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This article reviews scholarly research on the political economy of foreign direct investment (FDI) over the past 20 years. FDI research during this period reflects FDI's rapid growth, particularly in developing countries, and the emergence of intense competition among countries to attract investments. Countries have grown more open to FDI as evidenced by FDI deregulation, generous financial investment incentives, and the adoption of international agreements. Although extensive research shows that multinational corporations prefer to invest in countries with strong property rights protections, whether incentives and international agreements help countries attract FDI remains contested. Scholars can advance research by disaggregating FDI into multinational firms' specific production activities because the scope for countries to compete for FDI and firms' sensitivity to property rights vary widely. More generally, scholars should recast the separate study of trade and FDI into the study of global production in which trade and FDI are inextricably linked.

AbstractExisting research on foreign direct investment (FDI) focuses on how politics influences the supply of FDI inflows. In this article I shift focus to the demand for FDI inflows within recipient countries by examining individual preferences for FDI. I argue that FDI preferences are largely a function of FDI's effects on income. FDI raises wages, especially those of skilled labor because foreign firms require more highly skilled labor than their local counterparts. Accordingly, support for FDI should increase with respondents' skills. Using three years of extensive public opinion data from eighteen Latin American countries, I provide robust evidence that preferences are consistent with FDI's effects on income. There is relatively little support for alternate explanations including concerns about job security, opposition to privatization, and the socializing effects of higher education on economic policy preferences.

A growing body of research argues that external threats from the international system strengthen ethnocentrism and authoritarianism, personal values anchored in national identity. We evaluate a necessary implication of this argument, that these shifting values drive change in broader social behaviors. Our focus is revealed value change in a non-political setting: American consumers' choice of supermarket brands that symbolize national identity. Our empirical analyses leverage US counties' quasi-random exposure to US Iraq War casualties to identify the effects of local casualties on the weekly market share growth of "American" supermarket brands. We analyze weekly supermarket scanner data for a representative sample of over 1,100 US supermarkets and 8,000 brands. During 2003-2006, the weekly market share of American brands grew relative to non-American brands in casualty-exposed supermarkets. Variation in share growth across customer demographics is consistent with reactions to external threat. We rule out alternative mechanisms including partisan cues, other product characteristics, and animosity towards other countries. These findings strengthen IR's theoretical microfoundations by showing that international politics can reshape values enough to change broader social behaviors.