IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/11362.html

Are Robots Shifting Foreign Direct Investments ?

Author

Listed:
  • de Nicola, Francesca
  • Tan, Shawn W.
  • Tang, Aaron

Abstract

Industrial robots are rapidly changing global production processes, with large implications for patterns of foreign direct investments. The impact is ambiguous a priori. On the one hand, robotization may boost foreign direct investments since firms that have invested in robots increase their demand for complementary inputs. On the other hand, robotization may dampen foreign direct investments since firms have weaker incentives to outsource selected inputs and/or tasks. This paper finds that robotization at home boosts foreign direct investments, based on bilateral foreign direct investments data from 2003–21 across 65 countries. To uncover the underlying mechanism, the effect on foreign direct investments is decomposed into three components: capital per job (or capital intensity), jobs created per project (or labor intensity), and number of foreign direct investments projects. The positive effect of robotization in the source country on foreign direct investments is driven by increases in the number of projects and capital intensity, but not labor intensity. Decomposing foreign direct investments by business function reveals that this effect operates primarily through efficiency-seeking manufacturing investments rather than market-seeking activities, indicating that automation enhances firms' ability to establish complementary production networks abroad.

Suggested Citation

  • de Nicola, Francesca & Tan, Shawn W. & Tang, Aaron, 2026. "Are Robots Shifting Foreign Direct Investments ?," Policy Research Working Paper Series 11362, The World Bank.
    • Handle: RePEc:wbk:wbrwps:11362
    as

    Download full text from publisher

    File URL: https://documents.worldbank.org/curated/en/099257104272659396/pdf/IDU-bab1be73-e632-4c93-941d-4090d05d1a6c.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Krenz, Astrid & Prettner, Klaus & Strulik, Holger, 2021. "Robots, reshoring, and the lot of low-skilled workers," European Economic Review, Elsevier, vol. 136(C).
    2. Faber, Marius, 2020. "Robots and reshoring: Evidence from Mexican labor markets," Journal of International Economics, Elsevier, vol. 127(C).
    3. Dellis, Konstantinos & Sondermann, David & Vansteenkiste, Isabel, 2017. "Determinants of FDI inflows in advanced economies: Does the quality of economic structures matter?," Working Paper Series 2066, European Central Bank.
    4. Artuc, Erhan & Bastos, Paulo & Rijkers, Bob, 2023. "Robots, tasks, and trade," Journal of International Economics, Elsevier, vol. 145(C).
    5. Daron Acemoglu & Pascual Restrepo, 2020. "Robots and Jobs: Evidence from US Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2188-2244.
    6. John H. Dunning & Sarianna M. Lundan, 2008. "Multinational Enterprises and the Global Economy, Second Edition," Books, Edward Elgar Publishing, number 3215.
    7. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
    8. Baldwin, Richard, 2022. "Globotics and macroeconomics: Globalisation and automation of the service sector," CEPR Discussion Papers 17530, Centre for Economic Policy Research.
    9. Katherine Stapleton & Michael Webb, 2020. "Automation, trade and multinational activity: Micro evidence from Spain," CSAE Working Paper Series 2020-16, Centre for the Study of African Economies, University of Oxford.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andreas Baur & Lisandra Flach & Isabella Gourevich & Florian Unger, 2023. "North-South Trade: The Impact of Robotization," CESifo Working Paper Series 10865, CESifo.
    2. Franco, Chiara & Suppressa, Francesco, 2025. "Robot, trade and employment: Unravelling the relationship within the European context," Structural Change and Economic Dynamics, Elsevier, vol. 73(C), pages 407-422.
    3. Alguacil Marí, María Teresa & Lo Turco, Alessia & Martínez-Zarzoso, Inmaculada, 2020. "What is so special about robots and trade?," University of Göttingen Working Papers in Economics 410, University of Goettingen, Department of Economics.
    4. Koch, Michael & Manuylov, Ilya, 2023. "Measuring the technological bias of robot adoption and its implications for the aggregate labor share," Research Policy, Elsevier, vol. 52(9).
    5. Hidalgo, Camila & Micco, Alejandro, 2024. "Computerization, offshoring and trade: The effect on developing countries," World Development, Elsevier, vol. 180(C).
    6. Cilekoglu, Akin A. & Moreno, Rosina & Ramos, Raul, 2024. "The impact of robot adoption on global sourcing," Research Policy, Elsevier, vol. 53(3).
    7. Stemmler, Henry, 2023. "Automated Deindustrialization: How Global Robotization Affects Emerging Economies—Evidence from Brazil," World Development, Elsevier, vol. 171(C).
    8. Azmeh, Shamel & Nguyen, Huong & Kuhn, Marlene, 2022. "Automation and industrialisation through global value chains: North Africa in the German automotive wiring harness industry," Structural Change and Economic Dynamics, Elsevier, vol. 63(C), pages 125-138.
    9. Andrés César & Guillermo Falcone & Pablo Garriga, 2022. "Robots, Exports and Top Income Inequality: Evidence for the U.S," CEDLAS, Working Papers 0307, CEDLAS, Universidad Nacional de La Plata.
    10. Thao Trang Nguyen & Giacomo Domini & Marco Grazzi & Daniele Moschella & Tania Treibich, 2025. "Automation and the Margins of Export Performance: Evidence from French Firms," LEM Papers Series 2025/37, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    11. Faber, Marius & Kilic, Kemal & Kozliakov, Gleb & Marin, Dalia, 2025. "Global value chains in a world of uncertainty and automation," Journal of International Economics, Elsevier, vol. 155(C).
    12. Firooz, Hamid & Leduc, Sylvain & Liu, Zheng, 2025. "Reshoring, automation, and labor markets under trade uncertainty," Journal of International Economics, Elsevier, vol. 156(C).
    13. Sharfaei, Shahab & Bittner, Jan, 2024. "Technological employment: Evidence from worldwide robot adoption," Technological Forecasting and Social Change, Elsevier, vol. 209(C).
    14. Deng Liuchun & Plümpe Verena & Stegmaier Jens, 2024. "Robot Adoption at German Plants," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 244(3), pages 201-235, June.
    15. Antonietti, Roberto & Burlina, Chiara & Franco, Chiara, 2026. "Robots and the regionalization of global value chains," Research Policy, Elsevier, vol. 55(2).
    16. Jakubik, Adam & Rotunno, Lorenzo & Saini, Alisha, 2025. "Foresee the unseen: Evaluating the impact of artificial intelligence on international trade," Journal of Policy Modeling, Elsevier, vol. 47(4), pages 842-861.
    17. Pinheiro, Alexandra & Sochirca, Elena & Afonso, Oscar & Neves, Pedro Cunha, 2023. "Automation and off(re)shoring: A meta-regression analysis," International Journal of Production Economics, Elsevier, vol. 264(C).
    18. Alguacil, Maite & Lo Turco, Alessia & Martínez-Zarzoso, Inmaculada, 2022. "Robot adoption and export performance: Firm-level evidence from Spain," Economic Modelling, Elsevier, vol. 114(C).
    19. Artuc, Erhan & Bastos, Paulo & Rijkers, Bob, 2023. "Robots, tasks, and trade," Journal of International Economics, Elsevier, vol. 145(C).
    20. Wang, Linlin & Liu, Chun & Liu, Ding & Zhang, Yi, 2025. "Beyond jobs and wages: The hidden cost of automation on corporate social security contributions," International Review of Financial Analysis, Elsevier, vol. 106(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:11362. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.