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Double-edged sword: understanding the localized effect of foreign direct investment inflow in conflict settings

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  • Lorenzo Crippa
  • Laura Saavedra-Lux

Abstract

We analyse how inward foreign direct investment (FDI) received amid ongoing violence shapes armed conflict. We argue that FDI affects patterns of violence by influencing the state's counterinsurgency strategy. To prevent disinvestment, governments strive to capture territory linked to investment. Yet, heightened military presence in areas close to FDI projects reinforces rebel group reliance on irregular warfare, thus amplifying civilian victimization as a tool to elicit cooperation or enforce control.

Suggested Citation

  • Lorenzo Crippa & Laura Saavedra-Lux, 2023. "Double-edged sword: understanding the localized effect of foreign direct investment inflow in conflict settings," WIDER Working Paper Series wp-2023-127, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:wp-2023-127
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    References listed on IDEAS

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    1. Li Dai & Lorraine Eden & Paul W. Beamish, 2017. "Caught in the crossfire: Dimensions of vulnerability and foreign multinationals' exit from war-afflicted countries," Strategic Management Journal, Wiley Blackwell, vol. 38(7), pages 1478-1498, July.
    2. Therese Anders, 2020. "Territorial control in civil wars: Theory and measurement using machine learning," Journal of Peace Research, Peace Research Institute Oslo, vol. 57(6), pages 701-714, November.
    3. Renard Sexton & Rachel L. Wellhausen & Michael G. Findley, 2019. "How Government Reactions to Violence Worsen Social Welfare: Evidence from Peru," American Journal of Political Science, John Wiley & Sons, vol. 63(2), pages 353-367, April.
    4. Abbey Steele, 2011. "Electing Displacement: Political Cleansing in Apartadó, Colombia," Documentos CEDE 8747, Universidad de los Andes, Facultad de Economía, CEDE.
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    Keywords

    FDI; Foreign Direct Investment; Armed conflict;
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