Clarifying Promotional Activities: Image Building vs. Investment Generation

Investment promotion agencies (IPAs) play a crucial role in attracting foreign direct investment (FDI) by engaging in various promotional activities. Two primary strategies employed by IPAs are image building and investment generation. Understanding the differences between these activities and their influence on FDI inflows is essential for IPAs to optimize their promotional efforts. This article aims to clarify these promotional activities and provide insights into their effectiveness.



Image Building Activities

Image building activities focus on creating a positive image of a location as an attractive site for investment. The primary goal is to change the perception of investors about the investment climate in the location. Examples of image-building activities include advertising campaigns, participation in international trade fairs, and publishing promotional materials. According to Wells and Wint (2000), once an appropriate image of the investment climate is formed in the minds of prospective investors, IPAs tend to shift their promotional efforts towards investment generation activities.



Investment Generation Activities

Investment generation activities, on the other hand, focus on facilitating and encouraging specific investment projects. The primary goal is to identify and attract potential investors, provide them with relevant information, and assist them in the investment process. Examples of investment generation activities include organizing investment seminars, providing investment guides, and offering incentives such as tax breaks or subsidies. Harding and Javorcik (2007) found that investment promotion agencies can play a significant role in attracting FDI by providing information and assistance to potential investors.



Influence on FDI Inflows

The influence of these promotional activities on FDI inflows can be summarized as follows:

- Image-building activities can help create a positive perception of a location, making it more attractive to potential investors. However, they may not directly lead to immediate FDI inflows, as they primarily focus on changing investor perceptions.
- Investment-generation activities, on the other hand, can directly influence FDI inflows by facilitating and encouraging specific investment projects. By providing information, assistance, and incentives, IPAs can help overcome barriers to investment and attract FDI.

In conclusion, while image-building activities focus on changing investor perceptions, investment-generation activities aim to facilitate and encourage specific investment projects, directly influencing FDI inflows. Both types of promotional activities are essential for attracting FDI, and IPAs may choose to concentrate their efforts on one or the other depending on the current needs and context of the location. By understanding the differences between these promotional activities and their influence on FDI inflows, IPAs can optimize their strategies to effectively attract and retain investments.