The emerging economies of Asia and Latin America were the global story of the late 20th century/early 21st century, particularly the BRIC countries of Brazil, Russia, India and China. According to some estimates, the BRIC economies could outgrow the combined might of the G7 countries within the next two decades. As part of their development, many of these emerging economies have relied upon FDI and attracting foreign multinationals.
In the past few years, however, a new trend has been taking shape: emerging economies have been producing a number of fast-growing globally active companies. In the early stages of their development, these ‘emerging multinationals’ targeted neighbouring economies, which more often than not would have similar levels of economic development to their home markets. More recently, however, these emerging multinationals have been eyeing more developed economies, including the member states of the EU.
Outward FDI from emerging economies may bring traditional benefits, such as capital and new jobs, but due to the less advanced technological profile of many emerging multinationals, their subsidiaries often have less potential for technological and knowledge spillovers to domestic firms of host economies. Additionally, concerns about the political influence and political motivations of some emerging multinationals remain. However, the global crisis, which has seen economic growth in Europe reduced to near zero, has meant that many European and US multinationals have put their investment projects on halt. Consequently, many European countries are increasingly looking towards emerging economies for investment, the BRIC countries in particular.
The debate over whether outward FDI from emerging economies is ‘bad’ or ‘good’ has reached no great consensus, both in academic and political circles. In the meantime, there is limited research on how European investment promotion agencies (IPAs) have responded to the challenges posed by emerging multinationals. Therefore, this articles aims to list and discuss the approaches of European IPAs towards outward FDI from the BRIC economies. On the basis of the analysis of the official IPA websites of the 27 EU member states and those of nine other non-EU European countries, I have examined, compared and analysed their promotion efforts.
Talking the talk
Two variables have been central to this study: the linguistic customisation of IPA websites (ie, in which languages the website content is available) and the physical presence of the IPAs in the BRIC economies (ie, a network of representation offices).
English has emerged as the common language of the global economy, with very few non-English-speaking executives to be found nowadays. However, the role of other languages is important. Sharing a common language with an FDI partner enhances the ability to communicate, and therefore increases the chances of business being done between the countries. Languages represent a vehicle to transmit cultural values, which in turn increases familiarity and trust between negotiating partners. As for an IPA's foreign network, despite the proliferation of global information technologies, physical proximity – leading to face-to-face contact – is still important, particularly in Asian cultures.
All IPA websites are in English, as either the sole language, or in addition to the host country's local language. Other commonly used languages are German, French, Spanish and Italian. This study has examined whether websites carry information in Russian, standard Chinese or Brazilian-Portuguese. (As English is the official language of India, the country is not analysed here.) Out of 27 IPAs of EU member states, 15 have pages in Chinese, eight have pages in Russian, and five have pages in Brazilian-Portuguese (though it should be noted that one of these is the website of Portugal's IPA). Among the nine non-EU countries analysed, three of their IPA websites have pages in Chinese and Russian, and two in Brazilian-Portuguese.
Only two IPAs – IDA Ireland and the Invest in France Agency – have pages in all three languages. Invest in France is the most multilingual IPA, as its website has pages in 12 different languages, while IDA Ireland has 10. From non-EU IPAs, Switzerland's OSEC has a multilingual website, while the website of Norway's Nortrade offers pages in many different languages, including Chinese, Brazilian-Portuguese and Russian.
Of the rest of the IPA websites, various linguistic combinations are evident. Those of Austria, Cyprus, Greece, Hungary, Latvia and Poland provide information in Chinese and Russian. Many of these countries are reliant on FDI from and have historic connections with Russia. The combination of Chinese and Brazilian-Portuguese is found only in the IPAs of the Netherlands and Sweden, both of which carry a specific focus on investors in the Americas and Asia.
The IPAs of several western European economies – Belgium (Flanders), Denmark, Finland, Iceland, Germany and the UK – have pages in Chinese, but not Russian or Brazilian-Portuguese. Only Serbia's IPA has a Russian version of its website with no Chinese or Brazilian-Portuguese translations.
Walking the walk
Just as important as talking the same language as potential BRIC investors is having a physical presence in their countries. Establishing representative offices abroad is expensive, but may show that a host country means business when it comes to attracting investment from a particular BRIC. Of the 27 EU member states, the IPAs of 18 are present in a BRIC country. Of the nine non-EU IPAs, only Switzerland has such representation.
All 19 IPAs are present in China, 13 are in India, 10 in Russia, and nine in Brazil. Shanghai is the most popular location – 15 IPAs have a representative office there – overshadowing the Chinese capital of Beijing, which hosts nine offices. Moscow has 10 offices, while the Indian capital of New Delhi has nine, a figure matched by São Paulo. Mumbai, India's largest city, has six offices. The Pearl River Delta region – formed by Guangdong province (Guangzhou and Shenzhen) and the two neighbouring special administrative regions of Hong Kong and Macao – has seven offices.
IPAs will typically have one or two offices per country in the BRIC economies, though there are exceptions. UK Trade & Investment has five offices in India, reflecting the UK’s historic bonds with its former colony. Invest in Spain has four offices in China; and in addition to its office in São Paulo, it has an office in Brazil’s capital city, Brasilia, the only European IPA to do so. Hungarian Investment and Trade Agency has four offices in Russia, including in Rostov-on-Don, where it stands alone as the only European IPA. In China, Hungary has three offices; two of them are unsurprisingly in Shanghai and Beijing, and the third is in Chongqing, a major city in south-west China.
Almost one-third of the 19 European IPAs have offices in all four BRIC countries, and they are all from western Europe. The 'BIC' approach, taken by three western European countries, considers only the ‘truly’ emerging economies of Brazil, India and China, excluding Russia. In contrast, the 'RIC' approach (by Hungary only) includes only the Asian economies and Russia. The ‘Asia only’ approach, with representative offices in China and India, is pursued by three western European countries. The RC approach – taking in only Russia and China – is employed by two former Soviet republics and Austria. Lastly, three countries focus exclusively on China.
If we combine the linguistic customisation of websites and local presence, then only three European IPAs – Invest in France, IDA Ireland and Switzerland's OSEC – have both their corporate websites in all BRIC languages and local presence in all four countries. The IPAs of Belgium (Flanders), Portugal and Spain are present in all BRIC countries, but their websites do not have linguistic versions in native languages for all BRIC investors. Norway’s IPA aspires to offer content in all languages, but falls down on its local presence across the BRICs.
It can therefore be concluded that full BRIC investor targeting (of all four countries) is somewhat limited in Europe. Nevertheless, emerging economies do attract the attention of European IPAs, but in different configurations. Many European IPAs prefer to focus (both linguistic content and presence) on two or three BRIC economies.
China is the clear leader among the BRIC countries when it comes to the attention of the European IPAs. Fourteen of them (13 EU and 1 non-EU) have a distinct approach towards FDI from China: their websites provide (customised) information to Chinese investors, and they have representation offices in the country. These IPAs are mostly western European countries, more established EU member states, three ‘new’ members (Hungary, Poland, Latvia), as well as Switzerland, which is not a member of the EU. One conclusion may be that the ‘old’ EU member states display an overall positive attitude towards Chinese FDI, as evidenced by their FDI promotion efforts. Likewise, eastern European countries with strong traditions of FDI and openness to FDI tend to be more positive.
To conclude, this analysis was driven by a broad question of how European IPAs react to the rise of outward FDI from emerging economies of the BRIC countries. The results of the research on investor targeting activities of 39 European IPAs gives enough credibility to conclude that most of them made a positive decision in favour of promoting FDI from the BRICs, particularly from China.
Sergey Filippov is assistant professor in innovation management at Delft University in The Netherlands.
This article is an abridged version of Filippov, S (2012), European Investment Promotion Agencies vis-à-vis Multinational Companies from Emerging Economies: Comparative Analysis of BRIC Investor Targeting, UNU-Merit Working Paper 2012-076, Maastricht.