Most home-country measures can be applied in a non-discriminatory way to all firms and outward investments. In practice, however, they are often targeted towards particular companies or projects. The more complex and financially costly the HCM, the more likely it will be targeted at particular firms and investments. Some HCMs, such as treaties and basic early support services (e.g., information provision through publications and websites), are by their very nature non-discriminatory, and are therefore less used for targeting. Other HCMs, such as missions, trainings, feasibility studies, advisory services, financial support, investment insurance, operational support, maximizing benefits etc., tend to be employed with some form of targeting.
Governments can use such targeting to make the use of resources more efficient and focus HCMs on economic activities they consider desirable and in the national interest. In particular, HCMs can be targeted to promote those MNEs and OFDI activities that promise to generate and maximize home-country effects. Targeting can also be used to support companies that would not be able to invest without government assistance in the early stages – especially SMEs. A targeting strategy can be made to correspond with the economic circumstances of the home country and national development priorities. Thus, targeting strategies may differ between individual home countries (UNESCAP 2020).
Targeting can also be used to address the potential risk factors resulting from OFDI, such as aiming to prevent financial losses to the home country and offshoring (see E1) Financial losses and E2) Offshoring). Moreover, appropriate targeting can help mitigate concerns in host countries concerning issues such as state backing and competitive neutrality (see E3) Competitive neutrality).
In practice, governments set out eligibility criteria specifying the kind of companies or economic activities to which specific HCMs apply, particularly regarding the nationality, ownership and size of the MNE, the industrial sector, the destination country, and the effect on home and host countries (Sauvant et al. 2014, 21-25). This Toolkit differentiates between ten such types of targeting.
It is possible to combine targeting strategies. For example, a targeting strategy could focus on M&As with a strategic asset-seeking motivation in advanced economies, or on SMEs aiming to establish greenfield investments abroad for market-seeking purposes. Combining targeting strategies can increase the likelihood that the desired type of investment is promoted, and that an anticipated home-country effect is realised.
Interactions
C10) Evaluation: Evaluation can be used to check and verify whether the approach to targeting taken by the government is appropriate, effective and fulfils its purpose in promoting OFDI and generating home-country effects. It is an opportunity to identify which aspects of the existing targeting strategy need to be changed.
E3) Competitive neutrality: Targeting particular types of OFDI or investing companies could undermine competitive neutrality if other firms and investments do not enjoy the same benefits.