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Paper short abstract

How do UK and EU balance innovation and security as MNEs relocate from China amid the US-China rivalry? This paper shows regulatory ambiguity functions as strategic flexibility, enabling states to secure technology transfer through negotiated outcomes while filtering investments on security grounds.

Paper long abstract

As US-China techno-nationalist rivalry intensifies, multinational enterprises (MNEs) are reconfiguring global value chains away from China through friendshoring and nearshoring strategies. This presents European states with a fundamental dilemma: how to attract technology-intensive investment while maintaining security sovereignty? This paper examines how the UK and EU employ regulatory ambiguity in FDI screening as a strategic tool navigating this tension, contributing to understanding the evolving state-capital relations in techno-nationalist globalisation.

Challenging the dichotomy between “retreat of the state" and "return of the state," I argue that regulatory ambiguity represents neither state weakness nor pure intervention, but deliberate institutional flexibility enabling negotiated outcomes. Drawing on institutional theory and international relations perspectives, I analyse how European FDI regulations serve dual purposes: filtering investments on security grounds while enabling conditional arrangements that maximise technology transfer and local embeddedness. Post-Brexit institutional divergence between the UK and EU provides a natural experiment to assess different approaches to this strategic challenge.

I employ quantitative text analysis of UK/EU investment screening regulations (2018-2024) to measure regulatory ambiguity, combined with firm-level tariff exposure and investment project data. Preliminary findings suggest regulatory ambiguity functions as strategic institutional adaptation rather than policy incoherence, enabling European states to leverage geopolitical tensions for technological upgrading. This research advances theoretical understanding of how states in advanced economies strategically respond to techno-nationalist pressures, revealing complex state-capital dynamics beyond simple intervention narratives.