Retail Foreign Direct Investment by Brand Manufacturers

ABSTRACT Many successful brand manufacturers, such as Apple and Nike, have invested extensively in international networks of direct retail outlets. Systematic evidence on this development has been lacking because official foreign direct investment (FDI) data are classified according to the main industry of the investing firm and therefore most branded retail investments are classified as manufacturing or wholesale trade. Using novel project‐level data, we show that direct retail FDI now accounts for more than 5% of global FDI flows—about five times the FDI in official data. We provide empirical evidence that FDI in branded retail outlets is driven by brand owners’ need to control brand value, especially when it is difficult to contract and monitor sales and service quality.