Issues and risks of nationalization of foreign companies[Enjeux et risques des nationalisations des entreprises étrangères]

This article analyses the relationship between the nationalisation of foreign firms, institutional credibility, and the attractiveness of foreign direct investment. Using a formal two-period hold-up model - with a Cobb-Douglas production technology and a logarithmic reputation cost - we establish the existence of a nationalisation threshold K∗ and characterise the resulting equilibrium underinvestment. The model's predictions are confronted with three case studies in the energy sector (Bolivia 2006, Argentina 2012, Russia), illustrating how the institutional parameters φ and δ mediate the economic impact of nationalisations. We find that this impact depends less on nationalisation per se than on the institutional environment in which it occurs.