Mapping the Characteristics of Foreign Investment Screening Mechanisms: The New PRISM Dataset

Abstract

Since the 2008 financial crisis, many advanced industrialized economies, while eager to attract foreign direct investment (FDI), have also implemented or tightened investment screening mechanisms (ISMs), which empower governments to restrict foreign takeovers. ISMs, at the nexus between international political economy and international security, are an understudied phenomenon, although they have recently gained in policy prominence worldwide as a result of emerging technological risks and new threat actors. This research note introduces the Politics and Regulation of Investment Screening Mechanisms dataset, a newly coded dataset on ISMs in Organisation for Economic Co-operation and Development (OECD) countries from 2007 to 2021, examining the evolution of seven key features of investment screening over time. Based on these novel data, we then describe patterns in the evolution of foreign investment screening policies. Next, we consider likely applications of the dataset to answer questions about the politics of investment as well as broader questions of economic exchange and institutional design in an age of great power competition—including by providing some initial statistical exercises on the relationship between Chinese FDI and R&D spending on ISM features. Finally, we suggest how investment screening fits within the new arsenal of unilateral instruments of economic statecraft currently being developed by liberal democracies.

Naïve no more: Foreign direct investment screening in the European Union

“…What is novel about contemporary ISMs is their security, not economic, dimension (Bauerle Danzman & Meunier, 2023). The new regimes that have been recently created or tightened are aimed at reviewing the essential security interests that inward investment may negatively affect.…”

“…Table 1 provides an overview of the features of EU member states' ISMs (Bauerle Danzman and Meunier, 2023). Several descriptive features stand out.…”

The economic geographies of mergers and acquisitions (M&As)

“…A diverse mixture of state-owned enterprises and sovereign wealth funds are emulating the strategies of private firms and increasingly engaging in M&A activity to generate financial returns, support long-term prosperity and access strategic industries, among other motivations (Alami and Dixon, 2022; Babic et al, 2020). At the same time, the proliferation of inward foreign investment screening shows how some nation-states are simultaneously slowing down global M&A activity (Danzman and Meunier, 2023). As M&As facilitate the movement of corporate power, they are not politically neutral.…”

“…As M&As facilitate the movement of corporate power, they are not politically neutral. M&As are intimately entwined with geopolitical relations, and nation-states increasingly screen and scrutinize deals in order to ensure that potential takeovers do not pose risks to national security or undermine their wider geostrategic economic objectives (Alami, 2023; Danzman and Meunier, 2023). Researching M&As can therefore generate important insights into the uneven financialization of nation-states.…”

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

“…Political forces critical of economic globalization have been on the rise over the past decade (Bisbee et al, 2020;Milner, 2021;Walter, 2021). Inward-looking economic strategies are spreading rapidly (Bauerle Danzman & Meunier, 2023;Meunier & Nicolaidis, 2019), and the American-led liberal international order is said to be in crisis (Lake et al, 2021;Trubowitz & Burgoon, 2020). Accordingly, many analysts have suggested that we have entered a period of "deglobalization" in which multinational corporations (MNCs) are in retreat as states reassert their control and production networks are being reshored.…”