Political risk, economic integration, and the foreign direct investment decision

Yu-Fu Chen, Michael Funke

    Research output: Working paperDiscussion paper

    53 Downloads (Pure)

    Abstract

    In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. We also consider the impact of economic integration upon FDI decisions. The paper follows the real options approach, which allows investigating the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions while economic integration leads to an increasing benefit of investing abroad.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2008

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.208
    ISSN (Print)1473-236X

    Fingerprint

    Foreign direct investment
    Political uncertainty
    Investment decision
    Economic integration
    Political risk
    Investing
    Real options
    Investment strategy
    Policy uncertainty

    Keywords

    • Political risk
    • Real options
    • Investment
    • Foreign direct investment

    Cite this

    Chen, Y-F., & Funke, M. (2008). Political risk, economic integration, and the foreign direct investment decision. (Dundee Discussion Papers in Economics; No. 208). University of Dundee.
    Chen, Yu-Fu ; Funke, Michael. / Political risk, economic integration, and the foreign direct investment decision. University of Dundee, 2008. (Dundee Discussion Papers in Economics; 208).
    @techreport{9593888012af4eaf994b62905da6938e,
    title = "Political risk, economic integration, and the foreign direct investment decision",
    abstract = "In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. We also consider the impact of economic integration upon FDI decisions. The paper follows the real options approach, which allows investigating the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions while economic integration leads to an increasing benefit of investing abroad.",
    keywords = "Political risk, Real options, Investment, Foreign direct investment",
    author = "Yu-Fu Chen and Michael Funke",
    year = "2008",
    language = "English",
    series = "Dundee Discussion Papers in Economics",
    publisher = "University of Dundee",
    number = "208",
    type = "WorkingPaper",
    institution = "University of Dundee",

    }

    Chen, Y-F & Funke, M 2008 'Political risk, economic integration, and the foreign direct investment decision' Dundee Discussion Papers in Economics, no. 208, University of Dundee.

    Political risk, economic integration, and the foreign direct investment decision. / Chen, Yu-Fu; Funke, Michael.

    University of Dundee, 2008. (Dundee Discussion Papers in Economics; No. 208).

    Research output: Working paperDiscussion paper

    TY - UNPB

    T1 - Political risk, economic integration, and the foreign direct investment decision

    AU - Chen, Yu-Fu

    AU - Funke, Michael

    PY - 2008

    Y1 - 2008

    N2 - In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. We also consider the impact of economic integration upon FDI decisions. The paper follows the real options approach, which allows investigating the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions while economic integration leads to an increasing benefit of investing abroad.

    AB - In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. We also consider the impact of economic integration upon FDI decisions. The paper follows the real options approach, which allows investigating the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions while economic integration leads to an increasing benefit of investing abroad.

    KW - Political risk

    KW - Real options

    KW - Investment

    KW - Foreign direct investment

    M3 - Discussion paper

    T3 - Dundee Discussion Papers in Economics

    BT - Political risk, economic integration, and the foreign direct investment decision

    PB - University of Dundee

    ER -

    Chen Y-F, Funke M. Political risk, economic integration, and the foreign direct investment decision. University of Dundee. 2008. (Dundee Discussion Papers in Economics; 208).