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Peace and conflict at different stages of the FDI lifecycle

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  • Colin M. Barry

Abstract

Theoretically, instability and violence should deter foreign investment. Empirically, the evidence has been inconsistent. I highlight two key deficiencies in existing research, and present a more nuanced theoretical framework for considering this relationship. First, I make the case that the costs and risks associated with conflict are a function of both intensity and duration. Both should be accounted for. Second, I argue that the logic governing multinational corporations' (MNC) behavior changes post-entry into the host country. Combining these two insights, I argue that firms’ sensitivity to conflict, and that the particular signals they respond to, vary in predictable ways across different stages of the FDI lifecycle. I test the according hypotheses using firm-level foreign investment data, and find supporting evidence. Multinationals look for sustained peace when pursuing new ventures, but prove resilient to all but the most intense and persistent conflicts after the costs of entry have been sunk.

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  • Colin M. Barry, 2018. "Peace and conflict at different stages of the FDI lifecycle," Review of International Political Economy, Taylor & Francis Journals, vol. 25(2), pages 270-292, March.
    • Handle: RePEc:taf:rripxx:v:25:y:2018:i:2:p:270-292
    DOI: 10.1080/09692290.2018.1434083
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    Cited by:

    1. François, Abel & Panel, Sophie & Weill, Laurent, 2020. "Educated dictators attract more foreign direct investment," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 37-55.
    2. Iain Osgood & Corina Simonelli, 2020. "Nowhere to Go: FDI, Terror, and Market-specific Assets," Journal of Conflict Resolution, Peace Science Society (International), vol. 64(9), pages 1584-1611, October.
    3. Abel FRANCOIS & Sophie PANEL & Laurent WEILL, 2018. "Are Some Dictators More Attractive to Foreign Investors?," Working Papers of LaRGE Research Center 2018-05, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    4. Abel FRANCOIS & Sophie PANEL & Laurent WEILL, 2018. "Are Some Dictators More Attractive to Foreign Investors?," Working Papers of LaRGE Research Center 2018-05, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    5. Williams, Christopher & Steriu, Ruxandra, 2022. "MNE market entry and social investment in battle-weary countries: Evidence from Heineken," Journal of World Business, Elsevier, vol. 57(4).
    6. Nino, Gustavo & Baylis, Kathy & Crost, Benjamin, 2022. "Conflict and Small-scale Investment: Evidence from Colombia Peace Agreement," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322323, Agricultural and Applied Economics Association.
    7. repec:zbw:bofitp:2019_012 is not listed on IDEAS
    8. Marvin Jahn & Paul Stricker, 2022. "FDI, liquidity, and political uncertainty: A global analysis," International Economics and Economic Policy, Springer, vol. 19(4), pages 783-823, October.

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