The Politics of Foreign Direct Investment in Authoritarian Regimes

Existing scholarship does not account for why foreign direct investment (FDI) inflows have been increasing to many authoritarian countries in recent decades, with some authoritarian developing countries attracting levels of FDI similar to those in democratic developing countries. This dissertation argues that while authoritarian countries are in general more risky than democratic countries, this risk can be minimized when authoritarian regimes are constrained from both “above” and “below.” Authoritarian regimes that sign international investment treaties signal FDI-friendly policies and are constrained from backtracking on those policies. At the same time, authoritarian regimes that allow some degree of citizen participation in policymaking are constrained from deviating from FDI-friendly policies, which are generally preferred by citizens. In sum, it is hypothesized that authoritarian regimes that sign international investment treaties and maintain relatively high levels of citizen participation will attract the most FDI inflows. This hypothesis is tested using micro and macro level empirical evidence. Specifically, multilevel ordered probits of survey data on citizen preferences for FDI and statistical regressions of panel data on global FDI inflows are conducted. Estimation results confirm both the theoretical foundations and formal hypothesis of this dissertation: citizens in authoritarian countries view FDI inflows as welfare-enhancing and authoritarian countries with bilateral investment treaties and high levels of citizen participation attract the most FDI inflows. Additionally, results from an original survey of U.S. foreign investors reveal that multinational companies are aware of and value international investment treaties and freedom of association in host nations, thereby providing key primary evidence in support of the hypothesis. Finally, a comparative case study of Jordan and Syria further illustrate the micro-foundations of the argument. While both Jordan and Syria have signaled a dedication to liberal economic policies, Jordan has been the successor in attracting FDI inflows because of its participatory decision-making processes. This dissertation contributes to international political economy, international organization, and authoritarian political institution research by illuminating the domestic factors that provide credibility of compliance to international treaties signed by authoritarian countries. Previous literature has failed to address the variation of foreign investment inflows to authoritarian regimes and the role of compliance to international investment treaties in attracting these investment inflows to authoritarian countries