Data on global foreign direct investment (FDI) inflows shows that civil war significantly deters investment, while post-civil war settings attract investment. Civil wars, however, can end in different ways (government victories, rebel victories, and various types of settlements) and firms should be attracted to terminations that reveal more information about the future political and economic stability of the nation. We argue that comprehensive peace agreements and their subsequent implementation convey the most relevant information to investors regarding the credibility of the conflict actors’ commitment to future peace and stability and should thus attract the most FDI. Analysis of FDI inflows to 73 post-civil war countries lends support to our argument. The policy implications of the study are straightforward: governments that wish to attract the maximum amount of FDI for economic reconstruction following a civil war should negotiate and implement a comprehensive peace agreement.
AlleeTPeinhardtC (2011) Contingent credibility: The impact of investment treaty violations on foreign direct investment. International Organization65(3): 401–432.
2.
AlsanMBloomDECanningD (2006) The effect of population health on foreign direct investment inflows to low-and middle-income countries. World Development34(4): 613–630.
3.
Andersen-RodgersDR (2015) Back home again: Assessing the impact of provisions for internally displaced persons in comprehensive peace accords. Refugee Survey Quarterly34(3): 24–45.
4.
AppelBJLoyleCE (2012) The economic benefits of justice: Post-conflict justice and foreign direct investment. Journal of Peace Research49(5): 685–699.
5.
ArellanoMBondS (1991) Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies58(2): 277–297.
6.
AsieduE (2002) On the determinants of foreign direct investment to developing countries: Is Africa different?World Development30(1): 107–119.
7.
AsieduELienD (2011) Democracy, foreign direct investment and natural resources. Journal of International Economics84(1): 99–111.
8.
BerdenKBergstrandJHEttenE (2013) Governance and globalisation. The World Economy37(3): 353–386.
9.
BevanAAEstrinS (2004) The determinants of foreign direct investment into European transition economies. Journal of Comparative Economics32(4): 775–787.
10.
BiglaiserGStaatsJL (2010) Do political institutions affect foreign direct investment? A survey of U.S. corporations in Latin America. Political Research Quarterly63(3): 508–522.
11.
BusseMHefekerC (2007) Political risk, institutions and foreign direct investment. European Journal of Political Economy23(2): 397–415.
12.
BütheTMilnerHV (2008) The politics of foreign direct investment into developing countries: Increasing FDI through international trade agreements?American Journal of Political Science52(4): 741–762.
13.
CastilloGD (2008) Rebuilding War-torn States: The Challenge of Post-conflict Economic Reconstruction. New York: Oxford University Press.
14.
CleeveEADebrahYYiheyisZ (2015) Human capital and FDI inflow: An assessment of the African case. World Development74: 1–14.
15.
CollierP (1999) On the economic consequences of civil war. Oxford Economic Papers51(1): 169–183.
16.
CollierP (2009) Post-conflict recovery: How should strategies be distinctive?Journal of African Economies, 18(suppl 1), i99–i131.
17.
CollierPElliottVLHegreHHoefflerAReynal-QuerolMSambanisN (2003) Breaking the Conflict Trap: Civil War and Development Policy. Washington, DC: World Bank/Oxford: Oxford University Press.
18.
CollierPHoefflerAPattilloC (2004) Africa’s exodus: Capital flight and the brain drain as portfolio decisions. Journal of African Economies13(2): 15–54.
19.
DoyleMSambanisN (2006) Making War and Building Peace: United Nations Peace Operations. Princeton, NJ: Princeton University Press.
20.
DunningJH (1988) The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies19(1): 1–31.
21.
EggerPMerloV (2007) The impact of bilateral investment treaties on FDI dynamics. The World Economy30 (10): 1536–1549.
22.
ElkinsZGuzmanATSimmonsBA (2006) Competing for capital: The diffusion of bilateral investment treaties, 1960–2000. International Organization60(4): 811–846.
23.
EunCResnickB (2014) International Financial Management, 7th edn.New York: McGraw-Hill/Irwin.
24.
FoltaTBO’BrienJP (2004) Entry in the presence of dueling options. Strategic Management Journal25(2): 121–138.
25.
García CanalEGuillénMF (2008) Risk and the strategy of foreign location choice in regulated industries. Strategic Management Journal29(10): 1097–1115.
26.
GarrigaACPhillipsBJ (2014) Foreign aid as a signal to investors: Predicting FDI in post-conflict countries. Journal of Conflict Resolution58(2): 280–306.
27.
GlobermanSShapiroD (2002) Global foreign direct investment flows: The role of governance infrastructure. World Development30(11): 1899–1919.
28.
GlobermanSShapiroD (2003) Governance infrastructure and US foreign direct investment. Journal of International Business Studies34(1): 19–39.
29.
GohouGSoumaréI (2012) Does foreign direct investment reduce poverty in Africa and are there regional differences?World Development40(1): 75–95.
30.
HartzellCHoddieM (2007) Crafting Peace: Power Sharing Institutions and the Negotiated Settlement of Civil Wars. College Park, PA: Pennsylvania State University Press.
31.
HayakawaKKimuraFLeeH (2013) How does country risk matter for foreign direct investment?The Developing Economies51(1): 60–78.
32.
HögbladhS (2012) Peace agreements 1975–2011—Updating the UCDP peace agreement dataset. In: PetterssonTThemnérL (eds), States in Armed Conflict 2011. Report 99. Uppsala: Uppsala University, Department of Peace and Conflict Research.
33.
HolburnGLF (2001) Regulatory institutions and firm strategy: Theory and evidence from the electric power industry. Doctoral Dissertation, University of California at Berkeley.
34.
HolburnGLFZelnerBA (2010) Political capabilities, policy risk, and international investment strategy: Evidence from the global electric power generation industry. Strategic Management Journal31(12): 1290–1351.
35.
JakobsenJDe SoysaI (2006) Do foreign investors punish democracy? Theory and empirics, 1984–2001. Kyklos59(3): 383–410.
36.
JarstadAKNilssonD (2008) From words to deeds: The implementation of power-sharing pacts in peace accords. Conflict Management and Peace Science25(3): 206–223.
37.
JensenNM (2003) Democratic governance and multinational corporations: Political regimes and inflows of foreign direct investment. International Organization57(3): 587–616.
38.
JensenNM (2008) Political risk, democratic institutions, and foreign direct investment. Journal of Politics70(4): 1040–1052.
39.
JensenNMRosasG (2007) Foreign direct investment and income inequality in Mexico, 1990–2000. International Organization61(3): 467–487.
40.
JiménezA (2010) Does political risk affect the scope of expansion abroad? Evidence from Spanish MNEs. International Business Review19(6): 619–633.
41.
JiménezA (2011) Political risk as a determinant of Southern European FDI in neighbouring developing countries. Emerging Markets Finance and Trade47(4): 59–74.
42.
JiménezALuis-RicoIBenito-OsorioD (2014) The influence of political risk on the scope of internationalization of regulated Companies: Insights from a Spanish sample. Journal of World Business49(3): 301–311.
43.
JoshiM (2010) Post-civil war democratization: Promotion of democracy in post-civil war states, 1946–2005. Democratization17(5): 826–855.
44.
JoshiM (2015) Comprehensive peace agreement implementation and reduction in neonatal, infant and under-5 mortality rates in post-armed conflict states, 1989–2012. BMC International Health and Human Rights15(1): 27.
45.
JoshiMMasonTD (2011) Civil war settlements, size of governing coalition and durability of peace in the post-civil war states. International Interactions37(4): 388–413.
46.
JoshiMQuinnJMRegamP (2015) Annualized implementation data on comprehensive intrastate peace accords, 1989–2012. Journal of Peace Research52(4): 551–562.
47.
KathmanJD (2013) United Nations peacekeeping personnel commitments, 1990–2011. Conflict Management and Peace Science30(5): 532–549.
48.
KreutzJ (2010) How and when armed conflicts end: Introducing the UCDP conflict termination dataset. Journal of Peace Research47(2): 243–250.
49.
LacinaBGleditschNP (2005) Monitoring trends in global combat: A new dataset of battle deaths. European Journal of Population21(2–3): 145–166.
50.
LaffeyMNadarajahS (2012) The hybridity of liberal peace: States, diasporas and insecurity. Security Dialogue43(5): 403–420.
51.
LeeHBiglaiserGStaatsJL (2014) The effects of political risk on different entry modes of foreign direct investment. International Interactions40(5): 683–710.
52.
LewinAYMassiniSPeetersC (2009) Why are companies offshoring innovation? The emerging global race for talent. Journal of International Business Studies40(6): 901–925.
53.
LiQ (2006) Political violence and foreign direct investment. Research in Global Strategic Management12: 225–249.
54.
LiQResnickA (2003) Reversal of fortunes: Democratic institutions and foreign direct investment inflows to developing countries. International Organization57(1): 175–212.
55.
LiXLiuX (2005) Foreign direct investment and economic growth: An increasingly endogenous relationship. World Development33(3): 393–407.
56.
LickliderR (1995) The consequences of negotiated settlements in civil wars, 1945–1993. American Political Science Review89(3): 681–690.
57.
MarshallMGGurrTDJaggersK (2013) Polity IV Project, Political Regime Characteristics and Transitions, 1800–2012. Available from: http://www.systemicpeace.org/inscr/inscr.htm (accessed 1 May 2013).
58.
MasonTDBrandtPGursesMQuinnJM (2011) When civil wars recur: Conditions for durable peace after civil wars. International Studies Perspectives12(2): 171–189.
59.
Mihalache-O’KeefAVashchilkoT (2010) Foreign direct investors in conflict zones. Adelphi Paper50(412–413): 137–156.
60.
MillarG (2016) Local experiences of liberal peace: Marketization and emergent conflict dynamics in Sierra Leone. Journal of Peace Research53(4): 569–581.
61.
MillerKD (1992) A framework for integrated risk management in international business. Journal of International Business Studies23(2): 311–331.
62.
NeumayerESpessL (2005) Do bilateral investment treaties increase foreign direct investment to developing countries?World Development33(10): 1567–1585.
63.
NickellS (1981) Biases in dynamic models with fixed effects. Econometrica: Journal of the Econometric Society49(6): 1417–1426.
64.
NighD (1986) Political events and the foreign direct investment decision: An empirical examination. Managerial and Decision Economics7(2): 99–106.
65.
NoorbakhshFPaloniAYoussefA (2001) Human capital and FDI to developing countries: New empirical evidence. World Development29(9): 1593–1610.
66.
NorthDCWeingastB (1989) Constitutions and credible commitments: The evolution of the institutions of public choice in 17th century England. Journal of Economic History49(4): 803–832.
67.
OlsonM (1993) Dictatorship, democracy, and development. American Political Science Review87(3): 567–576.
68.
OnealJR (1994) The affinity of foreign investors for authoritarian regimes. Political Research Quarterly47(3): 565–588.
69.
PughM (2011) Local agency and political economies of peacebuilding. Studies in Ethnicity and Nationalism11(2): 308–320.
70.
PughMCooperNTurnerM (2011) Introduction. In: PughMCooperNTurnerM (eds), Whose Peace? Critical Perspectives on the Political Economy of Peacebuilding. New York: Palgrave Macmillan, pp. 1–10.
71.
QuinnJMMasonTDGursesM (2007) Sustaining the peace: Determinants of civil war recurrence. International Interactions33(2): 167–193.
72.
ReiterSLSteensmaHK (2010) Human development and foreign direct investment in developing countries: The influence of FDI policy and corruption. World Development38(12): 1678–1691.
73.
RotherL (1996) Guatemalans formally end 36-year civil war, Central America’s longest and deadliest. New York Times, 30December.
74.
RugmanAM (1981) Inside the Multinationals: The Economics of Internal Markets. New York: Columbia University Press.
75.
RugmanAMVerbekeANguyenTKQ (2011) Fifty years of international business theory and beyond. Management International Review51(6): 755–786.
76.
SambanisN (2004) What is civil war? Conceptual and empirical complexities of an operational definition. Journal of Conflict Resolution48(6): 814–858.
77.
SchneiderFFreyBS (1985) Economic and political determinants of foreign direct investment. World Development13(2): 161–175.
78.
SelbyJ (2011) The political economy of peace processes. In: PughMCooperNTurnerM (eds) Whose Peace? Critical Perspectives on the Political Economy of Peacebuilding. New York: Palgrave Macmillan, pp. 11–29.
79.
StaatsJLBiglaiserG (2012) Foreign direct investment in Latin America: The importance of judicial strength and rule of law. International Studies Quarterly56(1): 193–202.
80.
SulimanAHMollickAV (2009) Human capital development, war and foreign direct investment in sub-Saharan Africa. Oxford Development Studies37 (1): 47–61.
81.
ThemnérLWallensteenP (2013) Armed conflicts, 1946–2012. Journal of Peace Research50(4):509–21.
82.
TobinJLRose-AckermanS (2011) When BITs have some bite: The political-economic environment for bilateral investment treaties. Review of International Organizations6(1): 1–32.
83.
UCDP (2013) Battle-related deaths dataset v.5-2013. Uppsala Conflict Data Program, Uppsala University. Available from: www.ucdp.uu.se.
84.
UNCTAD (2013a) World Investment Report 2013. New York: United Nations.
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
