State-owned MNCs and host country expropriation risk: the role of home state soft power and economic gunboat diplomacy

Abstract

Expropriation risk has a binding effect on foreign direct investment (FDI). However, state-owned multinational corporation (MNCs) may counter the monopoly power of the host state by leveraging the political influence of their home government. The magnitude of this counter force, we argue, may vary, depending on the strength of political relations between the home and host state, and the level of economic dependence of the host country on the home market. We find supporting evidence of our hypotheses using Chinese firm level FDI information between 2003 and 2010.