiesinperipheralsub-regions wereverypessimistic.whilethemajorcity regionswillcontinuetofundinwardinvestment efforts,andbecapableofensuringthattheyare inthemindsofnationally-targetedcontractors, respondentsoutsidelargecitiessuggestthat bothfundingandcapturingtheattentionofa nationalcontractprovideraredifficult. otherconcernswiththenationalcontractual arrangementincludedissuesaround ‘memorandaofunderstanding’betweenthe

nationalproviderandlocalinwardinvestment bodies–thatis,themechanismsbywhich investmentleadscreatedbylocalagenciesare sharedwithuktI–andtheissueof aftercare/investordevelopment.thenational contractprovidesforinvestordevelopmentwork, butresourcesarerelativelythinlyspread,andthe difficultiesinintegratingsuchworkwithina target-drivenculture–aproblemundertherda regime,asmentionedabove–arelikelyif anythingtobecomemoreproblematicundera private-sectorcontract. theprospectofalocalised‘patchwork’islikely toexacerbateproblemscausedbycentralising centrally-fundedinvestmentsupportnationally, leadingtoasubstantialriskofincreasedregional (andintra-regional)inequalityinthedistributionof investment.fornewinvestment,thedangeris thatnationalplayerswillseeregionsashaving nicheofferingsonly,basedonexistingperceived clustersorsectoralstrengths.thisisaproblem becauseitrisksinsufficientattentionbeenpaidto localneeds,suchasreplacinglostinvestment withnewfdIofsimilarorbetterquality.Italso ignoresthefactthatmncsdonotalwaysseek tolocatein‘clusters’–indeed,ourinterviews provideevidenceof‘anti-clustering’inplaces, reflectingforexamplethedesiretoaccess cheaperorunder-exploitedlabourpools. whilelepsarenotrequiredtoprioritiseinward investment,inmanycaseslocal/sub-regional economicdevelopmenteffortshavebeenreconfiguredaroundthelepstructure.thisis primarilybecausemuchoftheavailablefunding ischannelledaroundlepsasinstitutions.thus, inthemajorityofcases,lepsareexpectedtobe thelocalinterlocutorstothenationalinward investmentservice.theyalsoattempttotakeon somewiderelementsofformerrdawork,as locally-determinedprioritiesandfundingpermit. lepsdo,itisargued,oftenmapontolabour marketareasmoreaccuratelythanrdasdid,

andaretheresultofvoluntarycombinationsby localauthorities.however,theirresources– particularlyintermsofinfrastructure–willremain limited,andintervieweesreportedconcerns aboutwhethertheycouldgobeyondbeing ‘talkingshops’,andwhethermanagersof prominentlocalfirmswerelikelytoparticipate. fromanevidenceofthelepboards,evidence sofarismixed(seealsochapter3).manylocal governanceactorsseemedtobeengagingwith leps,fautedemieux,withoutanygreat enthusiasm.thereactionsofmncmanagers anddirectorstolepsarecoveredindetailin chapter3,butthelackofaclearregional-level interlocutorisclearlyseenasaproblembysome majorinvestors. weshouldalsonotneglectthefactthatarguably themainroleofrdaswasasachannelfor fundingeffortsatthecoordinationofregional economies.thereisclearlyarisktoexisting institutions,suchascluster-typebodies,where thesewerecreatedwith(orinsomecases reinvigoratedby)rda-brokeredfunding. whethercluster-typebodieshaveestablished sufficienttrackrecordamongtheirprivatesector co-funders–andcanovercomefree-rider problemssufficiently–tothrivewithoutpublic supportisuncertain.equally,without infrastructurefundingfromaparticularregion, managersofsuchalliancesarenolongerunder anyobligationtodirectlyaidinwardinvestment efforts.thosewhichhavea‘product’whichcan sellonthemarketareaslikelytosellitoutside theirgeography(includingoutsidetheuk)as inside. thetransitionfromrdastolepsisunlikelyto affectallpartsofthecountryinthesameway. someintervieweeswithaperspectiveonthe nationalperspective,forexample,arguedthatthe formsofpublic-privatecollaborationenvisaged underlepsalreadyexistedinnortherncities, whichhavelong-standingtraditionsofmunicipal collaborationwiththeprivate-sector.thismay

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meanthatlepsinsomepartsofthecountryare solvingaproblemwhichdoesn’treallyexist. accordingtoonerespondentinacentral governmentdepartment: So there is a history in (the North) of local authorities and the private sector working together, which is not the case in other parts of the country, it is in some parts but not in all the parts. And therefore, you know, if you go down to the South you’ll probably paradoxically in some ways find more enthusiasm for LEPS down there than you will in the North because down in the South, this is a gross simplification but I think it has an element of truth, the LEP gives the private sector the ability to influence local authorities, which it didn’t have before. That’s not an issue in the North, that’s always been there finally,ourukresearchconcentratedonenglish regionsoutsidelondon.clearly,therearenow substantialdisparitiesintheextentof‘subnational’(orsub-uk)governancewithintheuk, givendevolutioninscotland,walesand northernIrelandontheonehand,andthe abolitionofrdasontheother.Ininterviews conductedtowardstheendofourresearch,this hadbecomeaconcernofanumberof respondents.accordingtooneinward investmentprofessional: Originally London was going to be into the national delivery but Boris Johnson kicked off and made a case for London being a special example and therefore it’s exempt and he got London and Partners. Well if (the national model) is good enough for the rest of England, why is it not good enough for London? Why are the devolved administrations allowed to do their own thing? If they can make a special case for London and Scotland, Wales, wherever it is, to be exempt, why can’t the northern regions or Manchester or Birmingham…

Conclusions examiningtherelevantsub-nationalgovernance structuresoveraparticularlyunstableperiodof time,anumberofpointscanbemade: Iftheaimistomaketheregionsofenglandan easyplacetodobusiness,ithastobe recognisedthattheinstitutionalenvironment, whileplacingrelativelyfewconstraintsoninward investors,iscomplex.Ifsecuringinward investmentisdependentuponsecuringpositive, institutionally-derivedadvantagestolocations, thereisaneedforbrokersofsomekindbetween theprivatesectorandtherangeofgovernance actorsinvolvedatlocalandregionallevels.while therdasdidnotalwaysworkperfectlyinthis regard,itisnotatallclearhowtheirrolehas beenreplaced. thereisprobablynoperfectanswertothe questionofwhatgeographicallevel(s)subnationaldevelopmentagenciesshouldbeat,in ordertobestmanagewhatoneofrespondents termed“theflexibleeconomicgeographyof inwardinvestment”.anyattempttodrawlocalor regionalboundariesaroundwhichsub-national activityistobefocussedisalwayslikelytocreate problemsofidentifyingboundaries,andof accordancewiththegeographicidentitiesofthe publicandofrelevantsub-nationalactors. equally,betweenlocal,regionalandnational agencies,thereisalwayslikelytobeeithera degreeofreplication/redundancy,orgapsin provision.thisisparticularlythecaseinengland, giventherelativeweaknessofregionsasafocus ofidentityorofcivilsocietyactivity.however,a nationalinwardinvestmentagency,working withoutregionaltargets,islikelytoexacerbate regionalinequalitiesinthedistributionofquality inwardinvestment.locally-ledlevelinward investmentactivitycanberelativelysuccessfulat inthelargestprovincialcities,whichbenefitfrom greatertotalresourcesanda‘brandname’.the

difficultiesforperipheraltownsinapost-rda environmentarelikelytobemuchgreater. theregionallevelofcoordinationwaswithdrawn withoutsufficientconsultation,includingoflarge inwardinvestors.clearlysomeeconomic challengesrequirecoordinationatlevelsbetween thegeographicalscaleofthetypicallepandthe englishnationallevel.regional-levelcoordination undertherdamodelhadrelativelymore supportinthethreenorthernregionsthaninthe restofengland.whetherthisisrelatedtothe greaterresourcesofrdasinpoorerregions,to thedifferentissuesfaced,tointernal organisationalissues,ortomattersofregional identityisunclear.Itisthoughpossiblethatthe formsandlevelsofregionalcoordinationrequired differbetweenregions.anyfutureattemptto createsupra-localstructuresthereforeneedsto beconstructedonthebasisofwhat local/regionalactorsseeasdesirableand necessary. fromtheperspectiveofmorerecent respondents,englishregionsthatcompete directlywiththedevolvedadministrationsfor investmentfaceparticulardifficulties,giventhe devolvedadministrations’enhancedrelative capacitytocoordinateactivitiesaroundinvestor attractionanddevelopment.peripheralregionsof englandthereforefacethedoublechallengeofa “ukfirst”fdIpropositionfavouringareasclose tolondon,andanincreasedchallengefromnonenglishgeographiesattheirborders. twofinal,moregeneralpointsshouldbemade onthenatureofeconomicgovernance.first, Britainhasdevelopedatraditionof“businessled”(butlargelystate-funded)governance institutions,withlittlegeneralemployerbuy-in.It needstoberecognisedthatitisunrealisticto expectsubstantialemployer-ledcoordination whereinstitutionalremitsarevague.employer

PAGE | ELEvEN

participationingovernanceinstitutions(skills bodies,lepsetc)shouldideallyinvolvedecisionmakingonrelevantmatterswithinaframework. forlepstoachievesuccess,bothwithregardto inwardinvestmentandmoregenerally,theyneed tofindwaysofcoalescingaroundprojectsin whichprivate-sectormanagersandotherscan participatefromatask-based,ratherthan primarilycommittee-based,startingpoint.finally, fundingforthecoordinationofeconomic developmentcannotonlybeproject-based. withoutinfrastructurefunding,thepossibilityof developingofinstitutionalcapacitysuchthatit cancreatemultipliereffectsislikelytobelimited. somesucheffectsworkonarelativelylongtimescale,andarenothelpedbycontinualradical institutionalchange.

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ChAPTEr 3 W H A T D O M U LT I N A T I O N A L S W A N T F R O M R E G I O N A L G OV E R NA NC E AG E NC I E S ?

Introduction thischapterpresentsfindingsonwhyforeign multinationalcompanies(mncs)engagewith subnationalgovernanceactorsinengland– entitiessuchasleps,andearlier,rdas,sector skillscouncils,trainingproviders,andother organizationsthathelpshapethe‘institutional environment’ofthelocalityatregionalandsubregionallevel. theactivityofmncstakesplaceinacontext, sketchedintheopeningchapter,ofgrowing competitionbetweenlocalitiestoattractand retainforeigndirectinvestment(fdI).thismeans thattheinstitutionalarrangementsthataremade atlocallevelassumeincreasingimportancein attractingmobilecapital.theextenttowhicha localitycanprovidelabourmarketskills,training, physicalinfrastructure,accesstofunding,and specialistknowledgeresourcesimpactsonits attractivenesstofdI.ofcourse,mncs themselvesactivelyhelpshapelocalinstitutional arrangements,asstudieshaveshown(e.g. crouchetal.2009;djelicandQuack2003);and phelpsandfuller(2001)gosofarastospeakof theimportanceofthelocal‘state–mncnexus’ throughwhichinstitutionalarrangementsare determined. thechapterfirstexaminesthepatternof relationshipsbetweenmncsandsub-national actors,identifyingtheissuestheyinteracton.It paysparticularattentiontoissuestodowithskills development,theexternallabourmarket,and redundancyandredeployment.second,it examinesthefactorsthatinfluencethat interaction.finally,itconsiderstheproblemsand tensionsthatemergeinthesearchforlocally competitiveinstitutionalarrangements.

Patterns of Interaction High-engagers and isolates thestudyfoundthatmncsfallintodistinct groups:the‘high-engagers’ thatseriallyand intensivelyinteractwithlocalactors,andthe ‘isolates’ whokeepverymuchtothemselves, self-sufficientlycarryingouttheireconomicactivity withlittleconcernfororengagementwithlocal institutionalarrangements.theisolatestendtobe smallerfirms,andsubsidiarieswithveryspecialist ornicheskill-sets,orthosewhosecompetitive resourceneedsarelargelyfurnishedinternally withinthemnc’swidersupplychain. nonetheless,bigmncscouldbeisolates,their sizegivingthemasenseofself-sufficiency:the hrdirectorofonefirm,engco,whichchanged itsstancefromisolatetohigh-engagernotedthat ...Quite frankly as you have probably come to appreciate huge multinationals can be quite arrogant sometimes in the way they conduct their business. And the fact is that I had not been aware when I came in here of any desire to actually engage with external help. therearebroadersectoralfactorsatworktoo. thuslargeengineeringsubsidiaries,forexample intheautomotiveindustry,areparticularlyreliant onaccessingexternalfundingforcapitalprojects, upskilling,andsoon.Incontrast,servicemncsin sectorssuchasItlookverymuchtointernal corporateresourcesforskillsdevelopment,or expectto‘buy-in’thehighlymobileskillsthey needfromanactiveexternallabourmarket. Inadditiontothesebroad‘structural’factorsthe patternofengagementalsoreflectsmnc strategy.somefirmsdetermineatsubsidiarylevel

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orevenattheglobalcorporatelevelastrategic stanceonengagementwithlocalbodiesinthe marketswheretheyoperate.thusengco changeditsapproachfromoneofnoninvolvementtoaglobalstrategyofengagement withlocalbodiesandagenciesaspartofraising itsprofileinhostmarkets.thiswasseenas importantforpositioningthecompanyin competitivelocallabourmarketsandsecuringthe future‘talentpipeline’,aswellasreinforcingthe brandinproductmarkets. finally,itwasstrikinghowfarengagement dependedinonthepreferencesandpersonal agendasofindividualmanagersinmncs.some individualsweredeeplycommittedtoapolicyof engagementthatoftenledtotheirassumingroles inregionalorlocalbodiessuchassectorskills councilsandleps.forexample,engco’shr directorwasveryactiveinworkingwithagencies onthedevelopmentofstemskillsinthelabour force,andintheexpansionofapprenticeships. Routine relationships versus sporadic highintensity issue-driven interaction forthosefirmsthatinteractwithregional agencies,thereappeartobetwopredominant modes.thefirstcouldbedescribedasroutine, protocol-drivenandregularinteractionassociated withthecalendar-setagendasofbodiessuchas sectorskillscouncils,producernetworkssuchas theautomotivealliancebasedinoneregion,and soon.thustotakearegionthatwasnotincluded inthestudy,theboardofthesectoralskills councilformanufacturing,semta,forthesoutheasthasrepresentativesofseveralmajor engineeringmncssuchasrolls-royce, siemens,Bmwandge.

Incontrastthereisalsoamoresporadic,highintensityengagementaroundspecificpressing issues:forexample,thesecuringofanewround ofinvestmentbytheparentmnc;thesearchto meetparticularworkforcetrainingneeds;or handlingthefalloutfromamajorredundancy programme. Interactionwasofteninitiatedbylocalagencies ratherthanbymncs.mncpresenceon governancebodiessometimesreflectedthe body’sdesiretofulfiltargetsor‘tickboxes’,rather thanactivemncengagement.onerespondent atthecentrallevelacceptedthat: [The] challenge is to stop people interfering in an [MNC’s] expansion that was going along quite happily without us just so we get our name on it and we can count it. And that happens, where you’re kind of getting people jumping on the back of stuff that was happening anyway in order to look like we’ve been involved. [...] [You] end up with people chasing the wrong target and having lots of people knock on their door saying we can help, we can help, we can help, and then when it comes down to it actually they can’t really help any more than the next person could but they did need the tick in the box to help themselves. And that frustrates companies a huge amount. Buttheinvolvementofsub-nationalgovernance actorscouldbemorestrategicandgoal-directed. governanceactors–includingonoccasion centralgovernment–wereoftenperceivedtobe wantingtogetsomethingoutofmncsina processthatthepublicaffairsdirectorofengco termed‘reverselobbying’.thusinthenorthern region,agencieswereinterestedinpromoting localfirmsinthesupplychainandtriedtoinvolve mncsinthis.Buttheagendadidnotinterest somelargermncsbecausetheirsupplychains wereglobalones.thiswasthecase,forexample, inautomotive: [The MNC] have got a worldwide contract on nuts and bolts so for a small organisation in

Liverpool to suddenly knock on [our] door and say I want to provide you with nuts and bolts, we are going to laugh at them because we have a contract worldwide.(Training manager, VehicleCo) thereseems,therefore,tohavebeenaprocess ofimplicitbargainingbetweengovernance agenciesandmncs:tosomedegree,each wantedsomethingoutoftheother.thiswas exemplifiedbythemidlandsengineeringfirm, engco,whosenewcorporatestrategyof engagementinvolvedtheestablishmentofa majorapprenticeshipprogramme(thoughinthis case,thegovernanceactorwascentral governmentratherthanaregionalplayer). politicallyaswell,[mncvisibility]wasan importantaspectofitbecauseagainthiswhole thingaboutraisingourprofile,hereisawonderful opportunitythatnotonlydowehaveareturnon investmentdirectlyinthemanufacturingspace, butpoliticallythegovernmentisgoingtoloveus becausehereisamajoremployerintheuk sayingwewanttoinvestinalargescale apprenticeshipprogramme... (hrdirectorengco). The functions that local agencies perform for MNCs sub-nationalbodiesperformedanumberof generalfunctionsonbehalfofmncs.firstthey actas‘interestaggregators’.thatisthey collectedandarticulatedtheneedsandinterests ofdisparatecompanies,forexamplewherea numberoffirmshadsimilarskillsneedsthateach firmwasunabletosupplyonitsownbutfor whichacollectiveinterestundoubtedlyexisted. moreover,agenciescouldfacilitatecooperation betweencompetitorfirmsbyexploringareasof commoninterest,notablyinrelationtoskills.such aroleiscentraltotheworkofsectorskills councilssuchassemtaforscience,engineering andmanufacturingtechnologies.asreportedin chapter2,therewerecaseswheretherda realisedthattrainingandskillsrequirements,

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articulatedbyanindividualfirminrelationtoits ownneeds,actuallyconstitutedabroader sectoralissueofskillsprovision.asaresult,the rdawasabletoaggregatesuchdemandsand bringtofruitionprovisionsthatbenefitedthe sectorratherthanjustanindividualfirm. thesecondmajorrolemncssawregional governanceactorsasplayingwasthatof coordinatororgatekeeper,giventheproliferation andchangeabilityofgovernancebodiesand schemesreportedinchapter2.rdasin particularwereseenasprovidinga‘one-stop shop’,simplifyingaccesstoarangeofother pertinentlocal–andsometimesnational–bodies suchastheskillsfundingagencyorjobcentre plus,furthereducationcollegesanduniversities, anditwasunclearhowthisfunctionwouldbe performedwiththedemiseoftherdas(see below).regionalactorsalsoplayedamediating orbrokeragerolewithmncs,havingthe accumulatedskillsandcontactstodealwiththird partiesonfirms’behalf.thisisakintotherole playedbythewelshdevelopmentagencyin relationtomncrequirements,reportedby phelpsandfuller(2001).suchbrokeragewas primarilyinrelationtofunding.thisprovisionofa linktofundingopportunitiesformsthethird principalroleperceivedbymncs,andonethey heavilyemphasised.theissueisconsideredin moredepthbelow. Brokeragecouldbevertical,tootherlayersof governance,aswellashorizontalwithinthe localityorregion.forexample,ajapanese automotivemnchighlightedanissueoverthe points-basedschemeforimportingforeignlabour. ... the original set of guidelines potentially prohibited them bringing Japanese engineers over if they didn’t speak English to a certain level. Now in terms of them bringing people over to the UK to work with the production process, them speaking English is not the reason they’re coming, you can use a translator, there are plenty of Japanese employees ... who speak Japanese

and English via that service, it’s the technical competency that’s important in that context. (Development agency official) thefirmsapproachedtherdawhichinturn conveyedtheconcernstocentralgovernment bodies(thethendepartmentofBusiness enterpriseandregulatoryreform,andtheuk Bordersagency).asaresult,thefinalpoints ratingsystemwasamended,removingtheneed forenglishlanguageskillforintra-company transfers.thisallowedmncsfromnon-english speakingareastotransferskilledemployeesto theuktoprovidetechnicalsupportfor operations. whilerdas,whentheyexisted,provideda verticalconduittohigherlevelsofgovernance, therewaslesscoordinationhorizontally,between regions.thiswasperceivedasaproblem particularlyformulti-sitemncsoperatingacross severalregions,aswasthecasewithfirmslike engco,vehiclecoandchemcoforexample.the firstofthesehadaroundtwentysitesspread acrossfiveregions,fourinengland.auk executiveofthefirmsawhistaskasoneof establishingandmaintainingregularcontactata seniorlevelwitheachoftherespectiverdas.for thesecompanies,thevariabilityinquality, competenceandproactivityoftherdaswasa concern.theexecutiveofengcogaveafrank assessmentoftherdaswithwhichhehad dealings: I will be quite open because they are on their death bed. [One RDA] were hopeless... there was just no relationship, there was no empathy. And we did things with them and they were helpful but frankly they were just not orientated towards our sort of manufacturing type company. There weren’t many of us in the region and quite frankly I don’t think they knew how to handle it. They just weren’t big enough in terms of resource or whatever. The [second RDA] were different ...

[The regional plant of EngCo] was one of the crown jewels for them in terms of promotion, and I had a very good relationship with them.[...] The [third RDA] were the best for us without doubt, they had manufacturing in their blood in one sense without being too emotional about it. But they were clearly very switched on to engineering, very switched on to companies like ours and immensely helpful, and full of people who I think were competent. asthisextractindicates,thereasonsforvariability inthequalityoftheserviceprovidedbyrdas werebroadlytwofold:first,regionsvariedin industrialstructureandtheroleoflarge-scale manufacturing;andsecond,andrelatedly,rdas variedintermsofthelevelofskills,expertiseand competencethattheywereabletooffermajor overseasmanufacturingfirms.similar observationsweremadeofotherbodies,suchas sectoralcoordinatingorganisations,forexample: thattheywereprimarilygearedtosmesrather thantotheneedsoflarger-scale,morecomplex businesses.evenwhensubsidiariesweresmall, theywerepartoflargeorganisationswhose needswerequitedifferentfromthoseofsmes. theproblemsthiscausedwereexemplifiedby thefollowinganecdote: We even had one situation up here where Business Link came in and told a company that employed 60 people here and 20 people in [a northern city] that they were eligible for European Social Fund money because they were an SME, despite the fact they employed 22,000 people in the States.(Executive of central governance agency)

The issues that MNCs and regional agencies interact over theinteractionsbetweenmncsandgovernance actorscoverawiderangeofsubstantiveissues. thenatureandprocessofinteractiontendto changeovertime.Inrelationtonewinvestors,

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regionalagencieswereusedforavarietyof issues,primarilyofinfrastructureandlabour supply,andtherelationshiptosomeextent involvedcoordinationbetweenuktIandregional bodies,forexampleinorganisingsitesearches, andinsecuringlabouravailability,suppliersand accesstosupportfunding.forestablished mncs,issuesofskillsandreinvestment predominated,while‘end-of-life’decisionsabout disinvestmentandclosureagainprompted interactionbetweenmncsandagencies.Below, anumberofthemainissuesarediscussedin moredetail. thetextureoftherelationshipwasoftenone negotiationasfirmstestedtheirinstitutional environmentwiththeirregionalinterlocutors.one newmanufacturinginvestorconstantlyprobedthe positionofregional(andhigher-level)actors. In the UK for the work permits there’s this pointbased system whereby to bring overseas workers into the UK you now have to get 70 points on this criteria. [The foreign investor’s] comment was, “well OK, it’s normally 70 but can we have 40?” So everything is a negotiating position because of the culture of that business. [...] They wanted to have manufacturing capability in the UK but they didn’t want to incur the costs of doing that. So they felt the appropriate thing was to set up effectively a [east Asian] manufacturing plant in the UK, employing [east Asian] labour and use them. From an economic commercial point of view it makes [...] commercial sense. So you can understand why they want to look at that. We obviously very quickly persuaded them that they weren’t able to do that but there was a role for bringing [east Asian] labour over to support the set-up and to support the skills, you know, knowledge within the business that they needed to bring in. (RDA official)

Reinvestment mncsalreadyestablishedintheregion harnessedtheirexistingrelationshipwithlocal governanceactorstobuildwhatmightbecalled ‘investmentalliances’.thesetypicallytookplace inacontextofglobalinter-plantcompetitionfor investmentwithinthemnc.twoexamples illustratethewayinwhichsuchalliancesworked. The car plant. Inoneautomotivemanufacturer, vehicleco,thesubsidiarysetouttoconstructa broadcoalitionthatincludedregionalactorsand centralgovernmentinastrategicapproachto securingcorporateinvestmenttobuildanew model.theukplantwasincompetitionwith severalotherplantsofthemncineuropeand furtherafield. I started with the local government first of all, with local trade union, with ourselves getting them on board. Then we went to the [Regional] Development Agency, one of the RDAs, which was a great RDA. Then high level of trade union. Then I started to meet with [the secretary of state] at the Department of Trade and Industry at the time. And it’s about making sure that people understand what you are trying to do, the challenges that face you, and what is necessary from all of the stakeholders in order to deliver. And relative to skills I have got x million Euros in grant for this model for training, obviously with the great support of the government and the support also of the trade union. (HR Director, VehicleCo) vehiclecosawthevalueofincorporatingsenior unionofficialsintotheinvestmentcoalition,not leastbecauseoftheirimportanceinproviding commitmenttotrainingrequirementsassociated withnewinvestment– astheaboveextract indicates. fromthepointofviewoftherdas,investment coalitionstrategiescouldcreateproblems(see chapter2),particularlywhereanmnchadmore thanoneukplantandhencethepossibilityarose

ofinter-plantcompetitionwithintheuk.Inthese cases,therewassometensionbetween governanceactorsatdifferentlevels,withcentral agenciesclaimingaperspectiveonnational interestsasawholethatcoulddifferfromthatof regionalplayers: ...if you took somebody like say [two multinational motor manufacturers] with their plants at [English sites], then what was the role of [the development agency] in discussions with their local management as opposed to the discussions between HMG and the national or indeed international management of [the two MNCs]. That was always an issue, it was always a source of tension between the two, you know, who was actually speaking, who had the authority to speak. Because of course you do have a situation where [these two MNCs] had a number of different plants across the country, and where you could see the development agencies would always see it as being within their remit, within their interests, to try and maintain the plant in their region as opposed to elsewhere. So you had that bit of competition. (Representative of central government department). IndustrialMachineCo’s location decision. alarge globalengineeringandelectricalequipment manufacturer,Industrialmachineco,respondedto aseveredownturninsalesfollowingthe economiccrisisin2008withareviewofitsplants indifferentcountries,withtheaimofrationalising activitiesthroughplantclosuresandmergers.the mnc’splantinasmallmidlandscitywaspartof thatcorporatediscussion,andquestionswere askedaboutwhetherthatlocationwasthe correctonefortheproductlinebeing manufacturedthere.thesubsidiary’sactivities werescatteredacrossseveraldifferentsitesin thecity,andthemnc’sproposalwasto rationalisetheoperationbybringingallthe activitiestogetherononesite,eitheratthe existinglocationintheuk,orincompetitorsites ineasterneuropeorchina.localmanagement’s

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responsewastomakethecaseforcontinued investmentinthecity.asuccessfulcasewasbuilt aroundthestrengthofthelocalsupplynetwork, theproductivityofthelocalworkforceandits specialistskillsinareassuchasproductdesign, andthesubsidiary’sburgeoningrelationshipwith thelocaluniversityforarangeofgraduateskillsin businessandengineering. thereemergedaninvestmentcoalition comprisingthelocalmanagementteamofthe mnc,theuniversity,andtheregional developmentagency.asaresult,aviablenew sitewasidentifiedandasuccessfulcasewas madetotheIndustrialmachinecoboardfor investmenttoberetainedlocally. oneofthefactorsthatenabledtheemergenceof suchcoalitionsbetweenfirmsandgovernance agencies(cf.kristensenandZeitlin’s2005 accountoflocalcoalitionsinthedanish subsidiaryofaukmnc),wasthecommitmentof thesubsidiary’smanagementteamtothelocality. InthecaseofIndustrialmachineco,local managers‘hadgrownupwiththebusinessin[the city]’.theissueofpersonalcommitmentoflocal managersiswellexpressedbyarespondent basedatthelocaluniversity: [P]art of this embeddedness is what the intentions and the views and ambitions and the aspirations of the local team are. Are they here for two years and off or are they people who have grown up with the business? [...] So there are different levels of agency within organisations which is quite interesting. asthissuggests,thepersonalcareeraspirations andstrategiesofkeylocalmanagersarean importantfactorindeterminingtheemergenceof investmentcoalitionswithregionalactorsattimes ofnewinvestmentorglobalrationalisationof operations,asinthetwocasesdescribed(cf. dörrenbächerandgeppert,2009;also kristensenandZeitlin2005).

Skills and training accordingtoofficialsatoneoftheformerrdas, theissueofskillswasthesinglemostimportant andmostfrequentlyraisedmatterbetweenmajor firms,includingmncs,andtherda’sinvestment developmentmanagers.skills,aswehaveseen, areoneareawithintheinfluenceofmnc subsidiarieswhenplantsarebiddingfornewor renewedinvestmentincompetitionwithother subsidiaries.thusthehrdirectorofvehicleco workedwithgovernanceactorstomakesurethat credibleplanswereinplaceforworkforcetraining intheeventthattheplantwasawardedthe contracttomanufacturethenewmodel. Everybody in Europe will want to build that vehicle so there will be a free for all to get the rights to build it. And what I am trying to do [is that] if they are going to build it in Europe we can say we have got all our people, not trained but identified what training we would need, we have got the training available so we can very quickly then switch it on and start training them so we can build it here. We are not going to train them how to build a vehicle if we are not going to get it, but we are trying to get everything in line from a training point of view so we know what training is required in each of the areas of our manufacturing process. (VehicleCo plant training manager) ‘gettingeverythinginline’meantworkingclosely withtherda,sectorbodies,trainingproviders andotherlocalagenciestoestablishplausible plans.thusvehiclecointeractedwithasectoral promotionbodyundertheaegisoftherda abouttheavailabilityoftrainingandtraining providersintheregion. So it’s looking at what we are doing as far as training, is there anybody local and regional that can provide that. And if the opposite, there is not, then I let them know [we] can’t find anybody within this region, shall I take it somewhere else. So identifying where we have got shortages of providers...

trainingwasseenasacrucialpartofthebidding competitionamongplantsindifferentcountriesto buildthenewmodel,particularlysince technologicaladvancesplacedadditional demandsontheworkforce: Every plant had to put together a bid and part of that bid was what training you can bring to the table for your people. Because every time we bring a new model in there is a significant shift in the technology with that product. And VehicleCo are keen to ensure that we build a vehicle of the right quality at the right levels from day one. And training is very important when you are building a new product. So they were keen as to how we would manage that and what the cost would be. We were fortunate that we put together a good plan and the plan was funded to a large extent by [the RDA] so they helped us to be successful in bidding for the car. It [...] was part of a massive programme but it was I believe a significant part and it helped us be successful in the bid. astheextractmakesclear,governanceactors, includingtherda,hadanimportantrolein brokeringtherelationshipsthatwouldallowskills andtrainingtobeavailable,andthisincluded brokeringfinancialsupportfortraining(see below).

relocation to [eastern Europe or China] (Senior university executive) Beyondthesporadicandintenseinteractionover renewedinvestmentinplants,trainingwasan issuewhere,asmentionedearlier,development agenciesplayedaroleinaddressingmarket failure(seetheexampleoflaboratorytechnicians, pg7).Itwastheexperienceofdevelopment agenciesthatmncsexaggeratedthefirmspecificnatureoftheskillsthattheyrequired,and ittookthebroaderperspectiveofanrdadealing withmanyfirmstounderstandsectoral requirements.nonetheless,theredoesappearto beanimportantdistinctionbetweengeneralskills wherethereisaninterestincollaborationwith otheremployerstocreatetheappropriateskilled labourpool,andveryspecialist,highlycompetitive skillsrelevanttosmallnumbersoffirmswhere thereislessofaninterestaggregationrolefor. onecarmanufacturer,carco,spokeforexample ofitsveryparticularskillsneedsindigitaldesign, whichwerecompany-specificandhardto generatethroughbroadertrainingschemes.

InIndustrialmachineco,likewise,securingthe supplyofskillswasseenasprovidingacrucial competitiveadvantagethathelpedensurethe viabilityofareinvestmentbid.thesubsidiary cametoanagreementwiththelocaluniversityto setupanengineeringschool,aprimaryroleof whichwastoassureasteady,long-termsupplyof tailoredengineeringskills,aswellastocarryout researchanddevelopmentincollaborationwith thecompany.

thisinterestaggregationroleinrelationtoskills waseasiertoaccomplishinsomesectorsthan others.thusintheautomotiveindustry,there wereasmallnumberoflargeplayerswhoshaped theskillsmarket,anditwaseasiertoprovide institutionalmechanismsofcoordination,whether throughtheregionalentitiesofsectorskills councilssuchassemta,orthroughregionspecific,adhocsectorbodiessuchasthe organisationrepresentingautomotive manufacturingfirmsandgovernancebodiesin oneregionweresearched.thisorganisation playedaroleinvehicleco’splanningfortheskills andtrainingrequirementsforthemnc’snew modelforwhichitwasbidding.

We are actually the anchor because they [the MNC] wouldn’t be able to replicate the relationship they have got with another university pretty much anywhere else. So ironically we are the ones who stopped them from thinking about

Buttherolewasbroadertoo.sub-national governanceactorshelpedmncsplanforthe skillsimplicationsofforeseeabletechnological change,suchastheexpansionofthemarketfor electricvehicles.asonetrainingmanagerputit,

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logistics,healthandsafety,maintenanceand theresultingskillsrequirementsaffectedthe roadsiderecovery. wholeofthesupplychainintheautomotive sector,frombatteriesthroughtoretailers, anotherexampleofregionalinterestaggregation logistics,healthandsafety,maintenanceand inthenorthernregionconcernedskillsforthe roadsiderecovery. compositessector.compositesarecarbonfibrebasedmaterialsusedintheautomotive, anotherexampleofregionalinterestaggregation aerospaceandothermanufacturingindustries. inthenorthernregionconcernedskillsforthe theheterogeneityofthesectorandthevarietyof compositessector.compositesarecarbonfibrefinalproductsinvolvedcomplicatedtheprocess basedmaterialsusedintheautomotive, ofdevelopingskillsstrategies,andasthe aerospaceandothermanufacturingindustries. followingextractshows,astrategywasconceived theheterogeneityofthesectorandthevarietyof ofintermsofnationalratherthanpurelyregional finalproductsinvolvedcomplicatedtheprocess engagementbetweengovernanceactors(both ofdevelopingskillsstrategies,andasthe centralgovernmentandsectoral),mncsand followingextractshows,astrategywasconceived othercorporateplayers: ofintermsofnationalratherthanpurelyregional engagementbetweengovernanceactors(both There are so many companies out there working centralgovernmentandsectoral),mncsand with composites and aircraft industry, wind othercorporateplayers: turbine, or certainly the blade manufacturers, they all at the thought that theyout were using There aretime so many companies there working proprietary techniques and technology but they with composites and aircraft industry, wind were doing broadly the similar things in different they turbine, or certainly blade manufacturers, parts of the country with shapes all at the time thought thatdifferent they were usingand sizes. And ittechniques took a national compositesbut strategy proprietary and technology they to bring them together to say well in actually rather were doing broadly similar things different than itofbeing a bit ofwith engineering you and tack parts the country differentthat shapes onto everything what ifcomposites we were to strategy develop sizes. And it tookelse, a national a framework qualifications around the use of to bring themoftogether to say well actually rather composites processes that need. than it beingand a bitthe of engineering thatpeople you tack And that’s what else, happened taken onto everything what ifbut weit’s were to 18 develop governmentaround departments, acompanies, frameworkthree of qualifications the usetwo of Sector Skillsand Councils and twothat andpeople a bit years. composites the processes need. (National-level body And that’s whatgovernance happened but it’sofficial) taken 18 companies, three government departments, two thefocusofmanufacturingmncsinparticular Sector Skills Councils and two and a bit years. wasonthesupplyofhigh-endskills,andhere (National-level governance body official) firmstendedtobecriticalofsomeoftheskills initiativesbeingundertaken,particularlybycentral thefocusofmanufacturingmncsinparticular government.firmsalsocriticisedthegap wasonthesupplyofhigh-endskills,andhere betweentheidentificationofskillsneeds,andthe firmstendedtobecriticalofsomeoftheskills practicalsupplyofskills.Inthewordsofthe initiativesbeingundertaken,particularlybycentral personneldirectorofcarco, government.firmsalsocriticisedthegap betweentheidentificationofskillsneeds,andthe ... my view is [the sector skills council] are very

clear and they articulate the needs of the practicalsupplyofskills.Inthewordsofthe automotive sector to align with our needs. [....] I personneldirectorofcarco, think translating that into action is always much ... my view is [the are verySo more difficult isn’tsector it, andskills that’scouncil] the challenge. clear articulate the needs of the if youand talk they to [the sector skills council] they were automotive sector align with needs. very clear it’s abouttohigher levelour skills, they[....] are I think translating thatsome into action always much very clear it’s about of theisdigital design more isn’t and that’s So skills, difficult very clear it’sit,about somethe of challenge. our leadership ifand youhigher talk tolevel [the manufacturing sector skills council] they were skills. That’s fine, very clear it’s higher level no issues withabout that and there areskills, any they are very clear it’s about some of the design qualifications that meet that. Thedigital challenge that skills, verygot clear about some of do ourwe leadership we have as ait’s business is how actually and higher skills. That’sit’s fine, in this locallevel area manufacturing upskill people.... Because no that and therebut arehow anydo you fineissues havingwith identified need, qualifications that meet that. The challenge that actually then meet that need? we have got as a business is how do we actually therewasafeelingamonganumberof in this local area upskill people.... Because it’s respondentsthatthesectorskillscouncil,while fine having identified need, but how do you expertatsecuringmoneyfromgovernment,was actually then meet that need? lessthanstrategicinspendingit.thebroader therewasafeelingamonganumberof issueconcernedtheprioritiesoftraining respondentsthatthesectorskillscouncil,while expenditurebycentralgovernment.therewasa expertatsecuringmoneyfromgovernment,was perceptionthatmoneywasmorereadilyavailable lessthanstrategicinspendingit.thebroader foroverly-generic‘low-end’skillsataroundnvQ issueconcernedtheprioritiesoftraining level2thanforhigherandmoreindustry-specific expenditurebycentralgovernment.therewasa skills.thisviewwasnotnecessarilyheldbyall perceptionthatmoneywasmorereadilyavailable majorfirms.Inthecarindustry,forexample, foroverly-generic‘low-end’skillsataroundnvQ mncswerekeentotakeadvantageofnvQlevel level2thanforhigherandmoreindustry-specific 2trainingschemes.nonetheless,manymncs skills.thisviewwasnotnecessarilyheldbyall weremoreconcernedwiththedevelopmentof majorfirms.Inthecarindustry,forexample, apprenticeshipschemesatnvQlevel3oreven mncswerekeentotakeadvantageofnvQlevel level4withapathwaythroughtoan 2trainingschemes.nonetheless,manymncs undergraduatedegree.thiswasthecasewith weremoreconcernedwiththedevelopmentof engcointhemidlands,andwithonenorthern apprenticeshipschemesatnvQlevel3oreven engineeringfirm,aeroco,whichspentsome level4withapathwaythroughtoan yearsworkingwithsemtaaswellaswith undergraduatedegree.thiswasthecasewith industrycompetitorstodeveloparangeofhigherengcointhemidlands,andwithonenorthern levelapprenticeships.Inthewordsofamidlands engineeringfirm,aeroco,whichspentsome engineeringsubsidiary,metalworkco, yearsworkingwithsemtaaswellaswith I’m always getting emails from the local training industrycompetitorstodeveloparangeofhigherproviders saying work with us and we can secure levelapprenticeships.Inthewordsofamidlands you this funding but when you delve into it, well engineeringsubsidiary,metalworkco, we know how it works sort of thing and it tends

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to be too generalistic for our requirements [...] I’m always getting emails from the local training There needs to be more input local providers saying work with us from and we can secure employers and more control really given you this funding but when you delve intotoit,how well the know funding is used. [...]sort We of need toand be maybe we how it works thing it tends more specific to like the industry or the to be too generalistic for heavy our requirements [...] heavy needs engineering environment whereas There to be more input from local what’s been offered is more quite control soft. [...]really My view ontothe employers and given how [regional] approach been it’s very the funding is used. has [...] We need to bemuch maybe around supporting who industry can’t afford to more specific to likeSMEs the heavy or the organise training inenvironment the way we probably heavy engineering whereas could. what’s (HR director been offered MetalworkCo) is quite soft. [...] My view on the [regional] approach has been it’s very much mncrespondentsalsowerewaryofrelyingon around supporting SMEs who can’t afford to trainingproviderstoguidethemthroughthe organise training in the way we probably could. labyrinthoffundingopportunities,sincethe (HR director MetalworkCo) providershadavestedinterestinpointinga potentialclientfirmtoprovisionforwhichthey mncrespondentsalsowerewaryofrelyingon wouldreceivefundingonapercapitabasisunder trainingproviderstoguidethemthroughthe governmentschemes.oneresponsetothiswas labyrinthoffundingopportunities,sincethe forfirmstoseekmoreobjectiveadvice,for providershadavestedinterestinpointinga examplefromthenationalapprenticeship potentialclientfirmtoprovisionforwhichthey service,thebodythatoverseesandfundsthe wouldreceivefundingonapercapitabasisunder deliveryofapprenticeshipprogrammesin governmentschemes.oneresponsetothiswas england. forfirmstoseekmoreobjectiveadvice,for examplefromthenationalapprenticeship finally,mncsusedbodiessuchasBusinesslink service,thebodythatoverseesandfundsthe orjobcentreplustocoordinatetherecyclingof deliveryofapprenticeshipprogrammesin skillsinthewakeoflargeregionalredundancy england. programmes.forthefirmmakingredundancies, local/regionalgovernanceactorshelpedplace finally,mncsusedbodiessuchasBusinesslink surplusskillsbackintothelabourmarket;for orjobcentreplustocoordinatetherecyclingof otherfirmsintheproductmarket,agencies skillsinthewakeoflargeregionalredundancy facilitatedtheaccesstotheredundantskills. programmes.forthefirmmakingredundancies, engcodescribeditsexperienceasfollows: local/regionalgovernanceactorshelpedplace surplusskillsbackintothelabourmarket;for ...when [a regional motor manufacturer] were otherfirmsintheproductmarket,agencies laying a lot of people off, that was a joint initiative facilitatedtheaccesstotheredundantskills. between [...] our agency worker provider and [the engcodescribeditsexperienceasfollows: RDA] to some extent, although it was more our initiative[ainregional saying are youmanufacturer] doing something? ...when motor were Because veryinitiative similar. laying a lotobviously of peoplethe off,skill thatsets wasare a joint And that manifested itselfworker in us attending, well[the between [...] our agency provider and actually had a jobalthough shop on itsite asmore you can RDA] tothey some extent, was our imagine, in because theyyou were laying off a large initiative saying are doing something?

Because obviously the skill sets are very similar. And that manifested itself in us attending, well actually they had a job shop on site as you can imagine, because they were laying off a large number of people and we were, along with other employers, we were advertising our vacancies. (HR director EngCo)

cost, then a better position you are in to bid for the car. So if someone else is willing to pay for the training [...] then the costs are reduced and your cost per car is going to be reduced. If you can do things smarter because of the training then you can reduce your costs. (VehicleCo plant training manager)

The search for funds mncscommonlysawthegatekeeperroleof regionalbodiesasprovidingaccesstosourcesof funding.rdasandotherbodieswereseenas havingexpertknowledgeoffundingframeworks, whetherateuornationallevel,andhavingthe skillsneededtoaccessfundsfortraining,capital investment(e.g.fortrainingfacilities),andsoon. theabilitytotapsourcesoffundingwas regardedbysubsidiariesasasourceof competitiveadvantage.Inthewordsofa japanesecarmanufacturer,motorco,ithelped‘to keepbusinessgoing,keepushereintheuk.’

crucial,therefore,wastheabilityofthesubsidiary tocoordinatefundingfortraining.withthehelpof therda,andthedepartmentoftradeand Industry,thesubsidiarymanagedtolineupnearly €10mintraininggrantsforthenewmodel.

firmsadoptedapragmatic,calculativeapproach tofunding,fortrainingforexample,inthesense thattheysawitasawayofloweringtheunit costsofproduction,andhencecontributingto successinthecompetitivecorporateinvestment (orreinvestment)tournamentsinwhichtheywere requiredtoparticipate(seeabove).thus vehiclecoexplainedhowtrainingsubsidieswere partofthepackagetheplanthadtoofferin biddingforthenewmodel.therewerecost pressuresonaplanttoproducehighvolumesof anewmodel‘fromdayone’:

We had a commitment of a million from us and a million from IndustrialMachineCo as the capital but we estimated it was effectively a 7.5 million build. So we went to [the RDA] to get match funding through ERDF single part match funding subregional, to get the outstanding 3.2 million to get it going. And [the RDA] I have to say were very good, they didn’t call it this but they fast tracked it through the ERDF process so we could get the capital. (Senior university executive)

So in order to do that you have got a lot of training to do up front with the people to get them so you can build your car at that rate. So that’s what [the parent company] will tell you, it’s volume, it’s also the cost. And they are not looking at cost as far as the training cost, they are looking at the cost as far as cost per car, which is sucked into the cost. [...] So the more you can get down your cost per car, the more volume, lower

similarly,inIndustrialmachineco,therdaplayed akeyroleinputtingtogetheracaseforremaining intheregionthatmightappealtothemnc’s corporateboard.partofthiscasewasthe provisionofskilledengineersthroughthedeal withthelocaluniversity.Inordertosetupthe training

engco’shrdirectorsuggestedthatakeytask forlocalmanagersofmncswastoexplainto regionalactorsandfundingactorswhymultibillionpoundinternationalcorporationsrequired localtrainingsubsidies. Now that is always a very difficult thing to say because they would look you in the face and say are you telling me that a company with a $30-40 billion revenue stream around the world is not going to do this job unless we the RDA give you a million pounds, or whatever it happened to be.

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We had to look them in the face and say yes because we would say at a plant level every plant in the EngCo world has to compete with every plant in the EngCo empire for new investment and they have to make their case as best they can. And in the end that sort of argument played. forthesamefirm,partoftheexpertiseandknowhowofregionalagencieswastheskillrequiredto avoidbureaucraticover-complicationofthe searchforfunding,forexamplebyavoidingthe needforfundingtobesanctionedbyhigher-level governanceactorsincentralgovernment. The relationship, a lot depended also on how the individual RDA got on with the London civil service. How you tailored your application bid for capital assistance. Some RDAs were much cuter than others about how to play the system to ensure the programmes did not unnecessarily have to go to London for approval. Because there was a financial limit, and if you were above it, it absolutely had to go to London and you knew then it would go round a completely different appraisal process and a much longer one. Whereas if you were cuter and stayed within the RDA approval limits it would be a whole lot more straight forward. It wouldn’t guarantee success but it would take you away from a whole lot of bureaucracy. (HR director EngCo)

The impact of institutional change therewaswidespreadconcernthatthechanges intheinstitutionalfabricresultingfromthe abolitionofrdaswouldexacerbateproblemsof coordinationandintegration,bothacrossregions butmostnotablywithinthem.thechangeswere seentorespondtothecoalitiongovernment’s localistagendaratherthanreflectingacoherent andrationalstructureforpromotingregional development,andthelackofcoherenceledsome toexpectthatthenewstructurewouldbequietly abandonedasunworkable.

thenotionthattherewasasingleregional interlocutor,apointofaccesstootherbodiesand anentitycapableofcoordinatingactionamonga rangeofgovernanceactors,wasseriously underminedbythemovetoleps.forexample, vehiclecowaslookingtoencourageachinese componentssuppliertoestablishasubsidiary closetoitsoperationsinthenorthernregion.as thehrdirectorputit, This is a problem I have got, now that the RDA has disappeared who do I talk to in order to make that happen. There I am, I am trying to bring company XYZ from China to here, they are already supplying us with parts and are desperate to establish a manufacturing base say somewhere within the UK, it’s going to bring jobs which is exactly what the government wants. RDA has gone away, who the hell do I talk to? I have had meetings with senior people from [a regional county council] and [one of the LEPs], I have had meetings with them, I had the RDA people involved and it’s now ground to a halt. I am now in a situation where I am bringing our local MPs in to see me in a couple of weeks time to start pushing this. Inotherwords,theresponsibilityforcoordinating diverseactorstoachieveacomplextask–inthis case,securinganewinvestmentbyasupplier– fellbacktoafargreaterextentonthesubsidiary itself.suchasituationwouldbelikelytocause particularproblemsforrelativelynewand ‘unembedded’mncs. forfirms,suchasengco,thatoperatedmultiple sitesacrossseveralregions,theabolitionof rdasandcreationoflepswasseenasa ‘nightmare’: There is no way we can have any degree of coordination across our entities [...] [The government] are wedded to localism and that in turn is not good news for big companies because there is going to be no consistency across, even

within the old regions there will be no consistency. (Senior executive EngCo). thiswasacknowledgedbyonesenior governanceactor: Where you have large companies with 23 manufacturing sites across England, Scotland and Wales who really don’t want to speak to 23 different local authorities to manage their skills agenda. aconcernwiththebreakdownofhorizontal institutionalcommunicationwasparalleledby fearsthattheroleofverticalcoordinationwhich rdashadperformed,linkingregionaland nationalgovernancelevels,wouldbebeyondthe capabilitiesoflocalistleps.asaresult,firmsfelt theywerelosinganeffectiveconduitfor communicatingtocentralgovernmentabout businessissues. Because we have gone from a position whereby we had regionally based contacts that fed back into government reasonably efficiently. So if you said something to an RDA you would be pretty confident it could get back in the right way into government. Particularly if it was a BIS related issue. And that our facility managers would have no inhibition about talking to an RDA if they wanted to, they would not be a threat. Whereas the long trail from [a northern LEP] to Whitehall might inhibit someone running one of our plants in the north east. So we have lost that connection. (Senior executive EngCo) Itwasfeltthatthegovernmentrecognisedthe danger,however,andthecreationofaquasiregionalstructureforBIswasseenastryingto plugthegapinverticalinstitutionallinkagesleftby theabolitionofrdas. thenewinstitutionallandscapecreateddilemmas ofengagementformncs.shouldtheyget involvedinthenewbodies,ornot?onetheone

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hand,involvementwasimportantforaccessto theinstitutionalnetworksthatwerenecessary,for example,formobilisingresourcesandidentifying providersfortrainingprogrammes.ontheother handtherewasscepticismastothequalityand competenceofthenewbodies,andfearsthat, starvedofresources,theywouldbelittlebetter thantalkingshops. Some of our facility managers have asked me, “Should I apply or should I offer myself to sit on LEPs?” And I said, “Well it’s entirely your decision but you should recognise what you’re letting yourself in for. If you do join a LEP, because very few of them are genuinely business or business run or dominated, I think you will find there will be a lot of councillors, either former ones or otherwise, going into it”, and they are going to be sort of downmarket, crudely, could become down market talking shops on a Friday night with no money, no resource and little ability to do something massive. They could really struggle to make a difference I believe because they have got no money, no resource and that combination is pretty damming I think. (Senior executive EngCo) when,despitethereservations,mncexecutives didattempttogetinvolvedinthenewleps,their experiencessometimesconfirmedthefears,with parochiallocalinterestsbeingseentotrumpmore strategicconcernswitheconomicdevelopmentof thelocality,asthefollowinginstanceillustrates. ...we have a highly competent facility manager in [the midlands], he runs a [component] plant with about 800 people, it’s absolutely a fundamental part of the business in the UK.... And I know the MP very well, he is in his 50s, he has an industry background. He came to talk to us about the LEP because he is a great promoter of the LEP, he believes if we have to have LEPs the one in [the midlands town] had to be the best it could possibly be. And he said would this guy be

interested in putting an application in [...]. And the bottom line was he was, he put an application in and he got nowhere. And the [LEP] were hopeless, they were just all bordering on the rude and so he came away very disillusioned. The MP was distraught because he realised that he had essentially pushed it at us in one sense, but he went away with his head in his hands in disbelief that our guy didn’t even get an opportunity. So that message goes out on the EngCo network, guys this is what can happen if you put your head above the parapet. I am not aware we have got anyone in a LEP. acentralgovernancerespondentconfirmedthat, atthetimeoftheresearchatleast,largelocal employerswere‘eitherthroughfirmchoiceor throughnon-selection’inmanycasesnot representedonlepboards.withoutinvolvement ofseniorfiguresfromkeymncsintheirlocality, leps’credibilitywithmncsasinterest aggregatorandgatekeeperwouldappearlikelyto dwindlerapidly. Inthenewstructure,uktIandspecificallythe consultancy,paconsulting,thatdeliveredits serviceswasseenasprovidingcross-regional integrationandcoordinationforbiggermncsin coresectorssuchasautomotive,lifesciences andIct,inrelationtosuchissuesasrecruitment, managementsuccession,ortraining.thusone officialoftheconsultancyexplainedhisroleinthe followingterms: ...Where they’re multi-sited, that’s where I add most value because they’re needing more hand holding into the different bits and joining that all together for them. Whereas if you’ve got one company in one place with one skills issue, I can be polite and hand them over [to lower-level agencies] to deal with. But the real value is added where you’ve got 20 sites across the UK and they need it managed for them, and all the different relationships brought together, or they

want to run a pilot in one or two places with a view to then going national with an apprenticeships campaign or a recruitment campaign. despitethisexpandedroleforacentralagency, however,therewassomescepticism. respondentsacknowledged,forexample,thatfor uktItoplayacoordinatingrolethroughthe consultancy’soperations,themnc’sneedshad tocometoitsattention,atatimewheninter-level linkageswere,asmentioned,disruptedbythe abolitionofrdas.moreover,mncshad reservationsabouttheabilityoftheconsultancyto playaproactivecoordinatingrole.onemajor multi-sitemnc,engco,claimedtodealonly rarelywithuktIortheconsultancy,andsawitas mainlyconcernedwithexporters‘to assist primarily people who are not well connected externally’(seniorexecutiveengco).Indeed,the firmsawitselfmoreassupportinguktIinthe latter’seffortstoattractinwardinvestors,by showcasing‘who is already in the UK and therefore, to potential inward investors, a major reason why they should consider coming to the UK versus somewhere else’.

Conclusion tosummarisethemainargument,whatmncs wantfromsub-nationalgovernanceactorsis: • accesstoadditionalfunding,particularlywhere thishelpsthemretaininvestmentintheregion, orattractnewinvestmentintothesite • theabilitytoprovideaccesstoaproliferating andchangeablerangeofrelevantbodiessuch asskillsandtrainingproviders,atregionallevel • toactasconduitifnecessarytoactorsat higherinstitutionallevels,notablycentral government • expertiseinidentifying,aggregatingand articulatinginterestsfromarangeoffirms, particularlyatasectorallevel,sothat resourcescanbetargetedforexampleon

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thedevelopmentofnewskillsneededbythe sectorasawhole • Inthecaseofnewinwardinvestors,help withidentifyinganddevelopingappropriate physicalinfrastructure,suchassuitablesites thathaveappropriateinfrastructureandare attractivetomobilekeyemployees. therearearangeofrelationshipsbetweenfirms andgovernanceactors,fromlow-keyroutinelinks tohigh-intensity,issue-focusedburstsofactivity. manymncssimplygetonwiththeireconomic activityandhavelittleifanyinteractionwiththe institutionalactors. anumberofissueswereevident,particularly concerningtheproliferationandchangeabilityof relevantbodies,intherelationshipbetween mncsandsub-nationalgovernanceactors.the plethoraofpotentiallyrelevantbodiesandthe frequentinstitutionaltinkeringcreatedsignificant problemsofcoordinationthatwereonlypartially resolvedbytheintermediaryroleoftherdas. suchproblemsweremoresevereformulti-site mncsthatoperatedcross-regionallywithinthe uk.Institutionalvolatility–theconstant developmentofnewbodiespartially supplementingorreplacingexistingentities, combinedwithamultiplicityofcentralinitiatives whosecomplexityfrequentlybaffledmncs–was afactoflife.Butvolatilityaffectednotjustthe schemesavailable,e.g.intraining,butalsothe basicinstitutionalfabricoftheregionsduringthe timeofourresearch,withtheabolitionofrdas andtheirreplacementbyleps. thenewstructureprovokedconsiderableunease andscepticismamongmncrespondentsabout theabilityofthearrangementstoperformthe coordinatingandintegratingfunctionsthatrdas hadpreviouslyperformed,howeverunevenly.the dangerofsuchvolatilitywasthatthehardworkof buildingeffectivenetworkslinkinginstitutional actorsandmncswouldbeundermined.the

‘institutionalmemory’,basedasitwasonthe networksofindividualsoperatingwithinthese structures,wasindangerofbeinglosttothe system. otherpotentialproblemsareapparentinthe ‘mnc–localstatenexus’(phelpsandfuller 2001).whiletheinterestsofsub-national governanceactors,particularlyinwardinvestment agencies,andmncslargelyoverlap,theyareat timesdissonant.theformerareconcernedwith thebroaderpictureofregionaleconomic development,notjustwiththecorporateinterests ofparticularmncs,andthisdifferenceof perspectivesometimescreatedtensions.onthe otherhand,therewasalsothedangerofa relationshipsoclosethatineffectadominant mnccould‘capture’or‘colonise’governance bodies,withtheresultthatthelatterpursued particularist,sectionalobjectivesratherthan broaderendsofregionaldevelopment. finally,theevidencesuggestssomewider implicationsforhowweunderstandthe institutionalfabric.firstly,theresultstellus somethingaboutthenatureofmncs.theseare nothomogeneous,monolithicentities,butrather collectionsofoperationswithoverlappingbut sometimesconflictinginterests.thisisseenmost clearlyinthestrongalliancesbetweenlocalmnc managementandshiftingconstellationof governanceactorsrangingfromtheregional developmentagencytothesectorskillscouncil, andaplethoraoftrainingprovidersatdifferent levels;insomecasesalliancesalsoinvolved workingcloselywithseniortradeunionofficials. such‘locationalcoalitions’weremostvibrantly observedinrelationtoplannedstrategiesfor securingnewinvestment,orcontinuing investment,inaplantthatwasregardedasakey, embeddedelementoftheregionaleconomy.

econdly,thestudyemphasisesthedynamicand creativenatureoftherelationshipbetweenmncs andgovernanceactors.togethertheygive meaningtotheinstitutionalfabricthroughtheir interactions.Inotherwords,institutional arrangementsarenotsomegiven,inherentor pre-existingcontextthatdefinesthe characteristicsofalocality.onthecontrary,they emergedynamicallyoutofthenegotiationsand alliancesofmncsubsidiariesandgovernance actorsinalocality.aswasseeninexamplessuch asthatofvehicleco,firmsandgovernanceactors worktogethertocreatetheinstitutional environmentintermsoftheavailabilityof appropriateskillsthatareneededforthemncto performandexpanditseconomicrolewithinthe locality.thusthereisanimportantrolefor ‘agency’andproactivecreationbylocal governanceactors,inalliancewithlocal management,oftheconditionsforembedding high-skillmncs.moreover,andrelatedly,the findingsindicatethatgovernancerolesare blurred.mncsfrequentlythemselvesperformed aquasi-governancefunction,singlyormore commonlyasacollective,forexampleoversector skillsplanningforfutureneedsinindustriessuch ascompositesormotormanufacturing,orinthe developmentofapprenticeshipprogrammes.the borderlinebetweenprivatefirmandgovernance actorcouldthusbecomesindistinct.

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ChAPTEr 4 R E G I O N A L H U M A N C A P I TA L D E V E L O P M E N T N E T W O R K S A N D F D I

Introduction

The Network as a policy tool

translatingpolicyintoactionisdependenton boththestructuresthatarecreatedaroundaset offormalrulesandactorsandtheemergent socialrelationsthatunderpinsuchstructures. theresultinginterdependencyanddynamic betweenstructuresandsocialrelationsdefine theengagementandparticipationamong relevantstakeholderswhichisnecessarytoboth developanddeliverpolicywithimpact.the analysishereseekstoshedlightonthestructural characteristicsoftherelationshipsbetween governanceactorsandmultinationalsthataimto retainorattractfdIthroughlabourmarketskills andcompetencies,withinaregionalframeof reference.thesestructureswerefertoasthe regionalhumancapitaldevelopmentnetwork (rhcdnetwork).

therhcdnetworkthatemergesinthecontext offdIreflectsapolicynetworkofinterdependent governanceactorsandmultinationalsthathasa sharedinterestinadvancinglabourmarketskills policy,provisionand/ordelivery.assuchthe networkmembersmaybeformallyorinformally institutionallylinked(rhodes,2007).thelinkages betweennetworkactorsreflecttheflowof resourceswhichmaytaketheformoftangible resourcessuchasfundingforthedeliveryof training.Butequallyintangibleresourcesinterms ofknowledgeandexpertiseregardinghowto leverageavailablefundingoridentifyingemergent sharedskillsgapsandcreatingcollaborative partnershipstodeliversolutions.thepolicyarena oflabourmarketskillshasalwaysbeendefined byadivisionofresponsibilitiesbetween governmentandprivatestakeholders.however, thedrivetowardpartnershipbasedpublicpolicy developmentandimplementationunderpins moderndemocraticpolicyandtherecognitionof theinterplaybetweengovernanceactorsand marketforcesisacornerstoneof‘civilsociety’ (mcarther,2008).theabilityofnetworksto deliverpositiveeconomicandsocialimpactsis consequentlydependentontheefficiencyofthe structuresandthesocialrelationsthat characterisetheflowofresourcesandoutcomes.

therearetwokeypointstoconsiderwhen interpretingtheanalysisthatfollows.first,the particularfocushereisthenexusbetween multinationalsandgovernanceactorswith respecttoskillsorcompetenciesissues.manyof thesub-nationalgovernanceactorsand multinationalsmayconnectonawiderangeof issuesinanumberofdifferentarenas.however, theseotherareasofactivityarenotconsidered aspartofthisanalysis.second,asweshall discoverlaterintheanalysisthemembershipof thenetworkofinterestispotentiallyextremely large.consequentlyitwasnotpossiblein interviewallpossibleactors,butinsteadthrough snowballingtofollowatrailofkeyinformants whowereableandwillingtotakepartinthis work.despitetheselimitationsthedatacollected enablesustodeveloparangeofdifferenttypes ofgraphicalrepresentationsandstatistical analysesbasedonegonetworks.1

thelinksbetweenactorsmayarisefrompolitical opportunity,institutionalroles,personal preferences,reputation,orsocialtrust (Bainbridge,pottsando’higgins,2011;leifeld andschneider,2010).assumptionsand perceptionsamongnetworkactorswithregard totheabilityofthenetworktodeliveragainst someofthesedriversarecriticalindetermining engagementandparticipationactivity.further,

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thedeliveryonoutcomesislargelysubjectto discretionarydecisionmakingwhichisshapedby constraintsonresourcesandinterpretationby individualactors(lipsky,1980).asaresultthe devolvednatureofnetworkstructurescanmean lossofcentralcontrolbypolicymakersassociatedwithtraditionalcommandandcontrol modelsofpublicpolicyimplementation-making evaluationofpolicyimpactmoredifficultandthe criteriaforpolicysuccessmorediffuse. therefore,whilenetworkstructureshavebecome apopularmechanismforintegratingpolicyefforts withmarketdemands,theircomplexity,the multiplicityofactorinterestsanddispersionof powermakestherealisationofdesiredimpacts challenging. theanalysisherewillbegintoaddressthe challengeofusingnetworkstructuresinthe arenaoflabourmarketskillsandfdIbyexploring themembershipandtiesbetweengovernance actorsandmultinationalfirms.theanalysis suggeststhenetworkconveyssignalregarding thestatusandhierarchyofactors,andthe centralityandconnectednessofnetwork members.theresultingregionalhumancapital developmentnetworkcanbecharacterisedasa seriesoflooselyconnectedsub-groupswhich usebothclosedandopentieswithin.arguable suchastructureprovidesdynamiccapabilities allowingthevarietyofstakeholderinterestsand motivesfordiscretionaryengagementtobe managed.ontheotherhandthelimited coherenceacrossthenetworkgivesrisetoa levelofcomplexitythatmakestheoutcomesor impactsdifficulttotrack.

Network Analysis themethodusedtointerrogatethedatais

socialnetworkanalysis(sna).thismethodcan beusedtoprovideinsightintothetiesbetween networkmemberswithrespecttoissuessuchas responsibilities,accountability,resourceflows, distributionofpower,dependency,cohesionand importance(wassermanandfaust,1994).sna usuallyconsidersanetworkofactorsthat operatewithinaprescribedpolicy‘boundary’ whichinthiscaseislabourmarketskillsand developmentactivityfocusedonattractingor retainingforeigndirectinvestmentataregional level.theattributesandrelationshipsofactors canberepresentedgraphicallythroughnodes andtiesrespectively.thenodesrepresentthe actorandtheirattributes(e.g.policymaker, policyimplement,governmentalactor, educationalactor).thetiesarethelinksbetween theactorswhichcanbedescribedintermsof presenceorabsence,strength,direction, centralityrelativetootheractors(wasserman andfaust,1994). themethodofidentifyingthenetworkpopulation usedwassnowballingbeginningwithasetof policyactorsthathavedesignated responsibilitiesforfdIinvestmentregionallyand labourmarketsskillsi.e.theregional developmentagency(rda)andassociated governmentbodyuktI.throughtheanalysisof documentsandinterviewswithrdastaffalistof thenamesofotherorganisationtheyhaveties withwasconstructed.eachintervieweewas askedabouttheirtiestootherorganisationsand inthiswaythelistwasaddedtountilnofurther neworganisationalnamesarose.the snowballingtechniqueswasparticularpertinent inthisinstanceasitwastheonlyfeasibleand reliablewayofidentifyingthemultinationalsand smallerorganisationsengagedinthesenetworks. furtherthediscretionarynatureofactor engagementinthisparticularlytypeofnetwork meantthatnopublicallyavailablelistofnetwork membersexisted.

Characteristics of the Regional Human Capital Development Network analysisofnetworkshasprovidedinsighttohow andwhytheycanbeapowerfultoolfor mobilisingresources.asaconsequenceactors withinthenetworkcanholddifferentpositions androleswhichreflectthedependencybetween actors,theeffectivenessofinformationflowor accesstoresources.weexaminethedata collectedtographicallyandstatisticallyexplore issuesofsignally,centrality,densityandstructural holes.

•

•

• •

Signalling networkscanprovideasignaltothemarket placeregardingthequalityorstatusofnetwork actors.forexample,thestatusofanewcomerto anindustryandregionmaybeinferredfromtheir relationshipwithotherhigh-statusnetwork members(Baum,calabreseandsilverman, 2000).thisisimportantasitcouldbealever thatpolicymakerusetoengagemultinationalsor otherkeyplayers.withinthenetworksobserved aspartofthisworkthepolicygroupshadclearly identifiedsignificantfdIsthattheymadeefforts toengagewith.however,encouragingfdI engagementinpolicyobjectiveswasstrongly linkedtobothpartiesbeingabletoidentify mutualgainsfromengagement.figure1shows thetiesbetweentheactorsengagedwithinthe regionalhumancapitaldevelopment(rhcd) network. Intotalthediagramrepresents77individual actornetworkmembersrepresentedthrough 137ties.thecolourcodingonthediagram indicatesthedifferenttypesofactorsthatare involvedwithinthisnetwork.thevarietyof stakeholdersactivewithinthenetworkisclear: • themultinationalcompanies(mncs)are representedingrey • Bluerepresentsthesub-nationalgovernance actorsincludingtherda,Businesslinkand regionallyoffices/representativesofthe

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• •

•

manufacturingadvisoryservice(mas),job centreplus,learningandskillscouncil(lsc), nationalskillsacademy(regionaloffice) redrepresentsthenationalgovernment actorssuchasBIs,uktI,skillsfunding agency(sfa),stemnet,nationalskills academy,nationalapprenticeshipservice greenrepresentsspecificskillsgroupssuch assemta,connexions,othersectorsskills councils Blackrepresentsuniversitybothregionallyand nationallywithinthehighereducationsector darkgreenrepresentsuniondrivenunion learn darkgreyrepresentslocalcollegeswithin thefurthereducationsector yellowrepresentsemployerledassociates suchasengineeringemployersfederation, Instituteofdirectors,confederationof BritishIndustry(cBI) finallythepoliticalarenarepresentedinlight blueincludescounty,cityandlocalmembers ofparliamentorcouncils.

thisgraphallowsustoexploreifthedifferent typesofnetworkmembersholddifferent positionswithinthenetworkandasaresulthave adifferentrole,accesstoresources,powerand relationtoothers.Itisclearfromthediagramthat nationalgovernmentactors(red),forexample, haveaquitedistinctpositioninthenetwork comparedtosub-nationalgovernanceactors (blue).thelaterhaveclosertiestoamuchwider rangeofmncsandaremorecentralwithinthe networkoverall.theformerbycontrasttakeup peripheralpositionsinthenetworkandtendto tiewithamuchsmallernumberofmncsand educationallyinstitutions.thisislikelytoreflect thedistinctioninroleswithspecificcentral governmentactorshavingrelationswithasmall numberoflargefdIsandassociatedskills funding.Itcouldbearguedthatthereisa hierarchywithinthenetworkwhichsignalsthe statusofthemncwithsignificantfdIsand relatedskillsissuesbeingaddressedbycentral

figure1:graphicalrepresentationofregionalhumancapitaldevelopmentnetwork2

governmentdepartmentswhilstresponsibilities tootherfdIsaredevolved. theemployerassociationsalsotakeup peripheralpositionswithinthenetworkand wheretiesexistthesearedirectlywiththefirms. thepositionofthemncswithinthenetworkis interestinginthatitdemonstratesthediversityin thelevelofengagement.thereareanumberof mncs(e.g.mnc6,mnc18andmnc20)that havemultipletieswitharangeofdifferenttypes ofactorsandthereforeholdamorecentral position.Incontrasttherearemanythathave relationshipswithaverylimitednumberofactors ie1or2otheractorsandthereforesitonthe periphery.alsonotablemnc5andmnc13are

examplesofactorsthataresignificantinvestors inaregionbuthavehadnoactiveengagement onskillsissuesduringthelifespanofthis research.thisisanimportantcharacteristicof thenetworkforitdemonstratestherealityofthe networkinthatsomeactorsmaytakeon observerrolesorbecomeinactiveasthe dynamicandprioritiesofthemembers themselveschange. Centrality and Density anactorinanetworkisconsideredprominentif itstiestootheractorsmakeitprominent.one formofprominenceiscentralitywhereanactor hasmanyconnectionstoothers.onemeasureof centralityisthenumberoftiesanactorhaswith

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othernetworkmembers(wassermanandfaust, 1994).muchoftheresearchoncentralityhas focusontheinter-organisationalrelations amongstprivatefirms.therelationshipbetween governanceactorsandprivateactorsislesswell documented.however,theevidencefrominterorganisationalanalysisshowsthat‘centrality increasesperformance’(tasi,2001,2002).the higheranorganisation’scentralitythegreaterits absorptivecapacityi.e.itabilitytolearnfromand utilisetheinformationitaccesses(george, Zahra,wheatleyandkhan,2001;cohenand levinthal,1990). anotherimportantcharacteristicofanetworkis theextenttowhichitsmembersareconnected

toeachother.onemeasureofconnectednessis density– anetworkwithcompleteclosureisone wheretheactorsareconnectedtoeachother. thereforedensityprovidesameasureoftheties betweenactorsinthenetwork.coleman(1988) suggeststhatwheremembersofthenetworkare veryclosetoeachotherthentrustishigherand transactioncostsarelowered.thesetypesof networkshavebeenassociatedwithincreased knowledgesharing(rowleyetal2000)and enhancednetworkperformance(ahuja,2000; uzzi,1997). analternativemeasureofconnectednessiswhat arereferredtoasstructuralholes.coleman (1990)arguesthatstructuralholesarethe oppositeofdensity.Inotherwordsthisoccursin anetworkwherethereisaholebetweentwo actorswhicharebothconnectedtoathirdactor, butnotconnectedtoeachother(Burt,1992). theactorthatcanbridgethestructuralholecan leverbenefitsviaaccess,timingandreferrals. somehavearguedthatratherthanstructural holesanddensitybeingoppositestheyarein factcomplementary(Burt,2000;reagansand Zuckerman,2001).theargumentsuggeststhat organisationsneedtoaccessinformationand/or resourcesoutsidetheirgroup,buttheindividual membersofthegroupneedtosharethe informationwitheachotherinordertogain benefitsfromit.whenthereiscompetition outsidethegroupthenstructuralholecreate opportunitiesforsocialcapitalamongthosethat canspanthestructuralholes.Incontrastwhen collaborationisneededwithinthegroupthen closurecanhelpcreatesocialcapitaltodeliver collaboration.Insum,socialcapitalisan importantmechanismthroughwhichresources areleveragedbuttheconditionsunderwhich theyoperatecanvary. thevalueofclosureandstructuralholeshasalso beenfoundtobecontingentonthenatureofthe knowledgebeingexploredinthenetwork.

specifically,wherenetworkmembersare attemptingtoexploitknowledgealreadygathered thenclosureinnetworksismoreproductive.this forexamplecouldbereflectedwherenetwork membershaveidentifiedacompetence developmentneedandgroupofinterestedfirms areworkingcloselywitheducationalproviders andfunderstodeliveranintervention.Incontrast, ifthenetworkisconcernedwithexploration strategieswheretheobjectivesandoutcomes arenotyetcrystallisedthenstructuralholesand lessdensityispreferableasitenables informationfromoutsidegroupboundariestobe accessed. figure2helpsusexplorethecentralityand connectednessofnetworkmembers.herethe numberoftiesanactorhaswithothersis reflectedbytheirsizeonthegraph.thuswhilst thenetworkislargeallmembersarenot connectedtoeachotherbutinsteadthere appeartobemultiplecoregroupsorsubnetworkswithintheoverallnetwork.these subgroupsaremorecloselytiedtoeachother thantheyaretiedtoothersubgroups.for example,thereisasub-grouparoundnatgov6, andexaminationwhichorganisationsaretied togetheritsuggeststhissub-groupisprimarily concernedwithscoping,developingand planningskillspolicy.specifically,thesub-group involvesarangeofactorsincludehigher educationalbodies,significantmncsandsector orskillsgroups. thereisalsoasubgrouparoundmnc18which reflectsthemncsrelationswithpoliticalactors andlocalskillsproviders,employerassociations. however,althoughtherearesubgroupswithin overallnetworkitisrelevanttonotethatnoneof thesesubgroupsareisolatedwithintheoverall networks.Itcouldthereforebearguedthatthe overallrhcdnetworkhasmultipleshubswhich reflectdifferentiationintheresources,power,and interestsofeachhub.

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statisticalexplorationoftherelationships underpinningthesenetworksindicatesthat subnatgov3(i.e.therda)isthemostinfluential inthesensethatithasbyfarthegreatest numberoftieswithotheractorsinthewhole networki.e.32directtieswithotheractors specificallyonskillsissuesimpactingonfdI,this translatestoconnectionswitharound40%of thewholenetwork.natgovisalsoasignificant sourceofinfluencehave22networkties correspondingto28%oftieswithinthenetwork. otherkeyactorsaresubnatgov9(newlep structures)with12ties(15%ofthenetwork); sectorskills2with16ties(20%ofthenetwork); andmultinational6with12ties(15%ofthe network),multinational18andmultinational17 withround10%ofthetiestootheractors. generallythosewithmuchhigherlevelsofties andthosewithveryfewtiesarepredictablein thebehaviourpatternsi.e.theyarelikelyto sustainhighorlowlevelsofbehaviouroverthe longer-term.howeverthosewillmediumlevel tiesasinthecaseofthemultinationalsorthe newlepstructureswewouldexpecttobemore difficulttopredictandcouldstrengthenor reducetheirtieslong-termdependingonarange ofnetworkfactorsfromavailableresourcesto transactioncoststotrustrelations.giventhis policynetworkisundergoingsignificant readjustmentwiththedemiseofsomepolicy actorsandriseofnewpolicyactorsthereisa largegroupofnetworkmemberthatmay continuetoengagebutcouldequallydisengage iftheconditionsarenotperceivedasconducive. whatisalsoclearfromthegraphicaland statisticalanalysisistheinfluentialroletherda hasundertakenwithinthenetworkintermsof tiestootheractors. thedensitymeasureconfirmsthatoverallthe networkisnotconstitutedofclosedrelations wherealotofthenetworkmembersaretiedto eachother.hereoveralldensityofthenetwork was.02where1representscompleteclosureof

figure2:graphicalrepresentationofthedifferingdegreesofinfluenceofnetworkactorsbasedonthenumberoftieswithothernetworkactors.

thenetwork.networkdensityisthusverylow.It isalsopossibletoexaminethedensityofthe networkstieswithineachofthegroupsof networkactorssuchasthenationalpolicyactors orthesub-nationalgovernanceactors.herethe densityfiguresshowthatdensityisgreatest amongthesectorskillsgroupwherethenumber ofactorsisalsoverysmall(density.3),followed bythesub-nationalgovernancegroup(density .06)andthenationalgovernanceactors(density .05).networkdensityamongtheactorswithin theothergroupswasmuchlower.thusoverall thepolicynetworkiswiderangingwithalotof actorsbuttherelationshipsbetweenthese actorsareloose.Itcouldbearguedthatthisisa

preferablestructureforapolicynetworkwhereit isimportantthatasmallnumberofactorscan linktolargergroupstosharingordisseminating knowledge.Butequallythedevelopmentofsubgroupscouldbeanefficientmeansthrough whichcompetingprioritiesbetweengroupsof stakeholderscanbemanagedacrossgroups. alsothosegroupmembersthatsharepriorities candevelopclosedrelationswheretrustcan facilitatespeedyandinnovativesolutions.this issueofthebenefitsofsubgroupsandtheir structuresisexploredfurtherthroughfigure3. Infigure3wefocusonthetiesofonespecific networkmembersubnatgov3(ietherda). withinthissub-grouptherdaholdsacentral

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positionhavingthelargestnumberoftiesthan anyotheractorinthegroup.however,overallthe densityofthesub-groupislowat.16.thisis becausemanyoftiesarenotclosebutinstead reflecttheclassic‘star’shapewherebyasingle actorhasaconnectionwithmultipleothers,but theothersarenotconnectedtoeachother.the analysisrevealsthattherdaisanidealposition toactasbroker.whencomparedtotheposition ofothernetworkmembersfromtheoverall network,therdawasfoundtohavethehighest numberofpotentialbrokeringrelationsat692i.e. therewerepotentially692pairsofrelationships betweenothernetworkmembersthattherda couldbroker.

figure3:graphicalrepresentationoftheregionaldevelopmentagenciesconnectswithotheractorsintheregionalhcdnetwork3

wecandrilldownfurtherintheanalysisby examiningthetiesbetween14membersofthe widernetworkthatdescribethedirectionofthe relationstheyhavewitheach.Intermsof directionwemeanwhetherthenetworkmember isasourceofinformationorareceiverof information.asmightbeanticipatedthedirection ofexchangesbetweenthenetworkmembersif two-way.forexample,mnc18shares informationwiththesubnatgov3(rda)andvice versa.thecentralpositionoftherdareinforces itspositioninconnectingactorsthatwouldnot otherwisebeconnectedtoeachother.Inother

wordstherearealargenumberofstructural holesaroundthelefthandsideofthegraph. however,ontherightofthegraphwecansee potentialstructuralholesbeingfilledbythe sectskill2(inthiscasearegionalsemtagroup). figure4:graphicalrepresentationofthedidactic relationshipsbetween14networkmembers

Conclusion oneofthebenefitsofthesocialnetworkanalysis methodisitsabilitytocaptureinvisualformthe complexsystemicrelationsbetweenawide rangeofactors.theanalysisherehadillustrated

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theexistenceofsub-groupsthatarelooselytied together.wemighthaveanticipatedmuchhigher levelsofdensitywithinthenetworkreflecting tighttiesbetweengovernanceactorsand multinationalsinaddressingskillsissues. however,itisveryapparentfromtheexample examinedherethattheterrainischaracterisedby asmallnumberofclosedtiesandahigher degreeofopenties.Inthesecircumstanceswe seeasmallnumberofgovernanceactors performingabrokeringrole.Itremainstobeseen whethertheinstitutionalrestructuringcurrently underwaywillgeneratedifferentrelations

figure4:graphicalrepresentationofthedidacticrelationshipsbetween14networkmembers

betweengovernanceactorsandprivatefirms. however,wherebrokeringrelationsarecommon wealsotendtofindasingleorganisationandits membersbuildupsignificantinstitutional knowledgeregardinghowtoleverageresources withinthenetwork.thisagainhasimplications duringstructuralchangewithregardtowhere thisknowledgegoesandthetimethatmaybe takentogeneratenewinstitutionalknowledge amongpartners.theinterviewevidencewould suggesttheinstitutionsarealready accommodatingtothisneedthroughthe movementofpersonnelfromoldinstitutionsto new.

thelackofdensityandbyimplicationthelarge numberofstructuralholeswithinthenetwork mayreflecttheresourcedynamicsunderpinning tieswithinthisspecificnetwork.muchofthe activitywithinthisnetworkisdrivenbyfunding. thenetworkstructureappearstooperateasa meansofmatchingfundingtosmallnumbersof actorsratherthanwholegroupsofactors.once thefundingfinishesthetiesarebroken.equally, competitionbetweenthemultinationalsmaybe moredominantthanthedesireorneedfor collaboration.therefore,aslongasaperception ofcompetitionbetweenactorsforlimited resourcesisprevalenttheexpectationfor

PAGE | ThirTy

collaborationandclosedtiesamongnetwork actorswillnotbemet.

Endnotes 1

egonetworkscanbecollectedthroughsurvey orinterviewwherealistofnetworkmembersis generatedandthenindividualsareaskedabout theirtiestothoseonthelist. 2 graphbasedontheegonetworksof14focal organisations

3 graphbasedontheegonetworkofthe regionaldevelopmentagency

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ChAPTEr 5 S U M M A R y F I N D I N G S F R O M T H E I N T E R N AT I O N A L P R O J E C T

Introduction Inordertogainafullerunderstandingof relationsbetweensub-nationalgovernance actorsandmncsunderavarietyofeconomic andpoliticalsystems,ourresearchhasbeen replicatedacrosssixotherregionsinthreeother countries.thesewerecanada(Quebecand ontario),Ireland(shannonandthegaeltacht region)andspain(asturiasandthemadrid region).withtheexceptionofIreland,research isstillongoingatthetimeofwriting.thischapter thereforebrieflysummarisesfindingstodate.

Spain spainisanotablylessliberaleconomythanthe othernationsundercomparisonhere.Italsohas amongthehighestdegreesofregionalpolitical decentralisationineurope.spainisdividedinto 17autonomouscommunitieswithdirectly electedparliamentsandgovernments.these haveextensivecompetenciesinplanning, transport,cultureandsport,agriculture,health, educationandsocialassistance,aswellas economicdevelopment.referencesbyour intervieweesto“thegovernment”frequently meanttheregionalratherthannational government.thedriversfordecentralisation remainarepoliticalratherthaneconomic,related to(continuallyrenegotiated)compromises betweenthenationalstateandsub-national politicalactors;thelatterare,inmany autonomouscommunities,eitherstrongly regionalistorsometimes,toagreaterorlesser degree,separatist. whilewehavesomeevidence,particularlyfrom themadridregion,oflargemultinationals seekingpoliticaldealswithnational

governmentalactors,thebroaderpictureisthat publicresponsibilityfortheattractionand retentionoffdIisheldatregional(autonomous community)level,withthenationalstatehaving relativelylittledirectinvolvement.substantial fdI,particularlyintheautomotivesector,dates backintothefrancoera(1939-1975).the moderncompetitionforfdI,however,dates fromspain’sentryintotheeuropeancommunity in1986.sincethen,therehasbeenintense geographicalcompetitionforfdI.while,as elsewhere,thereisobviouslycompetition betweenlocalitieswithregions,and,wherelocal authoritiesarerelativelypowerful,suchasthe cityofmadrid,thereremainsthepossibilityof conflictsofjurisdictionbetweenlocaland regionaldevelopmentagencies,thelocusofthis competitionisprimarilyregional.this competitionhascentrednotonlyonnew investment,butalso,andinsomeperipheral industrialregionssuchasasturiasparticularly, onmaintainingemploymentwithinlarge privatisedplantsintheextensiveformerly nationalisedsector,whichhavebeenextensively rationalisedastheirownershiphaslargely passedintoforeignhands.regionshaveinward investmentagencieswithsubstantialdaytoday autonomy,butunderthecontrolofregional governments.thesearefairlypolitical institutions,withtheirleadershipsubjectto changefollowingthepoliticalfortunesofthe regionalgovernment. giventhesubstantialautonomyofregional governments,regionshavebeenabletoseek fdIthroughintra-nationalvariationsinelements ofthesub-nationalbusinesssystemsfacing potentialinvestors,andtoadoptdifferent

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approachestowidercoordination–madridis theepitomeofneo-liberalisminaspanish context,whileasturiashas,sincethe1980s, largelyfollowedaformof‘business-friendly socialdemocracy’,withemployers’associations andtradeunionshavinganimportantrolein governanceoftheregionalpoliticaleconomy. thereisobviouslyariskthat,withinacountry comprisedofwhatsomeofourinterviewees regardedas17‘mini-states’,suchcompetition becomes‘zero-sum’,basedoncompetitivegrant orloanoffersfromthepublicsector.heavy relianceongrantsinthe1980sand1990s,and thesubsequentclosureofsomeplantswhich werepubliclyfunded,hasindeedcontributedto thenegativeimageofmncsamongmuchofthe spanishpublic.onabroaderbasis, intervieweesinvolvedinthedefenceofexisting largeplants,particularlytradeunions,werewell awareoftheproblemsofpotential‘regime shopping’withinspain. atthesametime,foreignmncsingeneraldid appeartobemoreintegratedwithinregional businesssystemsinspainthanwasthecasein theuk(orIreland).Ingeneral,strategic initiativesatthesubsidiarylevelseemedto receivefairlyeffectivesupportfromgovernance actors,eitherthroughregionalinwardinvestment agencies,ormoredirectlythroughrelationswith regionalministries.Inasturiasinparticular, subsidiary-levelactorshadbeensuccessfulin attractingglobaloreuropean-levelmandates, includingsignificantresearchanddevelopment activity.theexistenceofclearandrelatively powerfulregional-levelinterlocutorswas generallyacknowledgedasimportanthere. additionally,inacomparativeperspective,the

existenceofstrongregionalidentitiesdidseem tobeanimportantfactorincreatingconsensus andrelativelystrongtiesbetweentheactors involved.theimportanceofregionalgovernment itselfcontributestotherebeingaconvergence betweenthegeographicalscopeofpolitical governanceareasandregionaleconomies, althoughthisoperatesinanon-identicalway acrossspain;asturias,forexample,isfor reasonsofphysicalgeographyaveryselfcontainedregionaleconomy,withlittleinterregionalcommuting,forexample,whilemadrid, asthecapitalregionattractingsubstantial headquartersaswellasindustrialfdI,hasmuch morefuzzyeconomicboundaries,perhaps makingregionalactionshardertocoordinate.

whilethequalificationsandskillsofthespanish workforcewithinmneswerenotgenerallyseen asproblematic,managersdependenton relativelylocalisedsupplychainsdidhave concernswithentrepreneurialandmanagerial capacitywithinthe‘industrialtissue’ofsmaller enterpriseswhichoftenhadpreviouslyfairly captivemarketsinnationalisedenterprises.this wasalsoaconcernofinvestmentagencies, particularlyinthemoreindustrialeconomyof asturias.thisdidleadthemanagersofsome subsidiaryunitstoengageinqualityinitiatives withindigenousfirms,throughopendays, membershipofqualityclubs,etc.,goingbeyond immediatemarketneeds,onafairlyad-hoc basis.

whilecollaborationwithhighereducation institutionswascitedasbeingofimportancein someinvestmentdecisions,itwouldthoughbe anexaggerationtoseespanishregionsas examplesofstrongregionalinnovationsystems. mncs,particularlythoseoutsidethegroupof foreign-ownedformerlynationalisedenterprises, werenotveryactivelyembeddedwithskills institutions.Inotherwords,theproductive systemsofmneswerecreatedatoneremove fromformalqualifications,andemployment systemsoftenatoneremovefromnationaland regionalindustrialrelationsactors,withaheavy relianceonfirm-basedsystems.thus,as previousresearchonemploymentrelationsin mncsinspainhasfound(e.g.ferneretal 2001),theapparentlydenselyinstitutionalised frameworkofspanishemploymentisinfactvery malleableasappliedtomnes;particularly amongnewentrants,regionalorsubsidiary-level compromisesallowedforthecreationofvarious formsofnon-unionhrmorofmicro-levelsocial partnershiparrangements,bothofwhichwould beextremelydifficulttoestablishinlarge spanish-ownedfirms.

Ireland Ireland,perhapspartlybecauseitismuch smallerthantheothertwocountriesconsidered here,hasstronglycentralisedpolitical administration,with94percentofpublic expendituredecisionsmadeatanationallevel (o’Broinandwalters2007),andafragmented sub-nationalinfrastructure.whileboththe regionsinwhichwecarriedoutfieldworkhave economicdevelopmentagencies,theirremitis somewhatlimited.whatismostdistinctiveabout Ireland,however,istheweightoffdIwithinthe economy.thisisdrivenbyalong-heldpolitical consensusoveranfdI-drivenindustrialpolicy, withsupportforlowcorporationtaxand liberalisedtradepoliciesextendingthroughout thepoliticalclass. thus,certainlycomparedtoengland,and despitefragmentedsub-nationalgovernment, IrelandhasanarticulatedfdI-orientedbusiness system.thustheattractionandretentionoffdI inIrelandoperatesviaahierarchy,witha predominantlynationallevelorientation.the nationalinwardinvestmentagenda,Industrial developmentauthority,Ireland(IdaIreland),has anextensiveremitandisrelativelypowerful;this tendstooverrideregionalfocus,aswherefdI

PAGE | ThirTy ThrEE

locateswithinIrelandisnotaprimary considerationforIdaIreland.Belowthis national-leveltier,highereducationinstitutions andnetworksofsupplychainfirmsoperateasa secondarybodyofinstitutionscentraltothe attractionandretentionoffdI.thesub-national levelsubstructure–localandregional government,thelocalofficesofIdaIreland, regionaldevelopmentagencies–hassomerole inlocalnetworkingandaccesstoresources,but overallhasalwayshadamuchmorelimitedrole. withinthisformalpicture,Irelandisalsomarked bythedistinctiveimportanceofinformal networking–bothamongmncs,among institutions,andattheintersectionsbetweenthe two-atthesub-nationallevel.Institutionalaction tendstocoalesceinrelationtofdI.Institutions tendtoadoptahomogenousperspectiveonthe roleandimportanceoffdItonationalandlocal economies,andthussystematicallyengage, bothformallyandinformally,toencouragea positiveenvironmentforfdI.Institutional engagementwithmnesoccursbothona personallevelandaformalinstitutionallevel,to enhancepositiveinteractionsandestablish goodrelationswithinthesubnational environment.finally,thereisevidenceofmncs engaginginpositive,informalorsemi-formal networking,namelycollaborationonwinning newmandatesandinvestment,sharingbest practiceoronissuesofcommoninterest,such asinfrastructurewithinthesubnationalspace.It appearsthereisasignificanttendencyformnc subsidiariesinIrelandtointeractwithotherIrish subsidiariesinordertoenhancetheirpositionto corporate.additionally,theinformalrelationships oflocalsubsidiarymanagerswithinandbetween mncsinthesubnationallocationoffera significantcontributionthroughtheinformal transferofknowledge,accesstounique resourcesandpersonalnetworking.thissortof activitywithinmncsappearstogowellbeyond whatisfoundelsewhere.

thisispartlyaneffectoftheexistingweightof fdIwithintheeconomy,andtheconcentration ofmanagerialtalenttowardstheforeign-owned sector.Intervieweesrepeatedlyarguedthat,over time,Irelandhaddevelopedacadreofmanagers whohadbecomeschooledinanmne environment;theyhaddevelopedskillsand politicalacumen,notonlyontechnicalissuesof managementbutalsoindevelopingand influencingcorporatedecision-makers,attracting newmandatesandgenerallyembeddingmncs moredeeplyinIreland.thisisalsoaffectedbya particularformofoverspillresultingfroma patternofformermnemanagerssettingup supplychainoperations. fdIinIrelandisfairlystrongly‘clustered’ona sectoral-regionalbasis.thereishoweverno evidenceofadeliberatepolicytostrategically produceclustersinIrelandbutrather,thenatural andorganicgrowthofparticularsectorsin particularlocationshasbeenidentifiedby institutionsandnowoffersasourceof advantage.arangeofinstitutionshavenow adoptedtheperspectiveofclustersinIreland, withIdaIrelandusingthepresenceofsectoral clusteringasamarketingtooltoattractnew investment.thirdleveleducationalinstitutions arefosteringstrongresearchlinkswithlocal industrytoenhanceresearchcapabilitiesand skillsdevelopment.also,localindigenous industryisbeingpromotedbyotherinstitutions tocreateasupplynetworkintheregion. therefore,whileclusteringinIrelandwasinitially serendipitous–associatedlargelytothe availabilityofresources–thepresenceofa clusterinalocationhasbeenidentifiedbylocal institutionsandiscurrentlybeingadoptedasa potentialmeansofattractingandretaining investment.thepresenceofstrongpersonal relationshipsbetweenindustryactorsand managerswithinthesubnationalenvironment hasbeenrecognisedasasignificanttoolinthe transferofknowledge,developingsubsidiary

portfolioandembeddingthesubsidiarywithin thelocation. Insummary,intheformalspherethenational investmentagencyIdaIrelandisofover-riding importance.thisorganisationinmanyways reflectsanationalconsensusonattractingand retainingfdIinIreland.forallsignificantactors, whetherspecificallymandatedtodosoor otherwise,puttingonthe‘greenjersey’and helpingthiseffortisimportant:whileissuesof theintra-nationaldistributionofinvestmentare notabsent,theyareofsecondaryimportance. thisverystrongconsensusalsosomewhat overridesthe‘skillsecosystem’roleofsome institutionalactors,withsolutionssoughtmore bydirectnetworkingratherthan,asismorethe caseinengland,navigatingtheformalskills system.

Canada canadaisbroadlyaliberalmarketeconomyby anyeuropeanstandards.however,itisnotably less‘liberal’withinanorthamericancontext, withalargerwelfarestateandasomewhatmore employee-friendlyemploymentsystem.outside thelargenaturalresourcesector,canadian provincescompeteforfdIonthebasisofhigh qualitygeneraleducationandvocationaltraining. Interviewsalsorevealedthatrelativelyopen federalimmigrationpolicieswereimportantin attractingfdIbyincreasingthepossibilitiesof attractinghighlyeducatedandskilledworkers; thiswasparticularlythecaseinontario,whichis inverydirectcompetitionforinvestmentwiththe northernunitedstates.overallthough,the concentrationofgovernanceactorson developmentthroughforeigninvestmentwas perhapssomewhatmoremoderatethaninthe europeaneconomiesexaminedhere.InQuebec, inparticular,theprovincialstate’sdevelopment strategies,whileencouragingfdI,remainedpreoccupiedwiththedevelopmentofinternationally competitivelocalfirms.

PAGE | ThirTy FOUr

theprovincesofcanada(ontario,Quebec, etc.)have,byanystandards,anextremelyhigh levelofautonomyovermostdomesticaffairs. provincialgovernmentsarethekeyactorswith regardtofdIgovernancepolicy,andalsohave substantialautonomyoverissuesrelatedto employmentandskillsgovernance.Beneaththis, sub-provincial‘regions’haveverylittlepolitical autonomy. themainlocusofpoliticsinQuebecis separatismvs.federalism.thisisimportantfor tworeasons.first,provincialstateattemptsto reinforceaQuebecoisnationalidentityextendto thefieldofeconomiccoordination.second, electorally,conventionalconservativepartiesare blockedfrompower.Quebecconsequentlyhas pursued(atleastinanorthamericancontext) relativelysocial-democraticpolicies.equally institutionalisedrelationsbetweenemployers’ organisationsandtradeunionsonmatterssuch asskillsaremuchdenserinQuebecthanin ontario.Ingeneral,ontariopursuesamore conventionallyliberalapproach,withfewer attemptsatsystematiccoordinationbetween civilsocietyactors. Inwardinvestmentagencieshavearelatively restrainedroleinbothprovinces;theirremit doesnotextendbeyondtheattractionofinward investment.sub-provincialofficesofthe Quebecoisinvestmentagencyexist,buthaveno realautonomyofaction.localinvestment agencies–suchasinthehighlysuccessfulcase of‘canada’stechnologytriangle’inthe kitchener-waterloo-cambridgeareawestof toronto–emergeonanad-hocbasisinontario. theexistenceofQuebecois‘regionalpolicy’ leadstoinstitutionalisedstatesupportforlocal inter-firmcooperationinlocalisedsectorsinthe formofacluster-typestrategy.somelarge mncshavetakenleadrolesofthesesectorally basedalliancesofemployers.

Ingeneral,thecanadianworkforceishighly skilled,andbothfurthereducationcolleagues (“communitycolleges”inontario)anda successfulhighereducationsectorhavehigh degreesofcapacitytocollaboratewith business.thisisadistinctcompetitive advantage,includingformanualwork,wherethe skillsprofileisrecognisedby,forexample,auto manufacturersasbeingsubstantiallyhigherthan inthecaseofusstates.

Concluding remarks thereisaclearandunsurprisingdifference betweenthecanadianandspanishcases, wheresub-nationalgovernanceisstructurally important,andtheenglishandIrishcases.for thoseseekingtoattractandembedfdI,this allowsadegreeoflocalflexibilitywithinthe overallnationalbusinesssystem.thisallows regionalactorstocreateinstitutionalised patternsofcooperationwhichaugmentthe nationalbusinesssystem,butatthesametime sometimesriskscreatingzero-sumcompetition betweenregions.Ireland,ontheotherhand, retainsmanyofthefdI-facingadvantagesofa liberalmarketeconomy,while,throughastrong andstrategicconsensusontheimportanceof attractingandretaininginvestment,overcoming manyproblemsofcoordinationthroughrelatively informalnetworkingbothatnationalandmore locallevels.aswehaveseen,thecapacityof thisnetworkiscloselyrelatedtoan interpretationofIrish(economic)nationalidentity thatisstronglyfdI-oriented;theveryweightof fdIwithintheIrishnationaleconomycreates mutually-reinforcingeffectsinthisregard.

placeshavearguedthatthismightbeamatter ofpopulation(i.e.whatisasensiblescaleat whichtoattempttocoordinatefdIandrelated businesssystemactivities),oflabourmarket areas,ofaccordancetotheregionalidentitiesof thepublic,orofsomecombinationofthese factors.whilesub-nationaleconomicspacecan beimportantinthepotentialcreationof competitiveadvantageinattractingand embeddingfdI,theprocessoftheconstruction ofthegeographicalspace,andthelevelsofsubnationalautonomywithinit,isinherently embeddedinnationalandmorelocalpolitics. ourcomparisonsshowtheexistencebothof neo-liberalapproachestofdI(england,Ireland, ontario,and,atleastwithinaspanishcontext, madrid),andmoreactivelycoordinated approaches(asturias,Quebec).Boththese approachescan,intherightcircumstances,be successfulinattractinggoodqualityinward investment.however,itoughttoberemarked thattheliberalapproachesofIrelandand canadaarestronglysupportedbypastand currentcoordinationeffortsintheorganisationof state-fdIrelations,andintheskillsdomain(itis notableinthisregardthatconcernsaboutskills deficienciesremainfarmorecommoninengland thanelsewhere).therecentreductioninthe degreeofcoordinationofsub-national economies,alongsidethecentralisationoffdI attraction,inenglandthereforeissomethingof anuncontrolledexperiment.

theissueofscaleisimportant;forrelatively smallstatessuchasIreland,theremaybeless functionalneedforregionallevelsofnon-market coordination.withinlargerstates,furtherworkis requiredonthescaleatwhichthedevelopment ofsub-nationalsystemsismostlikelytohave someeffectiveness.Intervieweesinvarious

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