Defining your value proposition based on the assets and strengths you identified are the foundation for foreign investor targeting. This section offers suggestions for targeting strategies. Targeting strategies may involve focusing on specific countries, and on specific types of companies.
Targeting is critical to focus on those countries and investors where you have the greatest likelihood of success. With limited resources it does not make sense to dilute FDI attraction efforts by pursuing too many different countries or types of investors.
See the video below describing how Louisville, Kentucky, collaborated with Brookings to prioritize key country markets for investment.
Regions should target countries for investment based, in part, on existing foreign investors and existing connections with foreign markets.
Existing relationships with specific foreign countries or regions are an asset to be leveraged in FDI recruitment strategy. Countries where a region has these connections should be targets for FDI attraction activities. Furthermore, these existing relationships can be leveraged to generate leads with potential foreign investors.
These foreign connection assets include
- Existing foreign investors in the region
- International partnerships (such as sister cities or innovation and research collaborations with foreign entities, regions, or universities);
- Concentrations of immigrants, foreign residents, foreign students, and alumni from particular countries;
- Proximity to particular countries (e.g., Canada or Mexico, or North Atlantic markets for New England); or
- International organizations, such as foreign chambers of commerce, language schools;
- Relationships with foreign sources of supply (importers or distributors that are owned or have strong connections with foreign suppliers);
- Foreign countries or peer regions with similar clusters/sectoral concentrations and specializations.
Targeting Based on Existing Presence from Foreign Markets - NLC Report
“[To identify markets to target] communities can identify those that already have a strong local presence. A local presence signifies to potential investors that the community likely has a supporting workforce, infrastructure, market access, technologies, suppliers and services for their industry.”
*Strategies for Globally Competitive Cities: Local Roles in Foreign Direct Investment and International Trade, National League of Cities Center for Research and Innovation, p. 11
And understanding trends in global investment flows can be valuable in determining a country-targeting strategy. These trends may point to opportunities or areas of focus. For example, growth in foreign investment from major emerging markets, such as the BRICs, may cause a region to shift focus to those regions, particularly if you already have foreign connections there.
Targeting Types of Companies
Regions should also target potential investors that are attracted to a region’s value proposition. As illustrated in the previous section on regional value proposition, that might involve some of the following targeting strategies:
Examples of Targeting Strategies
|Regional Strength / Value Proposition||Potential Targeting strategies||Example|
|Sector or cluster strength, specialization||Companies in the sector or cluster, or companies that sell to or buy from the sector or cluster.||Milwaukee Water Cluster|
|Concentration of companies in a specific supply chain||Suppliers or customers of the companies in the supply chain; missing links in the supply chain||Pursuing auto suppliers to locate near an OEM assembly plant|
|Capacity for large sites||Major investment targets, such as auto plants||Golden Triangle in Mississippi|
|Shale resources with a major port||Oil & gas, petrochemical with the intention to export||Louisiana Gulf Coast|
Many regions promote the assets they have in “hot” emerging industries and technologies, such as UAV or biotech. The problem is that many other regions are taking the same approach, and so it is difficult to differentiate.
However, identifying industry trends and emerging sectors may make it possible for you to target companies and sectors that are more likely to invest. Industries that are growing, restructuring, or expanding globally — that also are interested in your regional assets — may deserve additional attention in comparison to industries that are declining or have already established their global footprints.
Observations on Targeting Strategy from an Investment Consultant
Podcast: Chris Steele, COO & President North America, Investment Consulting Associates (global management consultants)
[Question: What’s hot now?]
[16:20] “I’m always going to caution everybody with the ‘what’s hot right now’ is not necessarily what your community is going to be very good or adept at.”
[21:38] “However, the more that you can network with those that are already involved in FDI … so that you can understand the moving parts and the trends and be able to, kind of, read the barometer of what’s going on in that marketplace, the more you’re going to be able to connect [your] local strengths with the trends that are happening in that global marketplace.”
[Placeholder Brookings Market Prioritization]
WAVTEQ: International FDI consulting and technology firm advising companies on site selection and economic development organizations on how to attract FDI. Sources of data identified by WAVTEQ on p. 19 in 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:
- UNCTAD publishes the annual World Investment Report (www.unctad.org/wir) and many other publications on FDI, which can be used to identify investment trends. These publications are available for free.
- FDI databases are available from organizations such as the Financial Times Ltd. (www.fdimarkets.com) and Ernst & Young Investment Monitor (www.ey.com) that track the size and growth of the FDI market and can be used to identify target sectors (and target companies). Note that these are fee-paying subscription services.
ECORYS: “Exchange of Good Practice in FDI Promotion” (p.64-66). A “good practice” discussed in this report is identifying and targeting gaps in a local value chain. For example, a community’s primary cluster may be importing a key input. Attracting suppliers of that key input for FDI would help strengthen the local cluster. Read more from ECORYS on this practice.
National League of Cities Center for Research and Innovation, Strategies for Globally Competitive Cities.
Podcast: Chris Steele, COO & President North America, Investment Consulting Associates (global management consultants) interviewed on Regional Business Talk podcast by Ed Burghard (date?)
Several companies provide fee-based company data analytics tools that can help regions develop targeting strategies and identify companies that are growing and more likely to invest in foreign expansions:
- Research on Investment offers gazelle.ai, a business intelligence platform for economic development professionals that combines advanced analytics and human research to identify and target potential investors that have “signals” that predict growth and expansion and/or have qualified investment projects planned.
- OCO Global has its Velociti tool “that clients use to improve accuracy and effectiveness of their targeting and business recruitment. Velociti scores companies on their propensity to innovate, export, or invest….[it] feeds off a basket of 20 qualitative and quantitative indicators to derive scores on a company’s propensity to innovate, export, or invest, relative to their sector and market. The Velociti tool is connected via API to a number of leading international databases, which it harvests to build target portfolios of firms which match the clients offer and ambitions by sector, geography, size of company, or activity. This allows clients to target and recruit investment faster and far more effectively.”
“How to Identify Target Sectors for Inward Investment? Technical Methods and a New Model Based on Revealed Comparative Advantage,” By Dr. Henry Loewendahl, CEO, WAVTEQ and Glenn Barklie, Chief Economist, fDi Intelligence, Financial Times Ltd, February 2018. This publication reviews various methods used to identify target sectors for inward investment and describes a new technical method specifically designed to identify target sectors for inward investment attraction: Revealed Comparative Advantage for Foreign Direct Investment (RCA-FDI). The authors suggest that EDOs can use this approach to determine where comparative advantages exist and develop economic development strategies accordingly.
The EB-5 program is an increasingly important source of foreign investment. IIUSA, Invest in the USA, is a “national membership-based” not-for-profit association for the EB-5 Regional Center Program. Their members “account for a vast majority of capital formation and job creation in the U.S.” resulting from the EB-5 program.
Bureau van Dijk is a source of business intelligence that has some useful webinars and videos on demand, blogs, and white papers on its site. In particular, scroll down to the May 2018 webinar on “How can you use the wealth of FDI data available more effectively so you can make better decisions?”