China, India, and Eastern Europe have reached new heights of attractiveness as foreign direct investment destinations and increasingly will challenge traditional R&D locations in the industrialized world, according to the latest Foreign Direct Investment Confidence Index, an annual survey of executives from the world’s largest companies, conducted by global management consulting firm A.T. Kearney.

      Optimism concerning the global economy among executives surveyed has waned since 2004. In 2005, just over a third of respondents (36 percent) are more optimistic about the global economy compared to 31 percent who are more negative. In 2004, nearly 70 percent were more bullish on the global economy and only 12 percent were more negative.

      U.S. companies alone have reported accumulations in the last four years of more than $1 trillion in cash, and a gloomier investor outlook could mean continued cash stockpiling.  Global executives cite the need to improve their balance sheets, lingering fears of another economic downturn, shareholder pressures, and new interdependent business risks, as among the leading reasons for having accumulated record stores of cash.

      However, the top-line growth imperative is pushing companies overseas again.  In 2005, 54 percent of executives say they are planning foreign investment increases, the largest number since 2000.  Global FDI inflows rose by 2 percent to $648 billion in 2004, the first positive change in FDI since 2000. As cross-border mergers and acquisitions resuscitate and competition intensifies, pressures to expand overseas are conflicting with the rationale for holding cash.

            “Global executives face a series of conflicting pressures that may well moderate the FDI recovery,” said Paul Laudicina, managing director of the Global Business Policy Council, which conducts the study.  “The top-line growth imperative and revival of cross-border...

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