The political economy of inward FDI: Opposition to Chinese mergers and acquisitions

Dustin Tingley, Christopher Xu, Adam Chilton, Helen V. Milner

Research output: Contribution to journalArticlepeer-review

48 Scopus citations

Abstract

A great deal of political economy scholarship has focused on how countries can attract foreign direct investment (FDI), and the effects of FDI on growth and political stability. A related topic that has received almost no attention, however, is that of divergent political reactions to inflows of FDI in the countries receiving investments. This is an oversight, because inward FDI flows are not equally welcomed by the host country and, in fact, often encounter strong political opposition. We study this phenomenon by examining political opposition to attempts by Chinese companies at mergers and acquisitions (M&As) with US firms. This is especially important given rapidly expanding Chinese M&A activity. We hypothesise that although most legal barriers to foreign M&As are based on national security considerations, objections on these grounds are often vehicles through which to channel other grievances, and that economic distress and reciprocity are also key drivers of political opposition. To test this theory, we constructed an original dataset of 569 transactions that occurred between 1999 and 2014 involving Chinese acquirers and American targets. We find that there is more likely to be opposition to Chinese M&A attempts in security sensitive industries, economically distressed industries, and sectors in which US companies faced restrictions in China's M&A markets.

Original languageEnglish (US)
Pages (from-to)27-57
Number of pages31
JournalChinese Journal of International Politics
Volume8
Issue number1
DOIs
StatePublished - Mar 1 2015

All Science Journal Classification (ASJC) codes

  • Political Science and International Relations

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