The Role of Foreign Direct Investment in Economic Vitality

It is fascinating to me, to look at world economics through the lens of a brand builder. Take for instance the National League of City’s 1996 report, Achieving World-Class Local Economies. It outlined some of the effects of globalization on America’s cities and towns. One statement that struck me as particularly interesting was –

“Whether they are competing for production facilities, major conventions, transportation hubs, or tourism dollars, local economies are on the front lines in the global economy. And even if they aren’t directly or extensively involved in non-U.S. trade, cities and towns still must accept that the rules of the game have changed — that global competition is for real and has yielded tough, new standards by which cities and businesses are judged.”

What really intrigued me was that this report was written almost a decade before Tom Friedman first released his best selling book The World Is Flat: A Brief History of the Twenty-First Century. And yet, we failed to mobilize as a nation to capitalize on this insight and even more aggressively pursue our share of global foreign direct investment.

In part, I think the nation’s inertia is related to the fact that America’s share of global foreign direct investment was growing in the latter half of the 1990’s. Everything seemed fine, so why mess with a good thing? Fast forward to November 2005 and Joseph Cortright, at the time VP and economist with Impresa Consulting, shared his thoughts in an NLC forum and predicted “The era of effortless superiority is over” because other countries are becoming more competitive with the United States and their workers more skilled than they used to be.

Today, Brand America’s share of foreign direct investment is below 20%. This compares poorly to the late 1980’s when our share was between 35% and 45% of all global investment flows. One contributing factor is the failure to have a robust life cycle management plan for Brand America. Such a plan would have purposefully ensured the continued relevance, authenticity and competitiveness of the brand. In essence, Brand America failed to listen to the voice of the capital investor and paid a price for doing so.

This is not uncommon in the private sector either. When the voice of the customer is lost, and products begin to be eclipsed by competition, many companies have been punished in the market place and delivered lower shareholder value as a consequence. Of the original 12 companies that made up the Dow Jones Industrial Average, only General Electric is currently part of the index.

Brand building is hard work. The Strengthening Brand America Program is dedicated to helping make the job easier by sharing the principles of effective place branding and real world success models for potential reapplication. I expect the program will get more and more robust as we build a community of practitioners and experts who are willing to share what they know so America can again enjoy the benefits of accelerated economic growth and vitality.

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