What Money Can’t Buy: Inward FDI and Public Backlash against Globalization

• In Event: Poster Session: International Political Economy 2 & APCG (African Politics)
  In Poster Session: Poster Session: International Political Economy 2

Abstract

This paper investigates the role of foreign direct investment (FDI) in shaping the public backlash against globalization. More specifically, it focuses on the social behaviors exhibited by foreign companies within developed countries. The world has recently witnessed a retreat from globalization: nationalist candidate, Donald Trump, won the presidential election in the U.S. in 2016, the United Kingdom withdrew from the EU, and right-wing nationalist parties claimed victories in parliaments in many European countries. The use of strong anti-globalization rhetoric by political actors has instigated an underlying public antipathy against open foreign economic policies. Notably, states are raising barriers against foreign investment, which usually entails economic benefits.

Classic international political economy literature usually focuses on countries’ efforts to attract foreign investments rather than impose bars on FDI. The implicit assumption in this literature is that the host community's primary concern lies in the economic benefits engendered by FDI. While existing theories explain different mechanisms facilitating foreign investment around the world, we need other theories to understand the proliferation of protectionist FDI policies in OECD countries. I address this gap in the literature by examining how the social interactions between foreign firms and local community influence anti-foreign sentiment and preferences over foreign investment policies.

I demonstrate the importance of the social behavior of foreign firms at three different levels. First, utilizing intergroup contact theory, the paper elucidates how individuals’ negative work experiences in foreign companies lead to antipathy towards the partner country and diminished support for foreign investment (H1). Second, I investigate the influence of unethical behaviors exhibited by foreign firms on public sentiment through vicarious contact theory (H2). Third, the research scrutinizes the role of domestic institutions, particularly labor protection and co-determination, in shaping the foreign firm-labor relationship and public resistance against foreign investment (H3).

The theoretical framework is empirically supported through original survey data (H1), and a series of regression analyses conducted on firm-level, and county-level data collected in the United States (H2). Moreover, I use country-level labor institution and FDI policy data from OECD countries to test the third hypothesis (H3) .

This paper contributes significantly on two fronts. Firstly, it explicates the surge in anti-foreign sentiments by highlighting the necessity of examining both economic and social facets of foreign firms. Secondly, the findings may offer insights into the importance of considering not only economic outcomes but also social behaviors of foreign firms. They underscore the often-overlooked significance of social behaviors and equitable production processes in the realm of FDI.

Author

• Doeun Kim, University of California- Los Angeles