@article{Burger:332623,
      recid = {332623},
      author = {Burger, Martijn and Ianchovichina, Elena and Rijkers, Bob},
      title = {Risky Business: Political Instability and Sectoral  Greenfield Foreign Direct Investment in the Arab World},
      address = {2015},
      year = {2015},
      note = {Presented at the 18th Annual Conference on Global Economic  Analysis, Melbourne, Australia},
      abstract = {How does political instability affect the level and  composition of foreign direct investment (FDI)?  The answer  to this question has important implications for countries’  development trajectories since not all types of FDI are  considered equally conducive to economic growth. Alfaro  (2003) demonstrates that the growth spillovers associated  with FDI vary across sectors, being positive in  manufacturing, ambiguous in the services sector and  negative in the primary sector. Her findings help explain  why many countries have been especially eager to attract  FDI in manufacturing and services (Harding and Javorcik,  2011) and why investments in natural resources are  considered a mixed blessing, and even a curse (Sachs and  Warner, 2001).   Existing studies of the effect of  political instability on investment have focused mostly on  aggregate relationships. They typically document a strong  negative relationship between political instability and  aggregate investment (Alesina and Perotti, 1996), foreign  direct investment (Busse and Hefeker, 2007; Daude and  Stein, 2007), and growth (Barro, 1991; Alesina et al.,  1996). However, some authors find no significant or even  positive effects and argue that political unrest and  institutional quality are not important determinants of  investment flows (Noorbakhsh et al., 2001; Campos and  Nugent, 2003; Blonigen and Piger, 2014). In specific  instances, some foreign companies find it especially  advantageous to invest during periods of instability  (Guidolin and La Ferrara, 2007).  One possible explanation  for the divergent results is that the effect of political  instability on FDI varies across sectors. To start with,  resource-seeking multinationals may have limited  opportunities for investment due to the geographically  constrained availability of resources. Second, investments  may differ in the degree to which they are reversible and  in the extent to which their profitability hinges on  first-mover advantages. Third, the cost of finance l...},
      url = {http://ageconsearch.umn.edu/record/332623},
}