Economic Narratives and the Legitimacy of Foreign Direct Investments

Abstract

In the 1990s, the primary focus of the international investment regime shifted from the restriction and regulation towards the promotion and attraction of foreign companies. Dominant accounts in the international political economy literature emphasize the role of interests and institutions in explaining this policy shift but pay little attention to their legitimation. This article argues that transformations in dominant economic discourses—and in particular the rise of the competitiveness narrative—played an important role in granting legitimacy to this U-turn in international economic affairs. To test the argument, the article focuses on the impact of the differential changes in the portrayal of greenfield and mergers and acquisitions (M&A) inward foreign direct investments (IFDI) in economic discourses in the UK before and after the rise of the competitiveness narrative. In line with the theoretical argument, findings indicate that individuals who passed their early adulthood in a period in which the narrative of economic statism was still prevalent hold notably more skeptical views of M&A IFDI even though they are otherwise not more opposed to investments from abroad. A causal mediation analysis lends further empirical support to the argument.

The Myth of Deglobalization: Multinational Corporations in an Era of Growing Geopolitical Rivalries

“…Although the importance of international trade and investment as a share of global economic output grew rapidly during this period, they remained more constrained than globalization discourses prominent in the 1990s and 2000s could have made one believe (Cameron & Palan, 2004;Linsi, 2020). To an important extent, descriptions of MNCs as "globally footloose" organizations and of the world economy as "one global market" (e.g., Ohmae, 1990;Reich, 1992;Stopford et al, 1991) remained economic imaginaries rather than accurate descriptions of material realities (Cameron & Palan, 2004;Linsi, 2022). Even though MNCs undeniably did expand their transnational networks and operations, their organization remained tied to a regional (instead of truly global) spatial logic (Doremus et al, 1999;Rugman, 2005).…”

Disentangling public opposition to Chinese FDI: trade unions, patient capital, and members’ preferences over FDI inflows

“…Some accounts combine sociodemographic and ideational factors. Linsi (2022) shows that older British individuals, who grew up when the dominant public discourse toward foreign mergers & acquisitions (M&As) was “economic statism,” are hostile to foreign M&As, while younger individuals socialized in the neoliberal era are not. For a sample of developing countries, Lee and Shin (2020) argue and show that women are more likely to support inward FDI than men (or at least not less likely to do so), because multinational firms help diffuse norms about gender equality and women disproportionately benefit from service sector growth associated with FDI inflows.…”

Current Challenges to the Legitimacy of International Economic and Financial Arrangements

“…1115Zaum ( -1116 points to the resources that international organizations have at their disposal to co-create constituent's beliefs. In this thematic issue, Linsi's (2022) study illustrates the influence of economic narratives on individual beliefs. However, what matters, according to Beetham, is that "[a] given power relationship is not legitimate because people believe in its legitimacy, but because it can be justified in terms of their beliefs" (2013, p. 11, emphasis in the original).…”

“…In this thematic issue, attention is paid first to the question of how legitimacy is shaped. From a sociological perspective, Linsi (2022) addresses not just the role of material factors but also the role of ideational factors as drivers of the major shift away from the restriction and regulation toward the promotion and attraction of inward foreign direct investments that occurred in the 1990s. Arguably, economic narratives can play an important role in determining what individuals perceive as legitimate.…”