Asset Mobility and Political Risk Revisited

• In Event: State Politics and Policy & New Directions in Political Economy Virtual Poster Session
  In Virtual Poster Session: New Directions in Political Economy Virtual Poster Session

Abstract

I argue that foreign investors use both low and high asset mobility to mitigate political risk. In contrast to existing studies that view asset mobility as a structural characteristic, I advance an alternative view that emphasizes asset mobility as a strategic decision made by foreign investors. When entering politically risky markets, foreign investors can either stay mobile to avoid expropriation or make large sunk investments to exchange for government support. I propose a theory that explains how the effects of asset mobility vary across the spectrum of political risk. Empirically, I find evidence from a comprehensive database on global firms and an original survey fielded in China. This project nuance our understanding of the relationship between asset mobility and political risk.

Author

• Haosen Ge, Princeton University