This section explains the importance of understanding your region’s strengths and developing a value proposition — or “story” about the region — that differentiates it from competing regions. Successful FDI efforts begin with this core concept.
Voice of the Practitioner
The goal of gathering data on your community is to craft a value proposition that will be most meaningful to potential investors and that will effectively target marketing efforts. A region must offer a value proposition that distinguishes its package of strengths and assets for prospective foreign investors.
To be an effective strength, a region must clearly define its assets — such as clusters — so they do not sound similar to every other region. This involves defining specifically what types of companies or sub-clusters exist or what research is occurring in the region, and pinpointing unique or specialized capabilities so a potential investor will understand if these assets are valuable to them. Many regions tout the same broad sectors in their promotional materials or websites, with no clear way to differentiate one region from another.
Specificity is critical, because only then can a potential investor determine if the companies and institutions in the region — in that sector or cluster — truly represent potential customers, suppliers, research partners, or sources of skilled labor.
In addition, strengths or assets do not usually align with NAICS code-based definitions of sectoral strengths. So a simple assessment of industry concentrations by NAICS code may not effectively identify a region’s strengths.
Finally, in developing its value proposition, a region may be able to offer a combination of assets that distinguish it from other regions. One asset is usually not sufficient to drive a foreign investors’ location choice.
Guidance on Regional Specializations
Brookings Blog: “Metro areas target true global specializations to accelerate foreign investment” This blog makes a persuasive argument that highlighting “unique specializations” is the most effective FDI strategy, including “supply chains and customers, skilled workforce, trade relationships, and research institutions…To develop a unified message that will resonate in global markets, economic development organizations need to be far more realistic and strategic in defining their specializations and advantages.” Many regions claim “to have specializations in six or more sectors, for example, when invariably some of these are aspirational, and others, like biotech and advanced manufacturing, might also be claimed as unique strengths by dozens of other cities. The metro areas poised for success in global trade and investment recognize that just one or two of these specializations actually qualify as unique on a global scale and are placing them at the core of their strategies.”
Cluster or Sector
The value proposition of many regions rests, at least in part, on identifying industries or clusters where the region has competitive strength, and then honing in on unique specializations within that cluster. Examples include:
Great Falls Development Authority (MT) Pulse Crop Fractionation
Hired agriculture industry experts to understand their particular industry expertise, which set them apart from the crowd in their marketing and branding efforts. Instead of citing generic expertise in broad industries such as food processing, their industry experts helped them identify, define, and articulate expertise in pulse crop fractionation (dried beans, chickpeas, lentils, and peas), wheat and barley ingredient processing, and others. This has contributed to the attraction of FOEs such as Nippon Flour Mills and Malteurop North America. (p.42, IERC Final Report)
Milwaukee Water Technology Cluster
Brookings blog “A tale of two trade fairs: Milwaukee’s globally relevant water proposition” discusses Milwaukee’s choice of narrowing its focus to only one cluster — water technology — for FDI attraction and the positive outcome of that choice: “…the Milwaukee 7 Regional Economic Development Partnership sent a delegation to Hannover-Messe, the world’s leading industrial technology trade fair. As put by Beverley Ferrara of the Milwaukee 7: ‘Our region came with a broad marketing message, bumping up against almost 100 U.S. metro areas that were part of the SelectUSA pavilion. And guess what? We’re all saying the same things: we have clusters around manufacturing, the right location, affordable real estate, talented workforce, friendly business climate, incentives, strong infrastructure, great lifestyle…Trying to be everything to everyone ends up being nothing to no one.’ A few weeks later, the Milwaukee 7 teamed up with the Water Council to attend IFAT, the world’s leading trade fair for water in Munich. Armed with a highly targeted message, the team came away with a very different result. According to Beverley, ‘the show was a great success — already a company is planning a site visit to Milwaukee — and cemented the concept that a globally relevant cluster, plus true specialization, equals a compelling value proposition.’”
Karyn Page, President CEO, Kansas Global Trade Services (interview): “We found that you can’t just say ‘We have an aerospace cluster’. You need to say ‘We have an aerospace –– what?’ (be more specific). In this process of working with aerospace in Kansas, we realized that our focus needed to be on helping the supply chain, not the OEM. That means we’re focused on SMEs, which then guides us in our service offering. Then we understood more clearly that within aerospace we’re looking specifically at general aviation and commercial aero structures as a specialty. Being more specific brings more accurate opportunities.”
MSP Medical Technology
Brookings blog “Metro areas target true global specializations to accelerate foreign investment”: “In Minneapolis-St. Paul … although efforts initially focused broadly on the region’s health and wellness sector, foreign-owned firms reported that its medical technology cluster gives the area a global name and drives investment decisions.”
Portland Green Cities
A Brookings report (Ten Lessons from global trade and investment planning in US metro areas”) highlights Portland, Oregon’s narrow focus on promoting “We build green cities.” “A major focus of the region’s export plan was … the “We build green cities” marketing and business development platform for architectural, engineering, and clean-tech-product firms. This narrow focus caused some unease from the outset … but by throwing its weight behind a single industry, greater Portland made a big impact, first by successfully connecting firms to major smart city and urban development projects in Japan.”
Leveraging Cluster Knowledge to Test and Develop New Technologies for Foreign Investors
Nevada has developed a unique approach to leveraging its cluster strengths, by helping foreign companies test, prove out, and take to market new technologies — leveraging the knowledge assets in key regional clusters. Click here to read the case example.
Other regions build around the related concept of supply chains, by targeting investors that are customers or suppliers to a supply chain concentrated in a region.
Best Practice in FDI Attraction in Europe - Missing Links in Supply Chain
“Identifying ‘missing links’ in domestic ecosystems (such as clusters) or corporate value chains”: “Cluster managers or Invest Promotion Agencies identify current or future ‘missing links’ in their regional clusters based on conversations with local companies that take place as a part of regular aftercare activities. Agencies ask about current and future business problems facing these companies and where they are seeking the resources to solve those problems. Targeting is then focused on identifying companies that might have the technology and/or skills to fill the identified missing link and for which an attractive business proposition can be developed.” (ECORYS, p. 64)
Some regions focus on other niche strategies or special capabilities.
Niche Strategy Example - Focus on Mega Sites
Joe Max Higgins, CEO, Golden Triangle Development — THE LINK (Mississippi), Interview: “The Golden Triangle is probably no different than other rural, southern places. Well not even southern — just say rural. We’ve got some good stuff going for us and some bad stuff going for us. But FDI or U.S. investment, we carved out a niche: large, robust sites with access to water, sewer, natural gas. Transportation is pretty good – not great, there are other places with better. We’ve carved out a niche with super projects.” (The area has large – 1,000 acre – sites that are project-ready; including Tennessee Valley Authority certified Megasites.)
Combination of Assets
Many regions offer a combination of assets to distinguish themselves from other regions.
Combinations of Assets - Examples
- Madison County, Indiana, not only has the infrastructure capacity for heavy manufacturing (power, water, sewer), but ALSO is centrally located in the country with good transportation links to easily reach millions of consumers.
- Golden Triangle, Mississippi (discussed above) has megasites AND is a low-cost area with an abundance of labor.
- A packaged sandwich manufacturer selected a site in Rhode Island for a number of reasons, including ready access to large markets on the east coast AND a shovel-ready site.
- Investors taking advantage of U.S. shale resources, who also intend to export, favored Louisiana because of its port access (shale resources AND port).
Specific Business Activities
Some regions focused on a value proposition aimed at attracting investment in specific business functions or activities that can be found in multiple industries, such as call centers, IT support, headquarters, and logistics, leveraging a set of assets that appeals to these operations (such as a skilled, available, multi-lingual, low-cost workforce experienced in call center operations).
See WAVTEQ: Millenium Cities Initiative, The Earth Institute at Columbia University; “Handbook for Promoting Foreign Direct Investment in Medium-Size, Low-Budget Cities in Emerging Markets” (p.37-38):
IERC Final Report: “International Engagement Ready Communities: Effective Practices & Determinants of Foreign Direct Investment & Export Success, Final Report”
Podcast: Chris Steele, COO & President North America, Investment Consulting Associates (global management consultants) interviewed on Regional Business Talk podcast by Ed Burghard
- “A tale of two trade fairs: Milwaukee’s globally relevant water proposition”
- “Metro areas target true global specializations to accelerate foreign investment”
- “Ten Lessons from global trade and investment planning in US metro areas”
Minnesota Department of Employment and Economic Development
- “Minnesota’s Water Industry Economic Profile: Leveraging Industry Strengths to Grow an Emerging Cluster”, September 2015
- International FDI consulting and technology firm advising companies on site selection and economic development organizations on how to attract FDI: Millenium Cities Initiative, The Earth Institute at Columbia University; Handbook for Promoting Foreign Direct Investment in Medium-Size, Low-Budget Cities in Emerging Markets, Nov. 2009
- Nordic management consulting firm, formerly known as Tendensor International: “Business Attraction Management For Cities And Regions — Handbook of strategies, tools, and activities”, 2016