Why Boston attracts so much foreign direct investment: a global perspective on our city

(Image via Aleksandersson - Creative Commons)
(Image via Aleksandersson - Creative Commons)

Following is a contributed piece by Philip Budden, who works in RBS Citizens’ Foreign Corporate Team in Boston. He has also served as the UK Consul General in Boston.

In the world of foreign direct investment (FDI), Greater Boston is one of the places that attracts more FDI than one might expect.

At one level, Boston – and the Greater Boston region – benefits from being part of the United States’ market. Setting up a ‘foreign corporate’ enterprise anywhere within the U.S. offers access to a huge and competitive market with a wide range of both affluent consumers and talented workers.

This makes Boston compare favorably to similarly developed markets for investors taking a global perspective about where to make their foreign direct investments.

In theory, the U.S. benefits are as available in Boise or New Mexico as they are in Boston or New England.

But three elements set our region apart: Greater Boston’s competitiveness in innovation, its international connectedness, and its global brand.

As an innovation ecosystem, the Greater Boston area has a centuries-long tradition of innovation that is now anchored by the likes of MIT and other centers of higher education. The world is increasingly coming to Boston to learn about innovation.

Meanwhile, Governor Deval Patrick has been tireless in extolling the region’s strengths in innovation to global audiences.  This entrepreneurial legacy and current commitment underpins Boston’s attractiveness to foreign corporate investors.

In terms of international connectedness, Boston compares well to other cities of its size.

One way to measure this is the number of direct flights and international connections from the city’s main transportation hub, Logan Airport.  Direct flights matter to foreign direct investment, which is often seen flowing more rapidly from foreign parent companies along these direct channels.

While Boston has long had connections to key cities like London, Dublin, and Rome (correlating with FDI from Britain, Ireland, and Italy), it is now benefitting from the proactive effort to build more links, to the likes of Japan, Dubai, Israel, and China. As the transportation channels open up, these countries are likely to bring more of their FDI to Boston.

As a global brand, Boston also has an outsized slice of the world’s mindshare.  This stems from its unique history, from its founding story through its role in starting the American Revolution to its standing as the educational capital of America, with almost 70 institutions of higher learning in and around the city.

The wider attractions are a key part of the region’s allure, especially for foreign corporations that relocate their staff to oversee FDI operations.

Will Boston attract more FDI?

The world of foreign direct investment is competitive, and many international cities are now trying to attract more of it because foreign corporates bring many benefits to local ecosystems.

Boston is still ahead of the game but cannot be complacent: currently, foreign corporates  that invest in Boston and wider New England are well placed to use the city as a gateway to the rest of the North American market.

However, there’s always more that can be done.

Philip Budden is a transatlantic banker at RBS Citizens in its specialized Foreign Corporate Team (based in Boston), a Senior Lecturer at the MIT Sloan School of Management, and a British diplomat who, most recently as UK Consul General in Boston, has a decade’s experience supporting UK companies investing into New England.