Antitrust policy and inward FDI: The impact of policy risk and uncertainty on U.S. inward-FDI flows

The enforcement of antitrust policy potentially affects the level of foreign investment experienced by a nation. Yet the literature focusing on the impact of antitrust on inward foreign direct investment (FDI) is inconclusive with respect to the nature of this relationship, as antitrust involves properties that can both promote and deter foreign investment. In line with these countervailing conceptual underpinnings, the empirical literature on this topic also presents mixed findings. We argue that distinguishing between the policy risk and policy uncertainty characteristic of antitrust allows reconciling these competing perspectives. We employ sector-level data on U.S. antitrust and inward-FDI flows over the 2002–2018 period. Our panel-data empirical results indicate that the policy-risk elements of antitrust enforcement foster inward FDI, while the policy-uncertainty elements of antitrust enforcement deter inward FDI.