Emerging from war: Public policy and patterns of foreign direct investment recovery in postwar environments

Robert J. Moore

doi:10.1057/s42214-020-00084-4

Abstract

The postwar environment is different from those of active war and established peace, with risks of violence and political volatility existing alongside renewed commitments to stability and development. International aid organizations join governing institutions in guiding policies for postwar growth. Though investments here are risky, I argue that governments can clarify key uncertainties and accelerate the process of recovering FDI by strengthening policy in areas of information transparency, governing accountability, and engagement with international aid. These ideas are tested with a survival analysis of inbound FDI recovery using a worldwide sample of postwar periods from 1970 to 2008. I find that while transparency and accountability accelerate FDI recovery as expected, foreign aid tends to be associated with slower rates of recovery. Rather than encourage postwar FDI with a commitment to development, aid may be an indirect signal that the environment is yet unfit for private sector investment. Policymakers and aid organizations should not rely on aid alone to attract foreign investment in postwar environments. Structures that encourage investment for social responsibility, with a long-term market outlook, may be more successful in these contexts.

Highlights

International companies can be a productive force toward building stability and economic growth in countries recovering from war
Contribution and Conclusion To IB theory, this study extends a framing from emerging economy business research to postwar recovery environments, emphasizing the effect of policy to reduce context-related uncertainties facing investing firms (Meyer & Peng, 2016)
Results support the broader insight from emerging economy research that when policy and institutional environments are unstable, uncertain, and/or inefficient, these concerns gain prominence as drivers of FDI – they have the potential to overcome effects that might be predicted by traditional resource- or market-based logic (Peng, Wang, and Jiang, 2008)

Summary

Introduction

International companies can be a productive force toward building stability and economic growth in countries recovering from war. Companies may take active roles in the peacebuilding process Some have leveraged their valuable status as neutral parties to host peace negotiations, as in South Africa during the transition from the apartheid regime Is the time following its cessation (or reduction) This violence, and the power conflict among organized forces behind it, form the immediate backdrop for policy during the recovery period. Recent violence brings with it the risk of relapse should the reconciliation effort fail This is a valid fear, as over a third of postwar countries between 1960 and 2002 relapsed to renewed fighting within 10 years (Collier et al, 2008)

Methods

Results

Discussion

Conclusion