Selecting locations for international offices: A tool for scale-ups

Selecting locations for international offices: A tool for scale-ups

The article “Greenfield FDI attractiveness index: a machine learning approach” presents an index to evaluate the potential of countries for greenfield investment. The study also develops specific indexes for three relevant sectors: energy, information and communication technologies (ICT), and financial services.

Our insights we wish to share with you:

Ireland ranked fifth in the overall greenfield FDI attractiveness index presented in the study. It also appears in the fifth position in the energy and ICT indexes and third in the financial services index. The good position of Ireland in the indexes reflects the FDI-led growth model adopted in the past years, with the country becoming an important hub for Europe, the Middle East and Africa region, especially in the tech sector.

What was the approach for the research?

The overall and sectoral indexes were developed using exploratory factor analysis and automated machine learning (AML). Quantitative indicators were collected in several databases with annual data ranging from 2006 to 2019. A factor analysis was run to identify the most important features. Then AML is used to assess the relative importance of each resultant factor and generate a calibrated index. 

How might you benefit from these insights?

The indexes can be used as an assessment tool for scaling businesses that are expanding internationally. Scale-ups can evaluate the investment potential of countries and base their decision-making on a robust empirical measurement of location-choice factors.

The indexes also allow policymakers to identify gaps and policy priorities to attract foreign direct investment. They can use the overall and sectoral indexes to assess the areas in which policy actions might be necessary to overcome liabilities that may prevent investments.

Citation: Alon, I., Bretas, V. P., Sclip, A., & Paltrinieri, A. (2022). Greenfield FDI attractiveness index: a machine learning approach. Competitiveness Review: An International Business Journal.