Geopolitical alignment, outside options, and inward FDI: an integrated framework and policy pathways

Bhaumik, Sumon Kumar, Driffield, Nigel, Estrin, Saul ORCID: 0000-0002-3447-8593 and Razeq, Zarlasht M. (2025) Geopolitical alignment, outside options, and inward FDI: an integrated framework and policy pathways. Journal of International Business Policy. ISSN 2522-0691

Text (s42214-025-00212-y) - Published Version Available under License Creative Commons Attribution. Download (1MB)

• Scopus publication

Abstract

This paper examines the interplay of geopolitics, multinational enterprise (MNE) strategies, and host-country policies in shaping foreign direct investment (FDI) flows. We move beyond the traditional focus on MNE decisions by incorporating insights from international relations theory to analyze how geopolitical alignment influences MNE global strategies and host-country policy responses. We develop a framework that considers three main dimensions related to home and host countries: their political alignment, which affects their respective availability of outside options, and the technology gap between them and the political system in the host country. On this basis, we explore the dynamic interplay between international geopolitical agendas, MNE investment strategies, and local investment promotion agency (IPA) policy choices. Our analysis shows that while home–host geopolitical alignment can facilitate FDI and simplify policy choices, particularly in democracies, the absence of alignment necessitates a more nuanced IPA response. Our research indicates that IPA policies must consider geopolitical alignment, benefits distribution across various stakeholders, and the need to foster embeddedness and long-term engagement.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	Management
Subjects:	J Political Science H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited:	19 Feb 2025 14:12
Last Modified:	09 May 2025 20:04
URI:	http://eprints.lse.ac.uk/id/eprint/127373

Actions (login required)

View Item