Geopolitics and FDI: Chinese Investment in the United States

• In Event: Political Risk and Foreign Direct Investment

Abstract

Do multinational firms invest to primarily advance their home country’s geopolitical interests? Although this is an oft-cited negative externality to economic integration, FDI’s several possible motives cannot be readily parsed. We model Chinese FDI into the U.S. to estimate the effects of strategic considerations on Chinese firms’ location decisions. We leverage project-level FDI data to assess several possible geographical motives. These include access to technology and control over resources, as well as soft power based on location, mode of entry, industry, state ownership, and other project/firm characteristics. This study offers a novel approach for identifying geopolitically motivated investments whose primary motivation for economic integration undermines the security of competitor nations.

Authors

• Aycan Katitas, University of Virginia

• Soo Yeon Kim, National University of Singapore

• Sonal S. Pandya, University of Virginia