A Roadmap for Connecting with International Investors

Ramping Up an FDI Attraction Strategy 

Attracting international investment can seem daunting, especially for economic development organizations (EDOs) new to the endeavor or with limited staffing resources. However, successfully attracting foreign direct investment (FDI) to your locale typically provides generous returns. While FDI attraction presents a unique set of challenges, at its core, it works by the same principles as domestic business attraction. Thankfully, there are federal resources, SelectUSA, and the U.S. Commercial Service, as well as state and local resources, including chambers of commerce, industrial associations, cultural organizations, international twinning agreements, and more, that you can leverage to overcome the challenges associated with FDI attraction. Ultimately, the strategies and resources for connecting with foreign investors are more accessible than they seem at first glance.

In the face of limited bandwidth and budgets, the first hurdle many EDOs face when considering international promotion is justifying the expense and the staffing. Research shows a four-to-one return on every dollar put toward FDI attraction, $3.30 in capital investment and an additional dollar of FDI simulated domestic investment. Furthermore, high-paying jobs generally accompany investments by multinational firms. Analysis of income data from tax records reveals that U.S. subsidiaries of multinational firms pay their workers 25% higher wages than their domestic counterparts.

Before locales can reap the benefits of FDI, there are three main challenges EDOs must overcome when connecting with international investors. The first challenge is building awareness about your location. The second challenge is overcoming the information asymmetries created by geographic distance, cultural disparities, and regulatory differences. The final challenge is communicating across differences in business culture.

FDI Attraction Has a Familiar Starting Point

A key milestone in domestic or international business attraction is having your location included in a company's initial screening of potential site options, i.e., getting on a potential investor’s long list. However, to do this, companies have to know about your location. For many EDOs, creating an opportunity to present their location as an investment destination proves to be a major hurdle. Echoing this issue, research has shown that investors only consider a fraction of possible investment locations, and the investment decision-making process can be subjective and biased. Additionally, information asymmetries across international borders make it more difficult for EDOs to inform investors about their locations and provide supplementary information should an investor express interest.

Given the need to develop awareness about your location and overcome communication barriers, a targeted marketing strategy that includes an image-building component is a prerequisite to landing your location on a company’s long list. However, preparing for international outreach is simpler than it seems. As building awareness and providing data are staple practices in economic development, retooling the strategies you are currently using for an international audience is a good first step. To this end, Golden Shovel Agency can assist you with developing and refining your strategic and marketing blueprints.

The importance of a targeted marketing strategy cannot be overemphasized. While casting a wide net for FDI attraction may seem appealing, a location trying to be known for everything will end up famous for nothing. Connecting with investors can become unwieldy if your efforts are pulled in too many directions. Initially, strategies should focus on three to five sectors that align with community assets. Moreover, targeting a specific subset of international investors enables EDOs to more effectively tap into SelectUSA’s and the U.S. Commercial Service's connections with potential investors abroad. The Center for Regional Economic Competitiveness offers sound guidance on targeting FDI source markets.

Image building is essential to generate awareness about your location in foreign markets. The image-building component of an FDI marketing strategy needs to present a value proposition that not only differentiates your location from its immediate competitors but crafts a distinct narrative that investors will find relevant and motivating. Distinctiveness is not just a buzzword. Its importance has been measured in branding research by Kantar and discussed in a City Nation Place seminar on investment attraction communication.

Leveraging Federal Resources

Once your marketing strategy is in place and you have decided what type of foreign firms you would like to target, some federal programs and agencies can help you introduce your location to companies in foreign markets. With U.S. Commercial Service colleagues in 75 international markets, SelectUSA can help EDOs connect directly with foreign firms via a Single Location Promotion (SLP). These events are limited to a single market, and there is a fee of $30 per hour for the time of in-country staff plus any direct costs associated with hosting the event. See the SelectUSA EDO page for more information about SLPs.

SelectUSA also offers a stateside option for connecting with investors from multiple markets. Every year, SelectUSA brings thousands of vetted foreign investors to Washington, DC, for the SelectUSA Investment Summit. EDOs can participate as attendees, exhibitors, or locations for spin-off events.

Marshaling Local Assets and Networks

EDOs can leverage many resources at the city, county, regional, and state levels to connect with investors. The first resource EDOs can take advantage of is their state’s FDI promotion strategy. As state-level promotions may factor into an investor’s interest in your location, aligning your marketing strategies and value proposition with state narratives may allow your location to capitalize on an investor’s existing positive opinions or preconceived notions.

Twinning programs are formal arrangements between two distinct localities for the purpose of deepening and expanding bilateral ties. More importantly, twinning connections have a history of facilitating international trade and investment. To this point, a recent article in GlobalTrade presents a case study of how the sister cities, Miyoshi, Japan, and Columbus, Ohio, leveraged their ties to advance trade and investment. Twinning relations are typically established on pre-existing connections. Thus, even if the twinning arrangements do not have an expressly economic component, using them as a foundation for investment promotion offers investors a network they can tap to address information asymmetries and learn more about your location. This network reduces risk perception, increases investor confidence, and expeditiously builds awareness about your location.

Similarly, chambers of commerce and, especially, industrial associations can create the same networks when they engage with their counterparts in other countries. Moreover, these types of organizations can play a critical role in bridging the differences in business culture and regulatory regimens. SelectUSA produces two tools that are useful to duplicate at the local level or complement with local information: the SelectUSA Investor Guide, a guide that addresses the most common administrative and regulatory concerns that arise when firms expand to the U.S. market, and a Service Provider Directory, which supports business investors seeking specialized services from a variety of providers. Working with chambers and associations to compile this information for your location will assist investors or site selectors in conducting preliminary research, help facilitate active investment projects, and clarify business practices and procedures for foreign firms. 

Bringing Foreign Investors to You

Connecting with foreign investors is far from effortless, but it is well within reach for many EDOs. At the federal level, SelectUSA offers several avenues for introducing your locations to investors abroad. At the local level, twinning agreements, chambers of commerce, and industrial associations can facilitate the creation of networks that can mitigate information asymmetries for EDOs and investors. Finally, connecting with foreign investors starts with knowing who you want to talk to and saying something that gets their attention. The experts at Golden Shovel Agency stand ready to help you craft the economic development marketing strategies that can start this conversation.