Local Policymakers' Preferences for Foreign Direct Investment

• In Event: Attracting and Regulating MNCs

Abstract

Past research on foreign direct investment (FDI) predominantly focuses on country-level dynamics or public opinion, overlooking the crucial role of subnational governments. However, in many contexts such as the United States, subnational governments have significant decision-making authority across various stages of FDI projects, from the initial courting of investors to overseeing project completion and continuity. Our study reports the findings from the first-ever nationally representative survey of U.S. local government elected officials regarding their preferences for FDI. Employing a conjoint survey experimental design, we examine how the national origin of the investing company, job creation prospects, and local public opinion affect the local officials' receptivity toward investment initiatives. We find that these local policymakers prefer investments from the U.S. the most, Germany and Japan in the middle, and China the least. They also prefer investments that create more local jobs and those with local support. Importantly, the country-of-origin effect primarily arises from concerns related to the regime type of the investing country, rather than regional or racial differences. We also find that preferences for countries of origin can potentially be explained by policymakers' perceptions of geopolitics and the autonomy of companies. Additionally, we analyze qualitative survey responses to shed light on some of the specific concerns local governments face when thinking about foreign investment. Our project more broadly underscores the promise of researching subnational actors in international relations.

Authors

• Frederick R. Chen, The Ohio State University

• Jonathan Art Chu, National University of Singapore