Just as companies use branding to market their products to consumers, countries increasingly use branding to market themselves to foreign investors. Around 90% of the executives polled agreed with the proposition that government efforts play an important part in providing a positive brand image for their countries as a place to invest. In the same vein, 82% asserted that countries ought deliberately to cultivate a brand to attract foreign investment.
But do such marketing campaigns really work? In the June 2011 issue of The Economic Journal, two Oxford University economists, Torfinn Harding and Beata S. Javorcik, review data from 124 countries and conclude that investment promotion can indeed lead to heightened foreign-investment inflows. However, the results vary widely. Investment-promotion activities appear to be most fruitful for countries seeking to counteract a negative impression about business conditions. Perhaps that is why the study found that investment promotion seems to work best for developing, rather than developed states. The strategy appears to pay off in particular for emerging markets that are seen as being ensnared in red tape and mired in misinformation.
Investment-promotion agencies (IPAs) have scored noteworthy coups. Dr Sauvant notes that one ploy is for a developing country to entice a flagship company to become a direct investor and thereby provide an unofficial seal of approval and attract other investors. For example, Costa Rica, an en vogue tourist destination for backpackers, succeeded in 1996 in persuading Intel to build a US$300m semi-conductor plant in the tiny Central American country. Almost a decade later, the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which promotes investment in developing countries, found that the project had delivered large direct and indirect economic benefits to Costa Rica, including elevating its global standing as a worthy site for foreign investment.
Canada, of course, has many more in-built attractions for investors than Costa Rica, yet it also appreciates the value of strategic brand marketing. Invest in Canada, which operates a network of foreign-investor recruitment offices that spans 150 cities around the world, is a slick marketer of Canada’s charms to foreign corporations. Moreover, all ten of Canada’s provinces and several of its major cities now have their own IPAs that tout the business attractions of their respective locales.
However, for all their successes, IPAs can only do so much. “Promotional efforts can make people take a look, but, at the end of the day, it’s all about the numbers,” contends Steven N. Kaplan, Neubauer Family Professor of Entrepreneurship and Finance at the University of Chicago. As much as they advocate promotional efforts, the survey participants tend to concur. A decent majority (60%) acknowledges that market data, such as size and growth, ultimately trump branding razzle-dazzle.
In any event, IPAs are now confronted by the same conundrum as product merchandisers: brand saturation. As Dr Sauvant notes, “Efforts to attract investment have increased globally, both through national investment promotion agencies and sub-national units, so the world investment market has become much more competitive.” That is all the more reason that, if a country has a good story to tell, as Canada does, it is worth telling it well.
