1. Eastern NC Foreign Direct Investment Project
Brent Lane, Director
UNC Center for Competitive Economies
Kenan Institute of Private Enterprise
University of North Carolina
Kenan-Flagler Business School
Applied scholarship to strengthen local, regional and state economic development strategies
The Carolina Center for Competitive Economies (C3E)
Kenan Institute for Private Enterprise

2. Eastern NC Foreign Direct Investment Prospects
Project Summary:
Identify foreign direct investment (FDI) opportunities in the region’s targeted industrial clusters
Key Assumption:
ENC can build FDI advantage by establishing relationships in Emerging Economies

3. Project Tasks
Task One: NCER Targeted Industry Clusters Characterization
Task Two: Targeted Clusters’ FDI Pattern Assessment
Task Three: Targeted Clusters FDI Prospect Identification
Task Four: Identify Specific Country/Cluster Thought Leaders

4. Key Research Issues
Extent of Foreign Direct Investment (FDI) in NCER’s targeted cluster
Established FDI relationships/patterns
Leading emerging foreign companies for target cluster
Countries where emerging FDI prospects are concentrated
“Thought leaders” guiding future FDI decisions in those countries

5. The Carolina Center for Competitive Economies (C3E)
Research Team
Principal Investigator:
Brent Lane, UNC Kenan Flagler Business School
Senior Research Advisor:
Michael Luger, Dean, Manchester School of Business
Strategic Analysts:
Poi-Jui Lung, UNC MBA student
Swami Shanmugasundaram, UNC MBA student
Amit Sahai, UNC MBA student
Leonid Okneanski, UNC MBA student
The Carolina Center for Competitive Economies (C3E)
Kenan Institute for Private Enterprise

6. Core Concepts
Industry Clusters Foreign Direct Investment Emerging vs. Developed Economies Capital Markets in Economic Development

7. Industry Cluster
A cluster is a theoretical network of interdependent buyers and suppliers Industry clusters consist of industry sectors (NAICS) that exhibit significant input-output linkages C3E uses a defined set of 43 national industry clusters as a means of studying a regional economy’s strengths

8. “Advanced Manufacturing” Cluster Definition
Constituent Industry Sectors
Metalworking Machinery
Special Industry Machinery
General Industrial Machinery And Equip
Electrical Equipment & Supplies
Measuring & Controlling Devices

9. Using Clusters in Economic Development
Identify “Targets of Opportunity”
Clusters suggest regional comparative advantage
Denser clusters offer greater value proposition
Emerging growth companies
Expansion of existing firms
Focused recruitment based on defined advantage

10. Foreign Direct Investment
FDI can take many forms….
Physical facility/subsidiary in another country
Acquisition of US firm
Investment in US firm
Joint venture/strategic alliance with US firm
Intellectual property license

11. FDI Motives Transplanted home-bases:
top management, R&D, and production
Scanning units:
R&D units with limited development capability
Market-seeking units:
access customer concentration
Resource-seeking units:
access specialized inputs

12. FDI Drivers Company maturity/scale Export orientation
Geographic relevance
Resource advantage
Exchange rate
Cluster value proposition

13. Emerging vs. Developed Economies
No fixed definitions; often politically motivated
“Economist” magazine:
Argentina Brazil Chile China
Colombia Czech Rep. Egypt Hong Kong
Hungary India Indonesia Israel
Jordan Malaysia Mexico Morocco
Pakistan Peru Philippines Poland
Russia Saudi Arabia Singapore South Africa
S.Korea Taiwan Thailand Turkey

14. Advanced Manufacturing
Where are they now?
1,355 advanced manufacturing firms in EUS
Where are they from?
178 of these are FDI

16. FDI Prospect Criteria Where are the next ones?
Advanced manufacturing cluster sector
Headquarters or sole location
Annual revenues > $10 million
12,150 worldwide
Emerging vs. Developed economies

17. Findings
Advanced Manufacturing is predominantly a developed economy industry cluster
majority (6,537) of AM companies are in Developed Economy countries
sizable minority (816) of AM companies are in Emerging Economy countries

18. Findings
  But not all Developed Economies have established AM FDI patterns in EUS
Germany, England, Japan and Switzerland lead AM FDI in Eastern US
Italy, France, Spain, Portugal not yet active in FDI in the cluster

19. Minimal AM FDI from Emerging Economies to date
Findings
  Minimal AM FDI from Emerging Economies to date
816 prospect companies in 18 countries
only 7 AM EUS FDI locations from Emerging Economies
only Israel has been source of more than one

20. Findings
Both Emerging and Developed Economies have substantial populations of Advanced Manufacturing FDI prospects without established patterns of Eastern US location preferences
AM FDI strategy should address both certain Developed and Emerging economies

21. Emerging Economies
Most FDI prospects with least established FDI patterns in the Advanced Manufacturing cluster:
1.      China 11.  Mexico
2.      South Korea 12.  Russia
3.      India 13.  Hong Kong
4.      Malaysia 14.  Saudi Arabia
5.      Brazil 15.  Slovakia
6.      Singapore 16.  Argentina
7.      Hungary 17.  Turkey
8.      Taiwan
9.      Poland
10.  Czech Republic

22. Developed Economies
Most FDI prospects with least established FDI patterns in the Advanced Manufacturing cluster:
1.      Italy 5.     Netherlands
2.      France 6.     Australia
3.      Spain 7.     Norway
4.      Finland 8.     Ireland
Portugal

23. FDI Prospects

24. Capital Market Actors

25. Next Steps Specific prospect identification and qualification
Market “thought leaders” targeting
Capital market “gate keepers” identification
Additional clusters application