Date of Award

Spring 1-1-2018

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

First Advisor

David H. Bearce

Second Advisor

Andy Baker

Third Advisor

Adrian J. Shin

Fourth Advisor

Jin-Hyuk Kim

Fifth Advisor

Moonhawk Kim

Abstract

In the post-Washington consensus world, developing countries consider foreign direct investment (FDI) economically beneficial. Although these capital-scarce countries have competed for FDI to promote economic development, they have not attracted much FDI. Instead, FDI has been concentrated in certain countries. Recently, an increasing number of developing countries have employed various diaspora engagement policies (DEPs) for the promotion of FDI, yet these policies' impact on FDI is not well understood. Hence, in this dissertation, I examine the role of DEPs in promoting FDI. I propose three questions. First, do DEPs increase FDI into developing countries? Second, how do DEPs increase FDI? Last, under what conditions might DEPs be most effective at promoting FDI? I argue that DEPs are another pathway toward FDI for developing countries, in addition to existing studies that suggest improving democratic institutions and increasing memberships in international economic institutions as a route to FDI. DEPs have an impact on attracting FDI by establishing and improving the relationship between diasporas and their homelands and stimulating their material and non-pecuniary interests in homeland investments. Also, I propose that this new FDI strategy matters more in non-democracies and two types of DEPs are particularly effective for them. In non-democracies - where information on investment is scarce - DEPs focusing on FDI information can lower diaspora investors' uncertainties about investment locations. Additionally, non-democracies often face resentment from overseas populations. Their conflictual relationship can be salvaged by DEPs that shape non-material investment interests. In order to assess this theory of the FDI promoting impact of DEPs, I created an original large-N dataset of DEPs. The DEP dataset tracks ten forms of DEPs among 27 Asian countries from 2000 to 2014. Using this novel dataset, for the first time, I provide a systematic analysis of the effectiveness of DEPs in attracting FDI. Through a time-series cross-sectional analysis of FDI from the USA to 25 Asian developing countries from 2002 to 2011, I find support for the importance of DEPs in attracting FDI. While DEPs, per se, do not influence the distribution of FDI across countries on average, their positive impact on FDI is observed in non-democracies. There is evidence that this conditional impact is driven by DEPs that are associated with non-pecuniary investment interests. DEPs associated with information provision promote FDI in all regime types. A series of robustness checks further support the FDI promoting impact of DEPs. Therefore, I conclude that employing DEPs, focusing on providing investment-related information and stimulating non-pecuniary interests in investment, is another pathway toward FDI for developing countries.

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