National Security, Protectionism, and De-Globalization
46 Pages Posted: 23 Jul 2018 Last revised: 8 Feb 2022
Date Written: July 22, 2018
We investigate the effect of national security-related financial protectionism on globalization. We vary financial protectionism using the enactment of the Foreign Investment and National Security Act of 2007 (FINSA) in the United States and the staggered adoption of analogous laws in 33 non-U.S. countries between 2002 and 2020. We measure globalization using cross-border acquisition activity. We document that takeovers decline for firms in 61 national security-related industries when national security-related financial protectionism increases. Consistent with techno-nationalism, we document that takeover declines are concentrated in research-intensive national security firms. A wide variety of placebo and robustness tests corroborate our primary results. Our evidence suggests that national security-related financial protectionism is an economically significant factor driving de-globalization.
Keywords: FINSA, CFIUS, financial protectionism, mergers and acquisitions.
JEL Classification: F52, G14, G34, G38, K22
Suggested Citation: Suggested Citation