Academic journal article Journal of the International Academy for Case Studies

King of the Hill: Competing for Foreign Direct Investment in 'Dixie'

Academic journal article Journal of the International Academy for Case Studies

King of the Hill: Competing for Foreign Direct Investment in 'Dixie'

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case concerns foreign direct investment (FDI) in the southern U.S., specifically automobile FDI in Alabama. Secondary issues concern the aggressive competition, using incentives and state-specific features, of southern states in recruiting foreign investment and the employment opportunities that FDI brings. This case has a difficulty level of three. It is suitable for a junior level course and can be taught in a 90 minute class with two hours of preparation by students outside of class. The case could also be used in a senior-level international management class to illustrate the reach of globalization into our corner of the world. This case can be used as a template for professors in other states in illustrating the proximity of FDI in their state and the consequences of that FDI. We propose that there is international activity in the form of FDI here or abroad as well as exporting and importing in virtually all states. A professor can use this case as is or as a template to reflect international activity in his/her local geographical area. Students should relate to the importance of international business as they see its relevance to their lives.

CASE SYNOPSIS

This case is designed to illustrate the concepts of foreign direction investment, job creation, state incentives as a factor in FDI, and the unique features that a foreign investor wants from a state. The case can be used in its entirety or in part as appropriate. For example, one could investigate recruiting methods used by U.S. states in the pursuit of FDI and the results of that pursuit. Or one could investigate the facets of employment, such as a non-union environment, educational development, and tax policies, that are particularly attractive to foreign investors. Or one could compare the incentive packages offered by various southern states and determine the return on their investment.

Countries are faced with numerous challenges as they compete for the same Foreign Direct Investment (FDI) dollars. FDI is increasing as the world evolves into a global marketplace for industry. The U.S. government continually adjusts its policies and tax procedures in order to be a viable player in the world market. The southern U.S. has become more aggressive in recruiting foreign investment by providing incentives to attract industries and communicating the unique advantages they offer to foreign companies interested in a U.S. presence. Many southern states, including Alabama, have been successful in improving their economies and providing new employment opportunities by offering the incentives required to attract FDI and industries to the area.

INTRODUCTION

Colleges and universities have tremendous interest in foreign direct investment today. FDI provides well paying jobs and internship opportunities for students as well as consulting ventures for faculty. Some students are involved in finding out more about how southern states have been so successful in attracting FDI to "Dixie," as the southeastern states are known at home. The students introduced here are MBA students who are hoping that their advanced research will give them a competitive advantage over their peers. Their names are Mary, Tom, Zack, and Sue. Go with them as they unravel the intricacies of FDI. They are assisted by employees from various economic development offices in the south who are enthusiastic about the students' quest.

Neal Wade, head of the Alabama Development office, started the students with a little background information. Let's listen in for what Neal shared with them about FDI, different countries' motives, and the major Southern United States' FDI inflow players.

In today's global marketplace, governments increasingly must compete aggressively to attract multinational companies. Companies engage in foreign direct investment (FDI) for the purpose of actively controlling property, assets, or companies located in a host country. …

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