IU report: Indiana has been a top destination for foreign direct investment
June 29, 2009
BLOOMINGTON, Ind. -- A new Indiana University report released today (June 29) indicates that Indiana has been one of the nation's top beneficiaries of foreign direct investment (FDI) in this decade.
Firms where a foreign investor or company had at least a 50 percent stake accounted for 4.6 percent of Indiana's total private sector employment in 2006, ranking the state ninth nationally and well above the U.S. average of 3.5 percent.
About 148,000 Hoosiers worked for majority-owned U.S. affiliates (MOUSA) two years ago, up from 140,000 in 2005.
The Indiana Business Research Center at IU's Kelley School of Business did the study for the Indiana Economic Development Corp. (IEDC). The study is based on the most recent data available from the Bureau of Economic Analysis (BEA) and FDI announcements made between 2006 and 2008.
"Lots of global corporations are looking to invest in the United States -- we're one of the largest markets globally," said Matt Kinghorn, an IBRC economic analyst and co-author of the report. "Indiana's continued success in capitalizing on that trend and drawing more than its fair share of foreign investment will be a real plus for the state."
"The business climate and work force in Indiana continues to attract foreign investment to our state," added Mitch Roob, Indiana secretary of commerce and chief executive officer of the Indiana Economic Development Corp. "This report affirms the successful outcomes of our efforts to import jobs and build relationships with businesses around the globe."
The report said that Indiana MOUSA employment grew "markedly" from 2004 to 2006. Indiana's increase of 14,000 jobs exceeded those of all its neighboring states.
Between 2002 and 2006, MOUSA employment grew at an annual rate of 2.7 percent. Indiana was one of only 20 states to see positive growth over this period, during which the national annual rate declined by 0.4 percent a year.
Indiana's total employment growth rate over the same time period was just 0.5 percent annually.
"This shows the potential that foreign firms have to be a continued source of growth in Indiana. They are adding jobs here at a much faster rate than are domestically grown firms," Kinghorn commented.
Manufacturing jobs continued to be a big part of the story, accounting for 64.8 percent of MOUSA employment in the state, the second highest share nationally behind Arkansas. U.S. affiliate manufacturers employed 95,900 Hoosiers, accounting for one of every six manufacturing jobs in the state.
Time will tell whether Indiana's high concentration of FDI jobs in manufacturing will leave the state more vulnerable in light of the current economic downturn.
"You're always looking for economic diversity, but manufacturing's been such a strength for Indiana that the state must always pursue opportunities in this sector," Kinghorn said. "The demand for goods is down now, and foreign manufacturers are going to be subject to the same pressures as domestic manufacturers."
Other highlights from the report include:
- Sixty-five percent of the state's total MOUSA employment in 2006 can be attributed to Europe. Japan was the state's single-largest source country, accounting for 22 percent of the total. Currently-available data precede the opening of Honda's $550-million production facility in Indiana, so this percentage could increase in subsequent years.
- Indiana ranked eighth nationally for the gross value of property, plant and equipment of majority-owned U.S. affiliates in Indiana. Much of this results from the considerable investment in manufacturing facilities.
- Looking forward, the report presented data on new and expanding FDI announcements and indicated that Indiana could add MOUSA 12,200 jobs in coming years. Of that total, 80 percent, or 9,700 will be involved in manufacturing. The total value of these planned investments is $7.1 billion.
- In terms of source countries, investment commitments by Japanese companies will have the largest effect on Indiana employment. Nearly 40 percent of Indiana's FDI announcements in 2006-08 came from Japan, compared to 12 percent for other Midwest states and the United States. Two investments by Taiwanese firms in 2007 were large enough to make that South Asian nation the second largest source of job announcements in the state, with 14 percent of the total.
The report incorporates data from multiple sources, including BEA, the United Nations, the Organisation for Economic Co-operation and Development, IEDC and fDi Markets, a service of the
A complete copy of the report is available online at http://www.ibrc.indiana.edu/international/pdf/fdi09.pdf.