Complex dependence in foreign direct investment: network theory and empirical analysis

We develop a theoretical framework that accounts for complex dependence in foreign direct investment (FDI) relationships. Conventional theories of FDI focus on firm-, industry-, country-, or dyad-level characteristics to account for cross-border capital movements. Yet, today's globalized economy is characterized by the increasing fragmentation and dispersion of production processes, which gives rise to complex dependence among production relationships. Consequently, FDI flows should be represented and theorized as a network. Specifically, we argue that FDI relationships are reciprocal and transitive. We test these hypotheses along with conventional covariate determinants of FDI using an exponential random graph model (ERGM) for weighted networks. We find that FDI networks exhibit strong reciprocity and transitivity. Our network approach to studying FDI provides new insights into cross-border investment flows and their political and economic consequences, and more generally the dynamics of globalization. In addition to our substantive findings, we offer a broad methodological contribution by introducing the ERGM for count-weighted networks in political science.

Originally Published at 10.1017/psrm.2020.45


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Work Title Complex dependence in foreign direct investment: network theory and empirical analysis
Open Access
  1. John Schoeneman
  2. Boliang Zhu
  3. Bruce Desmarais
  1. International political economy
  2. Quantitative methods
  3. Foreign direct investment
  4. Social network analysis
License CC BY-NC-ND 4.0 (Attribution-NonCommercial-NoDerivatives)
Work Type Article
  1. Political Science Research and Methods
Publication Date December 2, 2020
Publisher Identifier (DOI)
Deposited January 23, 2023




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Work History

Version 1

  • Created
  • Added fdi_draft.pdf
  • Added Creator John Schoeneman
  • Added Creator B Zhu
  • Added Creator Bruce Desmarais
  • Published
  • Updated Keyword Show Changes
    • International political economy, Quantitative methods, Foreign direct investment, Social network analysis
  • Renamed Creator Boliang Zhu Show Changes
    • B Zhu
    • Boliang Zhu
  • Updated