Diversity Friendliness – Key To Competing for FDI

By Edward Burghard,
CEO The Burghard Group LLC,
www.strengtheningbrandamerica.com


Ed Burghard

Edward Burghard CEO, The Burghard Group LLC

When multinational corporations make a site selection decision, not only do they need to determine the potential location's ability to deliver on the mandatory project parameters, but they also have to consider the location's receptivity to foreign direct investment (FDI). A Puget Sound Regional Council paper entitled "Attracting Foreign Direct Investment To Your Community" framed the importance of a community's diversity friendliness this way – "Overseas operations are usually integrated into the management structure of the parent firm, so executives will often rotate through various locations. It is helpful if these postings are viewed not just as professionally rewarding, but also personally rewarding."

But, research has demonstrated resident views on FDI are strongly related to perceptions about the source country. If perceptions are negative, then the company is likely to experience a cultural push back that will make it more difficult to be successful. It is important for multi-national company leaders to understand how receptive a community is to embracing diverse points-of-view and people before making a final site selection decision. If they fail to take it into consideration, they may end up with unwanted operational challenges.

For example, in 1989 the Mitsubishi Estate Company of Japan purchased Rockefeller Center. But, the location choice embroiled the company leadership into an unwanted geopolitical public relations quagmire. The Japanese foreign ministry was concerned about a possible American backlash. It was a significant enough concern to prompt the Japanese government into publically urging Japanese companies to be cautious when considering purchases of US corporations and properties.

Another example was the negative reactions to a Dubai Ports World's purchase of port management businesses in six major US seaports. The controversy was significant enough that it ultimately involved a heated Congressional debate resulting in the Dubai-based company selling the businesses back to an American firm.

But, clearly not all FDI is perceived negatively. In 2012, the French company Airbus announced its intent to invest in building its first ever US production facility in Mobile, Alabama. The investment was well received at all levels. In addition, companies like Mercedes Benz, BMW, Honda and Toyota have all made successful investments in US locations. The difference between success and failure is related to the cultural attitude of the location with respect to the source country making the capital investment.

Airbus

Airbus will assemble A320 passenger aircraft, like the one shown here sporting "sharklets" on the wings for increased fuel efficiency, at its new plant in Mobile, Ala., beginning in 2015.
Photo courtesy of Airbus

Historically, assessing a location's cultural attitude toward FDI has been a real challenge. But, new research from Xavier University in Cincinnati, Ohio may make the task easier.

Professors at Xavier University have developed a quantitative research tool that evaluates locations on 5 unique sub-indicies (economic, well-being, societal, environmental, and diversity). The research study is called the American Dream Composite Index™ (ADCI powered by DunnHumby). It is a unique and robust measure of American sentiment. The data reflect how residents in a location feel about 35 different dimensions in their lives.

The American Dream Diversity Index™ measures the attitudes toward assimilation of differences in one's community. It is developed from the following four dimensions:

  1. Melting Pot – Community (Acceptance of diversity in one's neighborhood)
  2. Melting Pot – Personal and Social Identity (Acceptance of different personal and social ideas)
  3. Melting Pot – Diversity (Extent of exposure to diverse cultural experiences)
  4. Political Freedom (Satisfaction with the ability to vote feely and make political choices)

The aggregate American Dream Diversity Index and the four dimensions can provide useful quantitative insight into how "diversity friendly" a location is. As such, it can be used by multinational companies to help differentiate between US location options that are on their site selection short-list for consideration. These data do not represent the typical hype promoted by communities in the site selection process. In contrast, it represents the perception of people actually living in the location. And, as such is a more reliable indicator of reality.

The following table provides a look at the State level 2012 ADCI data. States that scored +1 standard deviation above national average, and states that scored -1 standard deviation below national average for the American Dream Diversity Index and the four component dimensions are identified.

Index/Dimension +1 Standard Deviation -1 Standard Deviation
American Dream Diversity Index HI, NM, WY, NH ND, IA, OK, AL, MS, AK, AR, SD
Melting Pot – Community WY, NM, HI, ID, NH NV, OK, ME. MS, AR, SD
Melting Pot – Personal and Social Identity HI, NH, VT OK, ID, AK, IA, UT, MS, AL, AR, SD
Melting Pot – Diversity DC, HI, DE, VA AL, AR, LA, RI, SD, VT
Political Freedom ID, NM, HI, NH, MT, VT, WY AL, RI, DE, MS, SD, ND, AK

For example, if a location in New Mexico (NM) and one in South Dakota (SD) were on the short list for consideration, based on these data you would conclude the locations present a meaningful difference in diversity friendliness. There are two dimensions where the difference is most pronounced. The first is acceptance of diversity in neighborhoods (Melting Pot – Community). This may signal that it may be easier for company managers transferred to a location in New Mexico to integrate themselves and their family into the community. The second big difference is in the ability to vote freely and make political choices (Political Freedom). This may signal that it will be easier to work with the political structure in New Mexico to resolve business challenges. At a minimum, these differences suggest areas worth additional evaluation and consideration before making a final location decision.

The ADCI data is currently available on a State level for calendar 2012. In addition to a State level update, Xavier University is also working on making MSA level data available for calendar 2013. However, if a multinational company is in the process of evaluating locations in the US for site selection, it can work directly with the team at Xavier University to do a special run of the study to generate data to provide insight into the location’s diversity friendliness.

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Calendar

Forthcoming FDI Events

The WORLD FORUM for Foreign Direct Investment 2015
07 - 10 February 2015
To be held in Sharjah, United Arab Emirates

Spring Janus Forum
01 - 04 March 2015
To be held in Amelia Island, Florida

Trust Belt Conference
31 May 2015 - 03 June 2015
To be held at the Hyatt Regency Columbus

FDI International Training Seminar
08 - 09 June 2015
To be held at The Apex City of London Hotel

FDI in Financial and Professional Services Seminar
10 - 11 June 2015
To be held The Apex City of London Hotel

FDIA Summit
27 - 28 October 2015
To be held in London

The WORLD FORUM for Foreign Direct Investment 2016
03 - 06 April 2016
To be held in San Diego, USA

FDI TRAINING SEMINAR
07 - 08 October 2014
Held in Vancouver at The Pan Pacific Hotel (COMPLETED)

FDIA Breakfast Meeting
18 - 18 June 2014
Held at The Union League of Philadelphia, USA (COMPLETED)

The WORLD FORUM for Foreign Direct Investment 2014
16 - 18 June 2014
Held in Philadelphia, Pennsylvania, USA (COMPLETED)