Responses of FDI to geopolitical risks: The role of governance, information, and technology

Adrien Bussy; Huanhuan Zheng

doi:10.1016/j.ibusrev.2023.102136

Responses of FDI to geopolitical risks: The role of governance, information, and technology

Adrien Bussy, Huanhuan Zheng^*

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

81 Citations (Scopus)

Abstract

We show that rising geopolitical risk and geopolitical uncertainty (GPR) deter foreign direct investment (FDI). We further explore the role of governance, information, and technology in shaping the responses of FDI to GPR and document three main findings. First, effective governance in the destination market safeguards FDI against GPR. Second, multinational corporations with better information gained from closer geographic, cultural, and commercial ties choose to delay FDI in response to rising GPR instead of managing it. Third, FDI in more R&D-intensive industries is more resilient to GPR because intangible technology can more easily be transferred across borders. © 2023 The Authors

Original language	English
Article number	102136
Journal	International Business Review
Volume	32
Issue number	4
Online published	13 Apr 2023
DOIs	https://doi.org/10.1016/j.ibusrev.2023.102136
Publication status	Published - Aug 2023
Externally published	Yes

Funding

We would like to thank the Senior Editor, Axele Giroud, and three anonymous reviewers for their helpful comments and suggestions over four rounds of revisions. Donglai Luo and Mehtab Ahmed Jagil provided excellent research assistance. Financial support from an NUS startup grant and MOE Tier 1 grant is gratefully acknowledged. The views expressed in this paper are those of the authors and do not necessarily reflect those of the Swiss National Bank.

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 9 Industry, Innovation, and Infrastructure

Research Keywords

FDI
Geopolitical risk
Geopolitical uncertainty
Governance
Information
Policy
Technology
Tie

Publisher's Copyright Statement

This full text is made available under CC-BY-NC-ND 4.0. https://creativecommons.org/licenses/by-nc-nd/4.0/

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abstract = "We show that rising geopolitical risk and geopolitical uncertainty (GPR) deter foreign direct investment (FDI). We further explore the role of governance, information, and technology in shaping the responses of FDI to GPR and document three main findings. First, effective governance in the destination market safeguards FDI against GPR. Second, multinational corporations with better information gained from closer geographic, cultural, and commercial ties choose to delay FDI in response to rising GPR instead of managing it. Third, FDI in more R&D-intensive industries is more resilient to GPR because intangible technology can more easily be transferred across borders. {\textcopyright} 2023 The Authors",

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AB - We show that rising geopolitical risk and geopolitical uncertainty (GPR) deter foreign direct investment (FDI). We further explore the role of governance, information, and technology in shaping the responses of FDI to GPR and document three main findings. First, effective governance in the destination market safeguards FDI against GPR. Second, multinational corporations with better information gained from closer geographic, cultural, and commercial ties choose to delay FDI in response to rising GPR instead of managing it. Third, FDI in more R&D-intensive industries is more resilient to GPR because intangible technology can more easily be transferred across borders. © 2023 The Authors

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KW - Geopolitical uncertainty

KW - Governance

KW - Information

KW - Policy

KW - Technology

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DO - 10.1016/j.ibusrev.2023.102136

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Responses of FDI to geopolitical risks: The role of governance, information, and technology

Abstract

Funding

UN SDGs

Research Keywords

Publisher's Copyright Statement

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