Capitalizing on the Global Outlook for Foreign Investment

Earlier this month, global management consulting firm A.T. Kearney released its 2014 Foreign Investment Confidence Index. The survey found that senior executives from global corporations are increasingly optimistic about the future of the world economy despite its slow and uneven growth.  Meanwhile, their top-choice for foreign investments: the United States, receiving the largest vote-of-confidence by business respondents in the survey’s 16-year history.

For the United States, foreign direct investment (FDI), either in the form of new firm openings, follow-on investments in existing facilities, or mergers and acquisitions, often brings with it higher-paying jobs, new R&D and innovation capacity, and a broader base from which to export goods and services. 

A.T. Kearney cites some illustrative big investments in the United States from the past year. South Korea’s Hankook Tires announced it will open up its first U.S. manufacturing facility in Tennessee. Kentucky attracted three new German auto suppliers. China’s WH Group acquired Smithfield Foods to increase its pork production capacity to meet growing demand in middle-class Asia. And Samsung plans to invest $4 billion in its facilities in Austin, TX to expand smartphone production.

Despite this rosy outlook, the United States cannot get complacent about its long-term prospects. With more investor choice among developing and developed markets, the U.S. share of annual global FDI has shrunk dramatically, from a high of 45 percent in 1984 to 26 percent in 1999 and then to only 12 percent in 2012. And for the first time, in 2012 and again in 2013, developing nations captured more FDI than developed nations.

In response, the Obama administration created SelectUSA within the Department of Commerce to promote and facilitate foreign investment opportunities. This, matched with a stable, well-managed U.S. economy and a predictable investment climate, will help.

But leveraging the current opportunity requires more than federal action.

Closing the deal on investment opportunities comes down to hyper-regional conditions. High-quality foreign manufacturers scour the globe for the optimal mix of assets—a vibrant innovation ecosystem, skilled labor pools, robust supply chains, quality multimodal infrastructure, and proximity and access to customers. These factors are nurtured, aligned, and leveraged in varying ways in metro areas.  The country’s success in attracting and maintaining foreign firms and capital therefore comes down to the vibrancy of the nation’s metropolitan areas and the industry clusters within them.

To help regional leaders and their state partners strategically build on their distinctive competitive advantages to cultivate and expand foreign investment, our program will release a new report tomorrow on FDI. Specifically, it will chronicle for the first time the location patterns of foreign-owned businesses in the United States and the number of U.S. workers they employ, with a focus on the 100 largest metro areas and the 50 states. For every metro area, it will show jobs in foreign-owned businesses by mode of entry, industry type, and source country and foreign city-region, giving leaders an improved understanding of what FDI looks like in their economies and how FDI integrates them into the global marketplace. It will offer recommendations on how federal, state and regional leaders can maximize the economic impact of FDI into the United States.

A.T. Kearney’s findings suggest that the global landscape of FDI is changing—and rapidly.  Only from regional assets can we ensure that the competitive proposition offered by the United States remains world beating.