Friend or Foe? Partisanship, Rivalry, and Overseas Foreign Direct Investment in the United States

Glen Biglaiser, Kelan (Lilly) Lu and Seong Hun Yoo

Social Science Quarterly, 2025, vol. 106, issue 2

Abstract: Objective This article revisits how political partisanship and home and host‐state relations affect foreign direct investment (FDI) inflows. Method We use panel data for overseas Chinese and South Korean FDI into the United States from as early as 2006 to 2022. Results We observe differences in Chinese and South Korean FDI, finding that Chinese firms prefer Republican‐governed states because of the lower economic costs and higher political safety sought by rival countries. Conversely, South Korean firms favor investing in states with divided governments since both Democrats and Republicans will want to take credit for the job creation from a U.S. ally, offering greater financial incentives to South Korean businesses. Divided governments also increase policy stability, benefitting South Korean firms. We also conduct robustness checks and assess the politics of the FDI mode of entry, and the results confirm our main findings. Conclusion Our study offers nuance into how partisanship and foreign relations between home and host states affect political risk and FDI.

Date: 2025
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