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Multinational investment activity under policy uncertainty in host and competing countries

Daisoon Kim & Sunhyung Lee

Journal of International Economics2026https://doi.org/10.1016/j.jinteco.2026.104252article
AJG 4ABDC A*
Weight
0.50

Abstract

This paper examines how economic policy uncertainty (EPU) in host and competing countries reshapes U.S. multinationals’ greenfield foreign direct investment (FDI). Using firm-destination level data from 2003 to 2021, we show that while host-country EPU deters investment, EPU in competing destinations attracts it through a spillover effect. We document a structural shift around 2015: as global EPU rose unevenly, the spillover effect from competitors became the dominant driver of investment decisions, supplanting the direct effect of host-country policy instability. Our findings indicate that in an era of heightened global uncertainty and risk, FDI allocation is governed by relative, not just absolute, policy stability. • Host-country policy uncertainty deters FDI, while competitor uncertainty attracts it. • Relative policy stability, rather than absolute levels, governs FDI flows recently. • A structural shift after 2015 made competitor uncertainty the dominant driver of FDI.

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https://doi.org/https://doi.org/10.1016/j.jinteco.2026.104252

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@article{daisoon2026,
  title        = {{Multinational investment activity under policy uncertainty in host and competing countries}},
  author       = {Daisoon Kim & Sunhyung Lee},
  journal      = {Journal of International Economics},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1016/j.jinteco.2026.104252},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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