The Political Economy of Inward FDI: Opposition to Chinese Mergers & Acquisitions

Chinese Journal of International Politics, vol. 8, no.1, p. 27-57, 2015

45 Pages Posted: 20 Aug 2014 Last revised: 15 Feb 2015

Dustin H. Tingley

Harvard University - Department of Government

Christopher Xu

Princeton University

Adam S. Chilton

University of Chicago - Law School

Helen V. Milner

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Political Science

Date Written: November 17, 2014

Abstract

A great deal of political economy scholarship has focused on studying how countries can attract Foreign Direct Investment (FDI), and the effects that FDI has on growth and political stability. A related topic that has received almost no attention, however, is the divergent political reactions to inflows of FDI that occur 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 receive strong political opposition. We study this phenomenon by examining political opposition to attempts by Chinese companies at mergers and acquisitions (M&As) with U.S. firms. We hypothesize that although most legal barriers to foreign M&As are based on national security considerations, national security objections are often vehicles to channel other grievances, and 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 U.S. companies faced restrictions in China’s M&A markets.

Suggested Citation

Tingley, Dustin H. and Xu, Christopher and Chilton, Adam S. and Milner, Helen V., The Political Economy of Inward FDI: Opposition to Chinese Mergers & Acquisitions (November 17, 2014). Chinese Journal of International Politics, vol. 8, no.1, p. 27-57, 2015. Available at SSRN: https://ssrn.com/abstract=2482445 or http://dx.doi.org/10.2139/ssrn.2482445

Dustin H. Tingley

Harvard University - Department of Government ( email )

1737 Cambridge Street
Cambridge, MA 02138
United States

Christopher Xu

Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544
United States

Adam S. Chilton (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

HOME PAGE: http://www.adamchilton.org

Helen V. Milner

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Princeton University - Department of Political Science ( email )

Corwin Hall
Princeton, NJ 08544-1013
United States
609-258-0181 (Phone)

Paper statistics

Downloads
208
Rank
116,910
Abstract Views
1,223