Analysis of Foreign Direct Investment Promotion Policy and Interstate Militarized Conflict (1970-2001)
Author: Eric Yi-hung Chiou
Abstract / Chinese PDF Download
Are states with pro-FDI policies less conflict-prone? This paper examines plausible linkages between a state’s FDI promotion policy and its desire to initiate conflicts. By focusing on the willingness of the state, I argue that pro-FDI policy may reveal the state’s propensity to preserve peace for two reasons. First, pro-FDI policy is incompatible with conflict initiation since the negative effects of the latter offset the state’s efforts to increase FDI inflow by the former. Second, pro-FDI policy tends to be credible when it explicitly addresses the state’s commitments to multinationals. Hence, states undertaking pro-FDI policies are less likely to initiate conflict in general. By employing various pro-FDI policy indicators, I test the FDI-conflict initiation relationship at the monadic level from 1970 to 2001. Statistical results show that while macro-pro-FDI policies are negatively associated with conflict initiation, treaty-pro-FDI policies do not have the same effect. At both theoretical and empirical levels, this study advances the understanding of the FDI-conflict relationship by demonstrating the possible pacifying effects that pro-FDI policy might have on conflict initiation, and reveals that states with pro-FDI policy tend to be less conflict-prone.