A collaboration between the Old Vic and Edinburgh's Royal Lyceum, Local Hero takes a classic Scottish film of the 1980s, sprinkles it with a new score by Mark Knopfler, formerly of Dire Straits and the composer of the film's haunting soundtrack, and adds a tougher contemporary edge to the battle between an oil company and the local people. Without ever engaging with the detail or seriousness of the environmental consequences of a large refinery appearing on the North West coast of the Highlands, or questioning the power of one man, the corporate executive to undermine or rescue an isolated community that struggles to survive, Local Hero remains a sentimental study of an idealised Scotland – one celebrated and defended by the 'blow-in' Stella (Katrina Bryan) – that resolves into a bitter-sweet homily on the virtues of belonging.

If David Greig's script lends the villagers a tougher edge – the determination of the local women to push through the deal that will open up a life of luxury is never vicious but does involve leaning heavily on the beachcomber Ben who holds out against the oil company – Knopfler's score is a pleasant fusion of folk, musical and rock'n'roll idioms. Most effective when the sentiments jibe against the tone of the music – 'Cheerio, Away You Go' has the gentle charm of a love song even as Ben dismisses the oil executive Mac – Local Hero is satisfied to present an escapist fantasy. Even when Mac (Damian Humbley) is forced to leave the village that he has come to recognise as home, the finale is a humble appreciation of the status quo.

The ensemble cast make the most of the musical's energy: the celebration of the deal at the local inn's ceilidh is lent a witty edge by the arrival of the communist Russian ship captain who combines a capitalist cunning with a romantic sense of adventure, and the attempts by Mac to convince Stella of his good intentions generate a moving combination of awkwardness and incompatibility. Katrina Bryan captures Stella's determination and idiosyncrasies without descending into manic pixie dream girl cliche, while Julian Forsythe's Ben is a consistent star-turn, defending his beach and revealing the wisdom of a man who has rejected acquisition and ambition for humility and humour.

Local Hero does lack the barn-storming energy of an outstanding number – 'A Barrel of Crude' wants to celebrate the bustling energy of the oil industry but falters as it becomes a list of the uses of oil, like a self-conscious display of research – with the emotive motifs of Knopfler's film score, especially the plaintive 'Going Home', conjuring a melancholic atmosphere. Comforting rather than bracing, and following the wistful themes of the source film, Local Hero is entertaining, heart-felt and warm, although it suggests deeper conflicts between place and capital, change and stability, idealism and reality that it fails to examine.

Royal Lyceum Theatre, Edinburgh, until Sat 4 May, then touring.