Sub-national Institutions and Inward Foreign Direct Investment: Effects of Political Party Pendulum Swings

ABSTRACT While the influence of national institutions is well-documented, we theorize and investigate how sub-national institutions affect localization of foreign direct investment into a sub-national geographic area. Specifically, we examine the effect of county-level political ideology and party majority affiliation in the United States on inward foreign direct investment through foreign-sourced greenfield start-ups in that county. As predicted, in examination of 2,978 counties (94.7% of all US counties), the dichotomous majority party affiliation (Republican versus Democrat) differentially influenced foreign-sourced greenfields. Significantly decreased levels of foreign-sourced greenfields were experienced in counties during a Republican majority relative to Democratic, all else being held equal.