A stakeholder-oriented conceptual framework to measure brand equity of nation of FDI

Abstract

Contrary to the main proposition of classical economics, nation competitiveness does not only depend on fundamentals but also nation brand equity, which is the aggregate enduring perceptions held by a country's key stakeholders. Historically, many countries have managed themselves as brands of some kind, knowing what they were doing and why but not realising any association with the ideas of branding and marketing. Due to globalisation and its intense forces of competition, many governments worldwide have now awakened to the need to adopt brand management concepts to help position their countries competitively. Nations are competing to attract global finite resources like tourists, foreign direct investment (FDI), and talent, and to increase their exports and international political influence. Countries that sustainably mobilise optimal shares of these resources can guarantee their citizens' national prosperity and quality of life. The FDI market resembles a massive, open global stock market for countries. Investors in that market consider country image and reputation - the nation brand - to decide investment locations. Compared to other domains of nation branding like tourism, exports, and public diplomacy, FDI destination branding is barely researched notwithstanding its increasingly visible real-world activity. Little knowing they were partly branding, many countries have set up investment promotion agencies and offer FDI incentives. Moreover, in the last 20 years, several principal bona fide and default proprietary indexes were conceived that track countries' reputations annually. Most of these practitioner models and their academic equivalents were not designed with the notion of stakeholder-oriented nation FDI brand equity (SON-FDIBE) in mind. Nation brand equity is co-created with and co-delivered by many key stakeholders. Consequently, the SON-FDIBE conceptual framework is an emerging national economic development policy alternative that seeks to competitively position countries in the global FDI market from a multi-stakeholder standpoint. FDI has many benefits for host nations: employment creation, capital development, technology transfer, talent development, poverty reduction, agglomeration effect, and export development. National governments may unlock these benefits with stakeholder-driven FDI policies. The main objective of this study was to design and validate a stakeholder-oriented conceptual framework to measure brand equity of nation FDI focusing on South Africa and Zimbabwe as comparative cases. Drawing on their FDI inflows from 1998 and performance in over ten leading proprietary-owned nation brand tracking indices covering the last five years, the two countries are occupying unfavourable FDI brand positions. There is also a scarcity of studies that have extensively reviewed existing private and academic models, and integrated them into a comprehensive stakeholder-based theoretical model of measuring nation FDI attractiveness. To close the gap, the extant literature on nation branding, including the standard economic theory of FDI classified in this thesis as the company-based brand equity approach was reviewed and synthesised into a multidimensional conceptual framework of SON-FDIBE. The study adopted a pragmatist philosophy heavily influenced by positivism, an abductive approach dominated by deduction, and a mixed case study and survey research design. Next, a questionnaire informed by the conceptual model was designed and administered to a multi-stakeholder convenience sample of 560 respondents-209 from South Africa and 351 from Zimbabwe. Factors affecting the SON-FDIBEs of the two countries were extracted from their datasets with exploratory factor analysis (EFA) and validated with confirmatory factor analysis (CFA) and/or structural equation modelling (SEM). Four SON-FDIBE index computation techniques, two unweighted and two weighted, were then designed and test-driven on the two national datasets. South Africa's and Zimbabwe's composite SON-FDIBE values fell in the “somewhat strong" and “somewhat weak" clusters of the measurement scale respectively. This finding is consistent with the two countries' performance in existing proprietary nation reputation indices. So, the countries and other developing economies in similar positions can adopt the SON-FDIBE index as a tentative national policy formulation and evaluation tool. The study has contributed to the emerging theory of nation branding and FDI by developing and validating the SON-FDIBE conceptual framework and its four index calculation methodologies. Conceptually, the SON-FDIBE is a unique, detailed perceptions-driven country performance management model synthesised from an appraisal of more than 40 existing proprietary and academic, bona fide and default, country branding models. It is a potentially viable alternative national development policy analysis and formulation model for developing countries seeking to understand their complex and dynamic global environment, characterised by intense competition and demands for social equity and ethical national administration. Methodologically, the framework is a ground-breaking technique for measuring FDI destination brand competitiveness validated empirically from the perspective of country stakeholders by applying EFA and CFA to determine sub-indexes and their weights. The index computation methodology with weights determined by CFA is recommended because SEM is an advanced statistical technique. Managerially, the SON-FDIBE model illustrates how policymakers and destination managers can engage stakeholders to identify and evaluate policy priority areas a country should focus on to position itself competitively as an FDI destination. Using this methodology, countries can reasonably balance the usually competing interests of their stakeholders and avoid overburdening nation brand equities driven by either foreign investors, policymakers, investors and policymakers working collectively, or the resource-based view of national development management. Like other studies, this research study has its limitations too. Its findings are based on only two case studies, South Africa and Zimbabwe. These countries do not represent the breadth of economies in Southern Africa, Africa and the developing world at large. As the study employed convenience sampling to select respondents, its findings cannot be quantitatively but theoretically or qualitatively generalised. Moreover, since the study adopted the stakeholder-oriented brand equity approach to measuring nation FDI brand strength, the range of stakeholders surveyed was not sufficiently inclusive. Therefore, future researches that address these limitations and further test the model are welcome. At the same time, political leaders, destination executives, and consultants should understand that, while it can take a single event to destroy a country's reputation, it may take several years to improve reputation. Hence nation branding and the SON-FDIBE conceptual framework are not a “quick-fix" solution to country reputation problems.