Politicization of Foreign Direct Investment Threatens American Innovation |
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By: Association for Competitive Technology Posted: 2008-02-23 05:37:30 |
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The Association for Competitive Technology released a comprehensive report today on the importance of foreign direct investment, particularly to innovative technology startups. In light of recent political moves to block foreign investment in 3COM and other American firms, the report urges American businesses and government regulators to support free trade and open markets.
"This report comes after news of increasing foreign investment in American companies, and confirms that such investment is invaluable to our economy and trade relationships," report co-author Braden Cox said. "The politicization of foreign investment decisions mainly hurts smaller companies and might have the unintended consequence of robbing promising American startups of the opportunity to become the next Google." "Innovative technology startups - an important engine of economic growth - are especially dependent on a constant flow of capital which can be invested into the research and development that often leads to breakthrough new products," said co-author Nora von Ingersleben. "With the United States facing the worst financial crunch and crisis since the Great Depression, it is much harder for startups to raise capital to develop innovative new products." The report finds that the benefits of foreign direct investment are especially pronounced for small- and medium-sized enterprises. -- The inflow of FDI increases the supply of capital for loans to businesses and individuals, thereby decreasing the cost of borrowing money for domestic entrepreneurs. This is of great importance to SMEs, which obviously have weaker financial capacities than their larger counterparts. -- In addition, while investing in innovative technology SMEs is often highly rewarding, it is also very risky - which means that banks prefer putting their money into larger, more established companies. This is particularly true in times of financial crisis, when banks are extremely reluctant to make high-risk investments that could have an additional negative impact on their balance sheets. -- For SMEs in the tech sector it is therefore of utmost importance to have a wide array of capital sources from which they can tap into to grow and compete. The full report can be found at http://www.actonline.org The Association for Competitive Technology (ACT) is an international grassroots advocacy and education organization representing more than 3,000 small and mid-size information technology firms from around the world. ACT advocates for an environment that inspires and rewards innovation, and provides resources like the Innovators Network to help members leverage their intellectual assets to raise capital, create jobs and continue innovating. |
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