Research Note: Research on Measurement and Application of International Investment Competitiveness Indices

Abstract

With the development of multinational business ties among nations, and establishment of closer bi-lateral cooperation among partner countries, international direct investment (or FDI) has begun to play a more significant role in the world economy. Moderate and large businesses serving as the drivers of the national economy of countries such as China, have been racing to achieve higher competitiveness by proactively establishing foreign branches via OFDI alongside aggressive promotion and marketing of products through international trade. In the context of OFDI, this study first of all, attempts to define international investment competitiveness index (IIC) in terms of a firm’s capability of making external investment decisions as well as operating and managing international projects (through foreign branches, and subsidiaries). The IIC puts special emphasis on the following factors: project investment and financing; technology, entrepreneurial management; and brand competitiveness relative to international trade competitiveness that primarily depends on the marketing mix. Second, this study initiates designing of illustration of three kinds of indices that may be used to measure IIC levels of the countries, sectors and firms respectively. These three indices are Investment Market Share (IMS), Investment Competitiveness (IC), and Revealed Investment Competitive Advantage index (RIC). These three indices should show international investment competitiveness from three separate perspectives: the market share, the country advantage, and the industry or sector advantage. Third, the study then applies the measurement of IIC to top ranking investing countries of the world with the available recent data. This paper reports the advantages and shortcomings of country specific FDI strategies using the results of comparative calculations and analyses. Finally, the paper explores further application of the indices in the investment management, investment project assessments, investment risk control and precautions, and investment policy making.