Given the growing uncertainty in the global business environment, a more deliberate approach to attracting foreign direct investment in California is revealed in a new report by LMU’s Center for International Business Education. CIBE conducted its research in collaboration with the World Trade Center Los Angeles, an affiliate of Los Angeles Economic Development Corporation.
“The industry network analyses in the 2022 FDI report provide critical insights into how the state of California can use specific locations to draw a cluster of industries to maximize its FDI benefits,” said Yongsun Paik, Ph.D., professor of international business and management and director of the Center for International Business Education, and Center for Asian Business.
Foreign direct investment saw a strong rebound, rising 77 percent year-over-year to $1.65 trillion in 2021 across the globe, according to United Nations Conference on Trade and Development. Foreign direct investment in the United States increased by 114 percent to $323 billion. While these are encouraging signs, there is still a great deal of uncertainty surrounding international trade and investment. The war between Russia and Ukraine could have wide-ranging effects across Eurasian continents and beyond. Labor and supply chain bottlenecks, inflationary pressures and rising energy prices are also persisting challenges.
These factors present a pessimistic view about global FDI flows in 2022. They are more likely to decline losing the 2021 growth momentum. Such a trend makes it even more important for policymakers to devise a more innovative approach to attracting FDI to boost local economy.
“Relatively speaking, the developed logistics infrastructure, abundant talent supply, and diverse industry clusters are the factors that make Los Angeles attractive to foreign investors,” said Richard Zhen Tang, assistant professor of marketing, who led the research for the report.
This year’s WTCLA FDI report focuses on the industry network of foreign direct investment. In partnership with LMU’s Center for International Business Education, the study examines the co-location patterns among various industries from 2010 to 2020 and derives the industry network that demonstrates the synergy among those industries. This perspective reveals the interdependence among foreign direct investors in various local industries, facilitating local governments and community leaders to identify the critical industries for attracting more investment and helping foreign investors to optimize their location choice. A localized industry network is developed for each region in California and Los Angeles County.
An estimated 17,966 foreign-owned firms were operating in California in 2021. These firms are estimated to employ 630,159 residents, who earned approximately $64.1 billion in wages last year. The full effects of the pandemic on foreign direct investment can be seen as California lost nearly 500 foreign-owned enterprises and more than 73,000 workers employed by FOEs. Japan remains the largest investor in California, with 3,523 firms employing 105,053 residents and paying nearly $11 billion in wages; the United Kingdom is second, with France, Canada and Switzerland making up the rest of the top five.
LMU’s Center for International Business Education is one of 15 national resource centers funded by the U.S. Department of Education to help improve the U.S. global competitiveness through instruction, curriculum development, research, and business outreach. LMU CIBE supports the university’s mission to cultivate a “globally imaginative” campus, as well as the LMU College of Business Administration’s mission to advance knowledge and develop business leaders with moral courage and creative confidence to be a force for good in the global community.
The World Trade Center Los Angeles is a nonprofit organization that provides business assistance services to international companies seeking to locate or expand their business operations in the Los Angeles Region, and to local companies seeking to export products or services to international markets.