This research investigates the association between direct foreign investments and foreign policy behavior in underdeveloped countries. Three conceptualizations of the relationship between these variables are culled from the literature. The first, the Trojan Horse model, regards foreign investments as a means for controlling host states. The second, the Scapegoat model, treats foreign investors and their home countries as targets to blame for the social and economic ills found in underdeveloped hosts. The third, the non-Foreign Entity model, sees foreign investors as attempting to appear as domestic, rather than foreign, firms, with effects on foreign policy being the result of the interdependence between the host and home states that is created by foreign investments. Cross-national research is employed to examine these models. The results do not support the Trojan Horse model but do provide support for both the Scapegoat and non-Foreign Entity models.
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