Foreign Direct Investment Location Strategies

Foreign direct investment (FDI) location strategies entail the analytical and strategic processes by which multinational enterprises select host sites for capital deployment, balancing economic, institutional and sustainability considerations. Core determinants include labour and production costs, formal institutional quality (regulatory ease, governance) and informal institutions (social trust, corruption). Firms also evaluate agglomeration economies—knowledge spillovers and shared infrastructure arising from clustering—alongside market size, resource endowments and energy mix quality. Contemporary frameworks extend beyond traditional cost- and institution-based models to incorporate environmental imperatives and multi-level governance dynamics, recognising the roles of national, regional and local authorities. Strategies vary from targeting global cities with dense talent pools and financial centres to investing in peripheral regions for cost advantages and emerging market potential. This integrated perspective guides policymakers in harmonising legal frameworks and infrastructure investments to attract high-quality FDI, and aids firms in navigating trade-offs between clean energy objectives, operational efficiency and local embeddedness.

Research from Nature Portfolio

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Foreign Direct Investment Location Strategies publication trend

The graph below shows the total number of articles in foreign direct investment location strategies across all publications each year (not limited to Nature Index journals).

Technical terms

Foreign Direct Investment (FDI): Investment by a firm from one country into business interests in another nation, involving ownership or control of assets.

Location strategy: The systematic process by which firms select investment sites based on economic, institutional and agglomeration factors.

Agglomeration economies: Benefits that firms obtain by locating near each other, such as knowledge spillovers and shared infrastructure.

Multi-level governance: Distribution of authority and policy responsibilities across national, regional and local governments.

Soft locational factors: Non-quantifiable site attributes including quality of life, social trust and institutional frameworks.

References

1. Analysing the Scope of Local Authorities (LAs) in Facilitating and Influencing the Sustainability of Foreign Direct Investment in Namibia: A Case Study of the Windhoek and Walvis Bay LAs. Sustainability (2023).
2. Location choice for large‐scale battery manufacturing plants: Exploring the role of clean energy, costs, and knowledge on location decisions in Europe. Journal of Industrial Ecology (2022).
3. Global cities: A multi-disciplinary review and research agenda. Journal of World Business (2021).