Nationalism, political survival and foreign direct investment

Abstract

Domestic politics and political risk are considered determinants of inward foreign direct investment (FDI) for host countries (HCs). Although the concept of nationalism is often factored into both indicators, few studies discuss directly the relationship between nationalism and FDI. In this paper, I argue that nationalism is more likely to cause a decrease of inward FDI only if political leaders find it to be convenient to help realize their political survival. I test this hypothesis by investigating anti-colonial, anti-Chinese and anti-western nationalisms occurring in Indonesia, Malaysian and Thailand after becoming independence. Qualitative evidences suggest that nationalism will bring about economic nationalism when it can also generate political interests. As a consequence, inward foreign direct investment will decline. If resorting to economic nationalism will jeopardize leaders' chance of political survival, nationalism can be tolerated; impact on inward FDI will not appear.