U.S. National Security and De-Globalization

Journal of International Business Studies

47 Pages Posted: 23 Jul 2018 Last revised: 17 Mar 2023

See all articles by David Godsell

David Godsell

University of Illinois at Urbana-Champaign

Ugur Lel

University of Georgia - Department of Banking and Finance; European Corporate Governance Institute (ECGI)

Darius P. Miller

Southern Methodist University (SMU) - Finance Department

Date Written: July 22, 2018

Abstract

Globalization, defined as trade- and FDI-related interdependence among nations, increases social welfare by transmitting managerial practices, advanced technologies, and labor skills across borders. Recent declines in FDI flows have prompted scholars to speculate on the nature, magnitude, and determinants of de-globalization trends. We investigate whether a U.S. national security-related foreign investment screening law, the Foreign Investment and National Security Act of 2007 (FINSA), contributes to de-globalization trends. FINSA awarded a regulator known as the Committee on Foreign Investment in the United States broad new powers to revise or reject foreign acquisitions of firms in national security-related industries. Using a difference-in-differences research design, a wide variety of model specifications, and estimation samples spanning 1990 – 2016, we document post-FINSA declines in foreign takeovers of U.S. firms in national security-related industries. Consistent with techno-nationalism, we document that takeover declines are concentrated among research-intensive national security firms. Placebo, event-time, and robustness tests corroborate our results. Our empirical evidence suggests that foreign investment screening laws help explain the nature, magnitude, and determinants of recent de-globalization trends and prompts MNE managers to increasingly weight the political factors behind foreign investment screening laws when assessing their foreign investment strategies.

Keywords: FINSA, CFIUS, foreign investment screening laws, mergers and acquisitions

JEL Classification: F52, G14, G34, G38, K22

Suggested Citation

Godsell, David and Lel, Ugur and Miller, Darius P., U.S. National Security and De-Globalization (July 22, 2018). Journal of International Business Studies, Available at SSRN: https://ssrn.com/abstract=3218001 or http://dx.doi.org/10.2139/ssrn.3218001

David Godsell

University of Illinois at Urbana-Champaign ( email )

Champaign, IL 61820
United States
1.217.300.0844 (Phone)

HOME PAGE: http://giesbusiness.illinois.edu/profile/david-godsell

Ugur Lel (Contact Author)

University of Georgia - Department of Banking and Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Darius P. Miller

Southern Methodist University (SMU) - Finance Department ( email )

United States

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