Dodging Bullets : The Heterogeneous Effect of Political Violence on Greenfield FDI
The relationship between political violence and greenfield foreign direct investment is contingent on the type of violence, characteristics of the investment-receiving sector, and extent to which the investing firm is geographically diversified. Th...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/192481481638146614/Dodging-bullets-the-heterogeneous-effect-of-political-violence-on-greenfield-FDI http://hdl.handle.net/10986/25813 |
| Summary: | The relationship between political
violence and greenfield foreign direct investment is
contingent on the type of violence, characteristics of the
investment-receiving sector, and extent to which the
investing firm is geographically diversified. This paper
presents an analysis with a dynamic fixed effects model for
a panel of 90 developing countries from 2003 to 2012. The
analysis shows that nationwide political conflict is
negatively associated with total and non-resource-related
greenfield foreign direct investment, but not with
resource-related greenfield foreign direct investment. The
insensitivity to political conflict of multinational firms
in the resource sector is associated with the high
profitability of natural resource extraction and the
companies' geographic constraints on location choice
during the period of estimation. In the non-resource sector,
the less geographically diversified firms are most sensitive
to the risk of conflict. |
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