Democratic Governance and Multinational Corporations: Political Regimes and Inflows of Foreign Direct Investment
Abstract
Foreign direct investment (FDI) is an important element of the global economy and a central component of economic development strategies of both developed and developing countries. Numerous scholars theorize that the economic benefits of attracting multinational corporations come at tremendous political costs, arguing that democratic political systems attract lower levels of international investment than their authoritarian counterparts. Using both cross-sectional and time-series cross-sectional tests of the determinants of FDI for more than 100 countries, I generate results that are inconsistent with these dire predictions. Democratic political systems attract higher levels of FDI inflows both across countries and within countries over time. Democratic countries are predicted to attract as much as 70 percent more FDI than their authoritarian counterparts. In a final empirical test, I examine how democratic institutions affect country credibility by empirically analyzing the link between democracy and sovereign debt risk for about eighty countries from 1980 to 1998. These empirical tests challenge the conventional wisdom on the preferences of multinationals for authoritarian regimes.
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As compared to investors from democratic regimes, ISPs with headquarters in authoritarian regimes may face less legal and reputational pressure from their home countries and civil society actors.
“As compared to investors from democratic regimes, ISPs with headquarters in authoritarian regimes may face less legal and reputational pressure from their home countries and civil society actors. 56”
From Authoritarian collaboration and repression in the digital age: balancing foreign direct investment and control in internet infrastructure (2026) · cites this paper as [56]
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- Authors
- Jensen, N. M.
- Corresponding author
- Jensen, Nathan M.
- ORCID
- Jensen, Nathan M.
- Venue
- International Organization
- Publisher
- Cambridge University Press (CUP)
- Published
- 2003
- Volume
- 57
- Issue
- 3
- Pages
- 587-616
- ISSN
- 0020-8183 (ISSN-L)
- 1531-5088
- OpenAlex
- W2150371751
- Cited by
- 1,017
- References
- 72
- Citations by year
- 2026: 30 · 2025: 50 · 2024: 42 · 2023: 49 · 2022: 68 · 2021: 51 · 2020: 48 · 2019: 65 · 2018: 45 · 2017: 56 · 2016: 49 · 2015: 64 · 2014: 57 · 2013: 53 · 2012: 62
- FWCI
- 42.96
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- International Organization (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Strategy and Management › International Business and FDI
- Social Sciences › Sociology and Political Science › Corruption and Economic Development
- Social Sciences › Business, Management and Accounting › Strategy and Management › Political Influence and Corporate Strategies
- Keywords
- foreign direct investment, democracy, authoritarian regimes, multinational corporations, political regimes, determinants of FDI, democratic institutions, sovereign debt risk
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