The Big Screen: Mapping the Diffusion of Foreign Investment Screening Mechanisms

Abstract

In the decade following the 2008 financial crisis, many advanced industrialized economies engaged in a competition to attract Foreign Direct Investment (FDI), whose flows had plummeted following the global shock. At the same time, however, they also implemented or tightened Investment Screening Mechanisms (ISMs), which empower governments to restrict foreign takeovers, especially in strategic sectors. ISMs are an understudied phenomenon in the International Political Economy literature. This research note describes patterns in the evolution of foreign investment screening policies and suggests a research agenda for analyzing these patterns. After defining ISMs and establishing the puzzle of rising investment screening in conjunction with rising efforts to attract FDI, we present a newly coded dataset on ISMs in OECD countries from 2007-2021, examining the evolution of seven key features of investment screening over time. Next, we set an agenda for future research by suggesting three explanations for their recent evolution in the shadow of rising Chinese investment: the role of bottom-up backlashes to economic globalization; elite-driven foreign policy arguments about the increasingly blurred lines between national and economic security in the information economy; and geopolitical transformations that have challenged key features of the post-war liberal order.

Keywords: cfius, fdi, foreign investment, investment, ism, screening, investment screening