Investing in Violence: Foreign Direct Investment and Coups in Authoritarian Regimes

This article analyzes an understudied and contested form of government taking, transfer restriction, which has supplanted expropriation as the most ubiquitous and costly type of international property rights violation. Veto-player-type constraints curtail governments’ ability to engage in outright and (nontransfer related) creeping expropriation but have little impact on their ability to generate wealth via transfer restrictions. We use a formal model to derive testable implications regarding the effect of political institutions and domestic politics on governments’ ability to collect these two types of rent. Empirically, we use novel time-series cross-sectional data to show that while veto-player-type political constraints diminish expropriation risk, transfer risk is much less affected: even constrained governments impose transfer restrictions.

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“… 2. See Bastiaens (2016) and Tomashevskiy (2017) on variation across autocracies. …”

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confidence: 99%

Even Constrained Governments Take

Graham

Johnston

Kingsley

2017

Journal of Conflict Resolution

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“…Such findings are complemented not only by arguments linking FDI to growth and economic performance in general (e.g., Alfaro et al 2010) but also by evidence linking FDI with benefits to political elites and decreased likelihood of coup threats (Bak and Moon 2016;Pinto and Zhu 2016;Tomashevskiy 2017).…”

Section: Mechanismsmentioning

confidence: 92%

“…In autocracies, capital formation enhances economic performance, which disproportionately benefits those affiliated with the regime leadership (Bueno de Mesquita et al 2004;Pinto and Zhu 2016;Zhu 2017). Foreign direct investment (FDI) enables autocratic leaders to buy off elites, decreasing a coup threat and increasing leader survival (Bak and Moon 2016;Tomashevskiy 2017). For example, leaders can require that international investors establish joint ventures, typically with established domestic elites, or require technology transfers to domestic companies affiliated with the regime.…”

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confidence: 99%

Cooperative Autocracies: Leader Survival, Creditworthiness, and Bilateral Investment Treaties*

Arias

Hollyer

Rosendorff

2018

American J Political Sci

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Capital accumulation is essential for economic development, but investors face risk when putting their capital to productive use. Bilateral investment treaties (BITs) commit leaders to limiting their takings of foreign assets and the revenues they generate. We offer theory and evidence that BITs enhance leader survival more in autocracies than democracies. BITs improve the "investment climate" in signatory states, and they do so by more in autocratic polities. Hazard models offer supporting evidence of improved autocratic leader survival. The improvement in the investment climate is evidenced by improvement of creditworthiness scores and higher sovereign bond prices, again with greater effect in autocratic states. Autocratic leaders have the most to gain from importing property rights-enhancing institutions.

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“…In addition, FDI can generate a shift in the distribution of resources and may benefit specific groups in a regime, rather than the state as a whole. In ethnically or religiously divided states, shifts in the distribution of resources in favor of one group over others may increase grievances (Tomashevskiy, 2017). In particular, when local businesses based around valuable natural resources such as oil are taken by foreign investors under government control, domestic complaints and resistance can easily spark and generate mobilization of people to rebel/protest.…”

Section: Fdi Cross-border Manda and Intrastate Conflictmentioning

confidence: 99%

Cross-border M&A, greenfield FDI and the onset of intrastate conflict, 1990–2015

Beuck

Shuaibi

Hwang

2022

ITPD

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PurposeBy examining the link between the two types of FDI and intrastate conflict from 1990 to 2015 in 138 countries, this paper intends to test the peace-through-FDI thesis.Design/methodology/approachTo empirically test the hypotheses, this study examines county-year observations from 1990 to 2015 for 138 countries. An instrumental variable method is utilized to this end.FindingsThis paper shows that, while greenfield FDI generates pacifying effects on intrastate conflict, M&A investment is likely to promote the onset of intrastate conflict.Originality/valueDespite the extensive literature on FDI and the onset of intrastate conflict, many have approached FDI as a singular phenomenon, and have not broken it down into its constituent parts of greenfield and brownfield investment types. Theorizing that this practice had oversimplified and blurred the relationship of FDI on intrastate conflict onset, the authors pursued the collection of novel data in order to more completely distinguish between the two types of FDI. With this novel approach dividing FDI into its component parts, the authors break open the black box of FDI to empirically find out the extent of its diverse influence on the onset of intrastate conflict.

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Investing in Violence: Foreign Direct Investment and Coups in Authoritarian Regimes

Cited by 15 publications

References 41 publications

Even Constrained Governments Take

Even Constrained Governments Take

Cooperative Autocracies: Leader Survival, Creditworthiness, and Bilateral Investment Treaties*

Cross-border M&A, greenfield FDI and the onset of intrastate conflict, 1990–2015

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