Advertising Study: Upper-Middle Income Countries Muddle the Message When Competing for Foreign Direct Investment

Newswise — Advertising used to build a positive image for countries as they compete for foreign direct investment varies significantly depending on a country’s income, according to a recent benchmark study by Daniel Baack, an assistant professor of marketing at the Daniels College of Business at the University of Denver, and Rick T. Wilson, assistant professor of marketing and international business at Hofstra University.

The study, “Attracting Foreign Direct Investment: Applying Dunning’s Location Advantages Framework to FDI Advertising,” appears in the June issue of the American Marketing Association’s Journal of International Marketing. Baack and Wilson found that advertisements from upper-middle income countries, such as China, Mexico, and Turkey, tended to try to communicate too much. In the researched 546 advertisements published during a 55-month period, the authors found that this country income group seemed to be trying to differentiate itself from lower-middle income countries, which are characterized by economic and political instability, while at the same time trying to emulate high-income countries, which possess an abundance of knowledge-created assets and sound infrastructure.

Research on FDI promotion often overlooks advertising. Baack and Wilson used Dunning’s FDI location advantages framework to analyze the content of the advertising from 31 countries, which appeared from January 2007 through July 2011 in widely read business magazines in the United States: Business Week, Forbes, Fortune, and The Economist.

“Very poor countries don’t do any advertising at all, which puts them in a trap,” said Baack. “Upper-middle income countries have key barriers to investment in terms of a national branding perspective. If you think about Mexico, for instance, there are concerns around political instability and economic transformation that someone investing in Germany wouldn’t be worried about.” He said a country such as Mexico would have to communicate stability to change a widely held perception while also showing that the country possesses benefits such as technology and human capital. Baack said countries in this situation try to say too much. “They get a muddled message because they want to both get past these initial hesitancies to invest and also sound like a high-income country that has great reasons to invest.”

Regardless of a country’s income categorization, the study’s authors offer the following suggestion: “Good advertising, whether for a country or a product, begins with a solid understanding of its advantages, disadvantages, and competitive position. FDI promotion is no different. Our research offers country managers a framework in which to understand their location advantages and a method to benchmark their existing advertising program.”

The study also revealed that advertising is nearly absent during the third quarter, especially in July and August. The authors say the reason could be budgetary or could be related to the fact that fewer principles view the advertisements during peak vacation time.