Foreign direct investment and the Covid-19 pandemic: The real economy perspective and theoretical implications

Abstract

Purpose: The objective of this chapter is to discuss the effects of the Covid-19 pandemic on the international operations of firms, with a particular focus on foreign direct investment. Design/methodology/approach: The real economy perspective was adopted, whereby basic relationships in terms of the development of FDI flows and transactions worldwide were analyzed. In addition, primary data from a survey of internationally operating Polish firms were analyzed in order to shed additional light on the influence of the pandemic on international economic activity. In addition to formulating observations with regard to general patterns emerging from the data, an attempt has been made to outline the likely theoretical implications of the pandemic for FDI research. Findings: In the short term, there was a significant limitation of FDI, caused mainly by the introduction of lockdowns. In the middle and long run, the current crisis will likely translate into acontinued slowdown in FDI flows. On the other hand, as we may see from the early evidence analyzed in the chapter, the impacts on the international economic activity vary across locations at different levels of economic development, but also between different industries and business models. Research implications: From a theoretical perspective, we must note that in the short run the existing theoretical concepts can be helpful in explaining the present phenomena. However, in the long-term perspective a number of fundamental assumptions may require several revisions outlined in the chapter. Originality and value: The chapter includes an analysis of recent macro- and micro-level data on the effects of the pandemic on international business, along with forecasts for the post-pandemic period. Apart from the practical dimension of the analyzed primary and secondary data, the chapter also offers a number of theoretical implications.