Brent Lane, Director UNC Center for Competitive Economies Kenan Institute of Private Enterprise

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. 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 ClustersForeign Direct InvestmentEmerging vs. Developed EconomiesCapital Markets in Economic Development

7. 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 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. 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 9. 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