Firm Nationality and Local Government Preferences for Foreign Direct Investment

Abstract

Existing research on foreign direct investment (FDI) focuses on the national-level characteristics of host countries or public opinion. However, subnational governments, which strongly influence the feasibility and profitability of FDI projects, remain understudied. We advance understanding of this middle layer of political actors by documenting subnational policymakers' attitudes toward investment projects. Specifically, we conducted an original, nationwide survey experiment on top elected local officials to examine how firms' national origin affects their receptivity in U.S. local communities. We find that American local leaders prefer domestic investment projects and are significantly less receptive to foreign firms, particularly those from China. These preferences stem, in part, from concerns about regime type and geopolitics. Far from focusing solely on the local economy and constituent opinion, local policymakers are also influenced by sociotropic and interstate considerations. More broadly, this study underscores the role of subnational governments in international relations and sheds light on how US–China tensions influence economic globalization.