Quotation Müllner, Jakob, Puck, Jonas, Fraißler, Martin, Dorobantu, Sinziana. 2019. Electoral Uncertainty, Political Constraints, and Political Capabilities in Cross-Border Investment. Academy of Management Proceedings. Aug


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Abstract

In this paper we explore an under-researched dimension of political risk: electoral uncertainty. Using 56,996 M&A and greenfield investments into 55 countries, we show that close upcoming elections reduce the likelihood of foreign investments. Based on political cycle theory, we hypothesize and show empirically that countries with lower political constraints allow incumbent governments to offer sweet deals to foreign investors for their political benefit, thus moderating the negative effect of close upcoming elections. Finally, we argue and show that firms with previous experience in pre-election bargaining are more likely to invest under electoral uncertainty. Our paper offers several contributions combining the literatures on electoral uncertainty, political risk and political capabilities. Most importantly, our research adds an important and controversial contingency to the widely accepted dogma that low political constraints impede foreign direct investment.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Academy of Management Proceedings
Language English
Title Electoral Uncertainty, Political Constraints, and Political Capabilities in Cross-Border Investment
Volume Aug
Year 2019
Reviewed? Y
URL https://journals.aom.org/doi/10.5465/AMBPP.2019.125
DOI https://doi.org/10.5465/AMBPP.2019.125
Open Access N

Associations

People
Müllner, Jakob (Details)
Puck, Jonas (Details)
Fraißler, Martin (Details)
External
Dorobantu, Sinziana (NYU Stern School of Business, United States/USA)
Organization
Institute for International Business (Zapkau) (Details)
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