Market Attractiveness Index for FDI: Different entry modes
What is driving the move towards one mode of entry over another? For the most part, country-specific attributes create conditions that make one entry mode more preferred. However, up until this point, we have had little consolidated data on the “appropriate” entry mode for a specific country. The author, former IEMS Senior Research Fellow Dr. Nan Zhou, tries to fill this gap through the development of two national level indexes:
Overall attractiveness of a country as a destination for FDI,
Defining the “best” choice among different entry modes: joint venture (JV), M&A and wholly owned greenfield subsidiary (WOS).
The author believes that these indexes will provide managers with a preliminary guide on where to invest. The research will show which entry mode is appropriate for each emerging market. The indexes will also provide recommendations to governmental officials how to improve the overall attractiveness of their country for FDI in general, as well as for specific entry mode in specific.
The indexes show that:
Developed countries are still the most attractive places for foreign direct investment, although emerging markets are slowly catching up;
WOS is the most preferred entry mode worldwide, followed by M&A, and JV; while in emerging markets, M&A is the most preferred entry mode, followed by WOS, and JV;
The overall attractiveness of BRIC has remained stagnant. Although most countries have improved the “hard” portion of the economy, the “soft” portions still lags behind.