Brent Lane, Director

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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
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Eastern NC Foreign Direct Investment Prospects

• Project Summary
• Identify foreign direct investment (FDI)
  opportunities in the regions targeted industrial
  clusters
• Key Assumption
• ENC can build FDI advantage by establishing
  relationships in Emerging Economies

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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

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Key Research Issues

• Extent of Foreign Direct Investment (FDI) in
  NCERs 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

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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
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Core Concepts
Industry ClustersForeign Direct
InvestmentEmerging vs. Developed
EconomiesCapital Markets in Economic
Development
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Industry Cluster
A cluster is a theoretical network of
interdependent buyers and suppliersIndustry
clusters consist of industry sectors (NAICS) that
exhibit significant input-output linkagesC3E
uses a defined set of 43 national industry
clusters as a means of studying a regional
economys strengths
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Advanced Manufacturing Cluster Definition

• Constituent Industry Sectors
• Metalworking Machinery
• Special Industry Machinery
• General Industrial Machinery And Equip
• Electrical Equipment Supplies
• Measuring Controlling Devices

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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

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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

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FDI Motives

• Transplanted home-bases
• top management, RD, and production
• Scanning units
• RD units with limited development capability
• Market-seeking units
• access customer concentration
• Resource-seeking units
• access specialized inputs

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FDI Drivers

• Company maturity/scale
• Export orientation
• Geographic relevance
• Resource advantage
• Exchange rate
• Cluster value proposition

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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

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Advanced Manufacturing

• Where are they now?
• 1,355 advanced manufacturing firms in EUS
• Where are they from?
• 178 of these are FDI

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FDI Prospect Criteria

• Where are the next ones?
• Advanced manufacturing cluster sector
• Headquarters or sole location
• Annual revenues gt 10 million
• 12,150 worldwide
• Emerging vs. Developed economies

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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

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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

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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

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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

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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

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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
• 9. Portugal

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FDI Prospects
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Capital Market Actors
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Next Steps

• Specific prospect identification and
  qualification
• Market thought leaders targeting
• Capital market gate keepers identification
• Additional clusters application