Elite Endorsement and Public Support for FDI: Evidence from an Indian Nation

• In Event: The Domestic Politics of Foreign Direct Investment and Multinational Firms

Abstract

Consider a foreign firm interested in opening a subsidiary in a developing country, as the first entrant into an industry otherwise absent. Consider a developing country government that wants the business venture to succeed, because local access to this customer-facing industry can bring material benefits to citizens. Consider an international aid organization with an explicit mission to support the growth of this industry in this and other countries. Consider, however, a citizenry with long-standing mistrust of this industry and scant exposure to foreign-owned ventures in their territory. Under what conditions might citizens be more likely to support the venture?

In this paper, we leverage a real-time, real-world scenario that matches these parameters: a commercial bank from American Indian nation "A" is in the process of opening a branch on the reservation of American Indian nation "B," which otherwise has no bank branch. The effort is endorsed by the government of American Indian nation "B," which, in an ex ante low-legitimacy, low-information environment, we expect to have a meaningful effect on increasing tribal members' support for the venture and their choice to become customers. We expect the domestic government endorsement to be especially meaningful relative to endorsement from the relevant international aid organization, the US Federal Reserve, which provides resources to improve American Indians' access to capital but is likely obscure to individual tribal members (or carries negative connotations). We also explore endorsement effects conditional on priming respondents about the investment's foreign ownership. In this paper, we report findings from survey experiments conducted before the bank breaks ground.

This project makes several contributions. First, because this FDI is customer-facing, public opinion matters directly for the foreign firm’s success. Second, the setting allows us to explore FDI entry in a nation whose citizenry have otherwise limited-to-no recent exposure to foreign capital within their territory, providing a counterfactual that avoids confounders raised in traditionally studied developing country settings. Third, by leveraging a real-world scenario, and collaborating with the commercial bank, the tribal governments, and the US Federal Reserve, we avoid assumptions about actors' preferences, which increases the internal validity of the research design and makes deception unnecessary. Fourth, although our real-world setting brings with it normative considerations that generate research design tradeoffs, we see our efforts to acknowledge and estimate resulting biases as a contribution to reconciling ethical priorities and the standards of causal inference.

Fifth, the project takes seriously American Indian nations as sovereigns, making choices in the context of a global economy.

We are indebted to rich, interdisciplinary bodies of scholarship that have long explored indigenous nations in the context of international relations and sovereignty. In this project, we frame the economic development concerns of indigenous nations as one-in-the-same as those of Westphalian developing countries, in hopes of reinforcing that these nations are worthy of study in "mainstream" international relations and international political economy. American Indian nations meet the conditions necessary for political scientists to use the concepts of outward and inward FDI, and the US federal government is rightly conceived of as an international actor relative to economic transactions between American Indian nations. Going forward, we challenge empirical international relations scholars to consider theories in light of the full set of state actors in the global economy -- whether indigenous nations, territories, dependencies, or other political entities with economic autonomy disconnected from their respective hierarchical power.

Authors

• Rachel Wellhausen, University of Texas at Austin

• Calvin Thrall, University of Texas at Austin

• Donna Feir