| ID | 160573 |
| Title Proper | Monopoly rents and foreign direct investment in fixed assets |
| Language | ENG |
| Author | Wright, Joseph ; Joseph Wright Boliang Zhu ; Zhu, Boliang |
| Summary / Abstract (Note) | In the past two decades, much of foreign direct investment (FDI) in the primary sector has flowed to unconventional, politically risky destinations. This presents a puzzle for theories that emphasize the ex post immobility of—and hence high potential expropriation risk for—fixed asset investment. Existing theories overlook one critical aspect of fixed assets: large capital requirements and high sunk costs act as entry barriers, resulting in market concentration and strong firm incentive for monopoly rent extraction. Personalist dictatorships, we posit, provide an attractive institutional environment for fixed asset investors. In such systems, the control of key economic sectors by the families of leaders, combined with a lack of institutional constraints, facilitate rent-seeking activities. We find that personalist dictatorships receive significantly more foreign investment in the primary sector, and fixed-asset intensive industries in general, than other regimes. This study highlights the importance of accounting for heterogeneity among investors and political regimes to understand the politics of FDI. |
| `In' analytical Note | International Studies Quarterly Vol. 62, No.2; Jun 2018: p.341–356 |
| Journal Source | International Studies Quarterly Vol: 62 No 2 |
| Key Words | Foreign Direct Investment ; Fixed Assets ; Monopoly Rents |