Investing in Peace: Do FDI Interdependence and Shared Pro-FDI Policies Reduce Interstate Conflict? (1985-2001)





Published date: 

December, 2017


Yi-hung Chiou


Since the 1970s, a rapid surge in foreign direct investment ( FDI ) has become one of the most important factors shaping the landscape of the global political economy. While theroists of commerical liberalism place emphasis on trade and claim the pacifying effects of ecomonic interdependence on interstate conflict, few recognize plausible linkages between FDI and interstate conflict. Differing from the conventional wisdom that merely focuses on the impact of oppurtunity costs on conflict, it argues that states' pro-FDI policies may reveal their reluctance to initate miliary action in interstate disputes. Moreover, this paper also contends that symmetrical FDI interdependence may be a promising factor faciliating peace. Nevertheless, the pacifying effects of the preceding FDI factors may vary in different dyads of state combination between developed and developing countries, due to the structural pattern of FDI flows. This paper analyzes the FDI-conflict realtionship from 1985 to 2001. The findings suggest the institutional feature of property rihts protection in a dyas of states is likely to be a credible indicator promoting the prospect of peace between states.