6.3 Place Brand Communication Strategies and Place Brand Image
6.3.2 Secondary Place Brand Communication
It was hypothesised that secondary place brand communication has a positive impact on attracting FDI that is mediated by the place brand image (H4). In other words, secondary place brand communication does not have a significant influence on the FDI of the country (β=0.166, t=1.117, p=0.264). However, as indicated, there is a significant mediating effect wherein secondary place brand communication influences FDI only when increasing the extent of place brand image (β=0.149, t=2.176, p<0.05). The identification of the full mediating effect is a novel finding wherein it has been empirically supported that only when the place brand communication strategies lead to the development of place brand image, can there be an influence on FDI inflows into the nation.
Secondary communication generally consists of the government's use of formal direct communication methods, such as marketing campaigns, press releases, speeches, and so on. As a result of their impact on market inefficiencies, Brewer (1993) discusses a variety of government measures that may influence FDI both intrinsically and extrinsically.
Marketplace inefficiencies may be increased or decreased by the same government decisions, which can lead to either a boost or drop in FDI flows. There seems to be little empirical evidence to support claims that selective government actions affect FDI inflows.
Capital investments have a favourable influence on inward FDI flows, whereas productivity restrictions placed by the governmental bodies have an adverse influence on inbound FDI flows. According to UNCTAD (1996), subsidies could only have a marginal impact on the attraction of foreign direct investment (FDI). Numerous studies demonstrate that grants do
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have an effect on site choices, particularly for export-oriented FDI, while other motivations seem to play a supporting role (Devereux and Griffith 1998; Hines 1996).
Nevertheless, Contractor (1991) found that policy decisions had little impact on FDI influx. FDI subsidies are often inefficient when the role of underlying FDI drivers is taken into consideration, according to Caves (1996) and Villela and Barreix (2002). Hoekman and Saggi (2000) also corroborate this position, concluding that while incentives are beneficial for recruiting certain forms of FDI, they do not seem to work when extended throughout the whole economy. When it comes to drawing in foreign direct investment (FDI), conventional market-related characteristics are still the most important ones, according to Nunnenkamp (2002a).
The question of whether FDI incentives are acceptable for host economies in light of the fact that they involve a transfer of resources from host nations to foreign enterprises was also addressed by Blomstrom and Kokko (2002). As a subgroup of these investigations, a number of researchers have also examined the effect of trade liberalization and economic relations on FDI inflows and discovered them to be significant factors. As Globerman and Shapiro (1999) have shown, CUFTA and NAFTA enhanced both inbound and outbound FDI in Canada and the United States. Both the external effects of economic reform on foreign investment and the direct impact of transformation in business laws associated with regional trade treaties are considered by Blomstrom and Kokko (1997). To them, tariff reductions in the area may lead to greater market expansion and more foreign direct investment (FDI).
However, decreasing external tariffs might diminish foreign direct investment in the region.
An empirical examination of FDI inflows' reaction to secondary location brand marketing tactics is presented in this thesis. It is the first effort to experimentally examine the importance of the mediating influence between secondary place brand communication techniques, place brand image, and FDI.
FDI decision-making may be influenced by numerous government strategies and policies. With regard to fiscal policy (i.e., choices on allocating government spending and determining taxation policies), it has a direct impact on FDIs since the government is in charge (Jensen, 2012). As an example, a government may implement an expansionary fiscal strategy that would give low tax rates to multinational corporations (MNCs) in order to attract foreign direct investment to an area. MNC FDIs choose locations with low or no tax burdens because they can utilize the additional after-tax earnings to either grow manufacturing capability and market dominance or improve shareholder dividends (Jensen,
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2012). As an option, the government may provide incentives to certain businesses. As a government benefit, a rebate lowers the cost of manufacturing for a company. MNCs in the industry sector are much more likely to be drawn to a territory, and hence may grow their footprint and FDI (Göndör & Nistor, 2012).
On this basis, neoclassical economics holds that policymakers should work tirelessly to make attractive investment conditions, and capitalists would naturally search out the greatest chances. Moreover, some evidence has shown that nations which devote more time and resources to promoting their investment opportunities are much more likely to attract FDI (Wells & Wint, 1990). Wells & Wint's original book, 'Marketing a Country,' was the inspiration for the development of investment promotion programs. To describe what an investment is, the categorization of procedures suggested in this work is now accepted as the universal term of reference (Wells, 1999). Many academics utilize Wells & Wint's categorisation (i.e., image-building behaviour, investment-generating function, and leading financial service approaches) when constructing an investment promotion strategy (Wint &
Williams, 2002).
According to the UNCTAD (2000) survey, most governments use a combination of incentives to achieve their investment goals. Financial incentives such as grants, subsidies, and government subsidies are more commonly supplied by developed, industrial nations since they come straight from the government's coffers, but they are less common in impoverished nations. Rewards may range from little payments to large sums. For instance, in the 1990s, the Portugal state offers monetary incentives to Volkswagen and Ford plants totaling over $250,000 per person employed, and Alabama state officials provided Mercedes-Benz with $160,000 per person employed, while Newcastle upon Tyne subsidized Siemens' plant with about $50,000 per person employed in the 1990s (Navaretti & Venables 2004). There have been studies that have shown that workers in the countries of Belgium, France, and Luxembourg get roughly 30,000 ECU in incentives. When it comes to government incentives, poorer areas are more likely to utilize those that don't involve the use of public dollars. They also tend to give regulatory incentives, such as permissive environmental, social, or labor market restrictions, according to the OECD's assessment in 2003. As part of spontaneous FDI-luring tactics, such incentives may be offered, although they are more usually provided as part of focused approaches.
The image of a place brand serves as a conduit for attracting foreign direct investment, which benefits from secondary place brand marketing. Only when place brand
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communication strategies contribute to the establishment of place brand image can there be an impact on FDI inflows into the country, according to a unique conclusion that has been experimentally validated. Few studies have supported allegations that FDI inflows are affected by government activities. Subsidies have a limited influence on attracting foreign direct investment (FDI). A wide range of government tactics and policies might have an impact on foreign direct investment (FDI). For multinational corporations (MNCs), FDI in countries with low or no tax burdens allows them to use the higher after-tax revenues to either develop manufacturing capabilities and market domination or to boost shareholder dividends. A rebate from the government decreases the production costs of a corporation.
Neoclassical economics says governments should strive to create favourable circumstances for investment, and that investors would naturally seek out the best opportunities. Countries that spend more time and money advertising their investment potential are more likely to attract foreign direct investment (FDI), according to research.