The effects of business- and non-business-targeting terrorism on FDI to the MENA region: The moderating role of political regime |
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Affiliation: | 1. School of Management, Northwestern Polytechnical University, Xi''an, China;2. EM Normandie Business School, Métis Lab, France;3. International School, Vietnam National University, Hanoi, Vietnam;4. Ecole Supérieure des Sciences Commerciales d''Angers (ESSCA), Lyon, France;1. Department of Business Administration, IQRA University, Karachi 75300, Pakistan;2. Center of Research for Energy and Climate Change (CRECC), Paris School of Business, France;3. ESSCA School of Management, France |
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Abstract: | This study investigates the effects of terrorist attacks on foreign investment by stressing the importance of both business- and non-business-targeting terrorism in the host country. Building on North’s strand of institutional theory, we argue that both forms of terrorism represent exogenous risks likely to generate high levels of non-ergodic uncertainty for MNEs and subsequently deter foreign investors. Further, we hypothesize that these effects may be moderated by host-country political regime type, which serves as a gauge for a favorable investment environment for MNEs operating in institutionally fragile markets. Using panel data on fifteen MENA countries over the period 2001–2018, we find empirical support for our hypotheses whereby hybrid political regimes, namely anocracies, strengthen the negative effects of both business- and non-business-targeting terrorism on FDI. Our work contributes to the research on FDI and exogenous risks by offering a more fine-grained conceptualization of terrorism, as well as by highlighting the moderating role of host-country hybrid regimes. |
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Keywords: | Terrorism Foreign direct investment (FDI) Business- and non-business targets Institutional environment Political regime MENA region |
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