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<p>The apparent association between authoritarian governance and foreign direct investment (FDI) in natural resource industries conceals important variation within the primary sector. Existing analyses often fail to distinguish between mining/extractive industries, which must invest where specific resources exist and may contribute to endogenous processes of authoritarian entrenchment, and agriculture, where democratic regimes may offer stronger incentives for investment. Given the dramatic increases in agricultural investments in the last three decades, this distinction is not trivial and augurs against blanket statements concerning natural resources. Yet, analysts routinely refer to the primary sector as shorthand for mining, despite this heterogeneity. Using subsector FDI data, we investigate the institutional determinants of agricultural investment in 50 emerging economies from 1980 to 2010, an historical period during which inward primary sector investment surged in many developing countries with diverse institutional attributes. We consider how intrinsic characteristics of both agricultural and mining/extractive industries connect to political institutions. We find that in subsectors such as agriculture where firms may consider multiple locations for investment and sunk costs are lower than in mining, higher democratic quality corresponds with increased investment. This has consequences for the politics of FDI as well as broader political implications for natural resource endowments.</p>

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Input-Factor Mobility and the Impact of Host Country Institutions on Foreign Direct Investment in Natural Resources

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年1月24日

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  • Andres A. Sandoval,
  • Patrick J. W. Egan,
  • Joe Weinberg

摘要

The apparent association between authoritarian governance and foreign direct investment (FDI) in natural resource industries conceals important variation within the primary sector. Existing analyses often fail to distinguish between mining/extractive industries, which must invest where specific resources exist and may contribute to endogenous processes of authoritarian entrenchment, and agriculture, where democratic regimes may offer stronger incentives for investment. Given the dramatic increases in agricultural investments in the last three decades, this distinction is not trivial and augurs against blanket statements concerning natural resources. Yet, analysts routinely refer to the primary sector as shorthand for mining, despite this heterogeneity. Using subsector FDI data, we investigate the institutional determinants of agricultural investment in 50 emerging economies from 1980 to 2010, an historical period during which inward primary sector investment surged in many developing countries with diverse institutional attributes. We consider how intrinsic characteristics of both agricultural and mining/extractive industries connect to political institutions. We find that in subsectors such as agriculture where firms may consider multiple locations for investment and sunk costs are lower than in mining, higher democratic quality corresponds with increased investment. This has consequences for the politics of FDI as well as broader political implications for natural resource endowments.