Abstract

This paper explores incentive strategies that regions use to attract foreign direct investment
(FDI) amid resource constraints and competition. It analyzes how regions can effectively allocate
limited resources to enhance FDI incentives, focusing on financial aspects such as tax
rates, corruption, and the overall investment climate.
Using theoretical scenarios, the paper identifies successful strategies for incentivizing FDI,
taking into account priority sectors, proximity to competing regions, and level of information
available. The findings reveal that distant regions should always act based on their true preference
while regions within commutable distance should strategize based on the other region’s
interest, incentive package, and level of information available.
Furthermore, the study emphasizes the importance of managing limited resources and aligning
incentives with regional strengths. It also discusses reasons why regions may opt not to
incentivize certain projects despite their interest when full information is available and regions
are within commutable distance. This research contributes valuable insights on optimizing resource
allocation for attracting FDI and suggests areas for future investigation regarding the
long-term impacts of various incentive types on regional development.
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