Authors’note: The authors would like to thank the following individuals for their helpful comments: Jeffrey Berejikian, Markus Crepaz, Alfred Cooper Drury, Bryan Early, Nathan Jensen, Hoon Lee, Toby Rider, Mark Souva, Jaroslav Tir, and Laron Williams. Replication data and do files along with an online appendix of additional tables are available at http://www.isanet.org/data_archive.html.
Investment, Opportunity, and Risk: Do US Sanctions Deter or Encourage Global Investment?1
Article first published online: 16 OCT 2012
© 2012 International Studies Association
International Studies Quarterly
Volume 57, Issue 1, pages 65–78, March 2013
How to Cite
LEKTZIAN, D. and BIGLAISER, G. (2013), Investment, Opportunity, and Risk: Do US Sanctions Deter or Encourage Global Investment?. International Studies Quarterly, 57: 65–78. doi: 10.1111/j.1468-2478.2012.00761.x
- Issue published online: 25 MAR 2013
- Article first published online: 16 OCT 2012
Lektzian, David and Glen Biglaiser. (2012) Investment, Opportunity, and Risk: Do US Sanctions Deter or Encourage Global Investment? International Studies Quarterly, doi: 10.1111/j.1468-2478.2012.00761.x © 2012 International Studies Association
Complementing the effectiveness of US sanctions debate, the US government often prods US investors to disinvest from targeted countries, hoping to pressure sanctioned countries to back US foreign policy goals or face economic costs for their actions. Missing from the effectiveness of sanctions debate is the impact US sanctions have on third-party foreign direct investment (FDI). Using panel data for 171 countries from 1969 to 2000, we present the first empirical study on the effect of sanctions on global FDI. We find strong evidence that when US firms disinvest during US sanctions, global FDI significantly increases, providing the target country with a reliable source of capital replacement. The results suggest the limited effectiveness of sanctions for restricting capital flows to targeted countries and that US firms may ultimately bear the highest costs from US-imposed sanctions.