Should I stay or should I go now? Understanding terrorism as a driver of institutional escapism

Max Abrahms, Luis Alfonso Dau and Elizabeth M. Moore

International Business Review, 2023, vol. 32, issue 4

Abstract: Prior empirical research has examined the effects of terrorism on foreign direct investment. These studies reveal the negative impact of terrorism on national economies, but neglect to theorize and examine how terrorism drives institutional escapism by promoting outward foreign direct investment (OFDI) to countries with lower risk levels. This study proposes and tests a rationalist explanation that builds on the concept of institutional escapism for how terrorism encourages increased levels of OFDI, particularly to countries with reduced risk. Drawing on the resilience, political violence, and international business literatures, we demonstrate through a unique global dataset of 22,873 observations, 5584 home-host country pairs, and 153 countries over 16 years (1995–2010) that terrorism induces institutional escapism in terms of OFDI.

Keywords: Outward foreign direct investment; Terrorism; Resilience; Country-of-origin advantage; Country-of-origin disadvantage; Institutional escapism (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:iburev:v:32:y:2023:i:4:s0969593123000203

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DOI: 10.1016/j.ibusrev.2023.102120

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