رویکرد کمی برای هدایت تلاش های تبلیغاتی IPA در بازارهای نوظهور

Investment promotion agencies (IPAs) engage in a range of promotional activities with the aim of improving foreign direct investment (FDI) inflows. However, at any particular time, they tend to concentrate their efforts towards image building or investment generation. The decision of where to focus promotional efforts depends on investors’ perceptions of the IPA's location. In contrast to current methods, this paper employs an innovative quantitative finance approach that allows IPAs to speedily measure risk perceptions using real-time data. Using this approach, the paper focuses on determining whether or not the risk of nationalisation is a concern for large multinational companies in the natural resource sector. Our empirical results demonstrate that such companies are not concerned about nationalisation risk. The findings have implications for guiding the promotional efforts of IPAs, both in countries where nationalisation is a risk and in countries where changes in the political environment have reduced the risk of nationalisation.

In emerging markets, FDI is considered an essential component of economic development. Countries around the world compete intensely to attract foreign investors and IPAs carry out various activities with the aim of improving FDI inflows. While IPAs engage in a range of promotional activities, evidence suggests they tend to focus their promotional efforts at any particular time towards image building or investment generation. Image building activities are conducted to build an image of a location as an attractive site for investment. Once an appropriate image of the investment climate is formed in the minds of prospective investors, IPAs tend to shift their promotional efforts towards investment generation activities (Wells & Wint, 2000). Thus, the focus of promotional efforts depends on investors’ perceptions of the IPA's location. For IPAs in emerging markets, determining investors’ perceptions is a challenging task due to the presence of political risks that are generally not as prominent in developed markets. Moreover, a company's susceptibility to political risk can change over time due to changes in FDI policies of host governments (Oetzel, 2005). In this paper, we focus on changes in political risk that arise due to the intensification of populism in a host country. In such circumstances, there is a greater risk that changes in policy will adversely affect foreign investors as governments tend to give in to social and political pressures to redistribute wealth to the populace. A nationalistic ideology often underlies the populist fervour; therefore, host governments have a greater incentive to expropriate or nationalise foreign investments in order to meet the demands of the electorate. In Bolivia, such populist sentiment led to the nationalisation of the oil and gas sector. This paper uses financial market data to measure investors’ perceptions around events that heightened the risk of nationalisation. Specifically, we are concerned about the risk of nationalisation for large multinational companies in the natural resource sector. Attracting such companies is an important aspect of investment promotion as they are more capable of successfully entering and conducting business in foreign markets. In contrast to smaller companies, they have various competitive advantages in FDI, such as the ability to get financing more easily (Horst, 1972), more rapidly reach the limits of foreign markets (UNCTC, 1992) and make larger investments (Tan & Vertinsky, 1996). However, large companies are also more prone to attracting the attention of host country authorities (Henisz, 2000). Moreover, large natural resource companies have a greater capacity to exploit a host country and are therefore more susceptible to the risks of expropriation and nationalisation (Stosberg, 2005 and Vaghefi et al., 1991). In order to guide the promotional efforts of IPAs, this paper focuses on determining whether or not the risk of nationalisation is a concern for large multinational companies in the natural resource sector. The research has implications for IPA activity, both in countries where nationalisation is a risk and in countries where changes in the political environment have reduced the risk of nationalisation. Up to now, the relationship between political events and financial market performance has been the subject of numerous studies. Much literature in political science, such as that of Gemmill (1992), has examined stock market responses to uncertain political events by mainly focusing on market movements in relation to elections. Lin and Wang (2007) point out that further empirical research has explored the impact of a variety of political uncertainties that may be related to capital markets, such as strikes, boycotts, terrorist acts, macroeconomic management, monetary policy, legislation, and social and political evolution. In comparison to previous literature, the distinguishable feature of this paper is that it focuses on the market's perception of the risk of nationalisation in a populist political environment by applying an innovative quantitative finance approach for measuring the market's reaction to specific events. High-frequency data (HFD) for companies on the London Stock Exchange (LSE) that were affected by the nationalisation of oil and gas resources in Bolivia are used to accurately measure volatility changes around events that preceded and paved the way for the nationalisation. It is possible to exploit these financial market data for the purpose of measuring the political risk perceptions of IPA clients as equity investors have the same concerns as IPA clients in relation to risks that may adversely affect the future profitability of the company. Moreover, it is not just short-term risks that concern investors as numerous studies demonstrate that they generally undertake investments over a long-term horizon (ICISIA, 2005 and Ipsos MORI, 2002). At present, investors’ perceptions are measured using qualitative methods and IPAs are advised to refer to publicly available reports on their location and investment climate (MIGA, 2010). Surveys of business conducted by political risk insurance (PRI) providers are also used to measure perceptions of political risks. These methods only provide a measurement of risk perceptions at a point in time; thus, they become outdated with developments in the political environment. Furthermore, they are limited as to the information they provide about specific companies’ perceptions of risk. The innovative approach that is utilised in this paper allows for the timely identification of changing risk perceptions and has the potential to guide the promotional efforts of IPAs. It provides a means for IPAs to quantitatively measure risk perceptions and base their promotional efforts on more up-to-date and relevant information. It allows IPAs to immediately identify the extent of investor concern and enables them to speedily determine whether image building or investment generation activities should be conducted to attract FDI. Moreover, it provides IPAs with a method to assess the risk perceptions of specific companies. In this context, our approach can guide the promotional efforts of IPAs in attracting targeted investment.

The unique contribution of this paper involves the application of HFD to measure large multinational companies’ perceptions of the risk of nationalisation in the natural resource sector. At present, IPAs measure risk perceptions using qualitative methods that only provide a measurement of risk perceptions at a point in time; thus, they become outdated with developments in the political environment. In contrast to current methods, our approach allows IPAs to speedily measure risk perceptions around market events using real-time data. Using this innovative approach, the paper focuses on determining whether or not the risk of nationalisation in the natural resource sector is a concern for large multinational companies. Our findings demonstrate that such companies do not perceive nationalisation as a threat to future profitability. For each of the events that preceded and paved the way for the nationalisation of oil and gas resources in Bolivia, the market did not perceive nationalisation to be a concern for either BG Group Plc. or BP Plc. In both cases, the companies are large multinationals that operate in the natural resource sector. From an IPA perspective, this finding has implications for guiding promotional efforts in countries where there is a risk of nationalisation. In such countries, IPAs could attract FDI to the natural resource sector by focusing their promotional efforts on investment generation and targeting large multinational companies that do not have negative perceptions about nationalisation risk. Evidence suggests that market efficiency exists in its strong form for large companies and this negates the possibility that investors misperceived the risk. We identify two plausible explanations for the lack of attention afforded to the risk of nationalisation. Firstly, the profitable nature of natural resource investments may outweigh the risk involved. Secondly, large companies with operations in many countries may be less exposed to the risk. Thus, large multinational companies in the natural resource sector may be more willing and capable of undertaking investments in countries where nationalisation is a threat. However, supporting such claims requires further analysis that is beyond the scope of this study. Our findings also have implications for guiding promotional efforts in countries where changes in the political environment have reduced the risk of nationalisation. In such countries, IPAs tend to focus on image building to inform the investment community about the improved climate for FDI. Once the appropriate image of the location is formed in the minds of prospective investors, IPAs shift their focus from image building to investment generation (Wells & Wint, 2000). However, our findings demonstrate that IPAs that intend to attract large multinational companies to their natural resource sector should not focus promotional efforts towards image building. Such companies do not have negative perceptions about the risk of nationalisation; therefore, image building is unnecessary and would be wasteful of resources. Alternatively, IPAs should focus their promotional efforts towards investment generation activities. While predominantly beneficial for IPAs, these activities would also benefit the targeted companies that would immediately be made aware of investment opportunities in the IPA's location. While this paper focused on the risk of nationalisation, the methodology is generic and can be applied to any risk that hinders FDI. In countries where risks are changing, it allows IPAs to base their promotional efforts on up-to-date and relevant information. It allows IPAs to immediately identify the extent of investor concern and enables them to speedily determine whether image building or investment generation activities should be conducted to attract FDI. By utilising this approach, IPAs could also assess targeted companies’ perceptions of risks that are similar to the risks that exist or existed in their own country. This would provide IPAs with a comparison measure of targeted companies and guide their promotional efforts in attracting the preferred investment.