%0 Generic
%A Liu, Luxin
%C Heidelberg
%D 2020
%F heidok:28815
%K relative gains-seeking, inward foreign direct investment, China, U.S.
%R 10.11588/heidok.00028815
%T The Hidden Investment War: State Intervention and Relative Gains Seeking from Inward Foreign Direct Investment in the U.S. and China
%U https://archiv.ub.uni-heidelberg.de/volltextserver/28815/
%X This dissertation aims to analyze and compare the evolution of the regulatory regimes for inward foreign direct investments (IFDIs) in the U.S. and China. The theoretical-analytical framework combines the theory of relative gains-seeking and historical institutionalism. Since some cutting-edge technologies generate positive externalities across different industrial sectors and have both commercial and military applications, firms and countries that possess them can yield long-term relative gains from international economic cooperation and global value chains. As indigenous innovation demands long-term and large capital investments, especially in R&D-intensive sectors, a late developer such as China can accelerate the general process of technology diffusion by intervening in IFDI deals to promote the transfer of cutting-edge technologies possessed by foreign entities to domestic firms. For an early developed economy such as the U.S., its task is to protect the advanced technologies from being transacted or taken over by foreign firms – to defend relative gains from international economic cooperation. The comparative-historical analysis in this study first places the institutional origins and evolutions of the two regulatory regimes in the broader historical context. It gives special attention to the institutional origins of the contemporary IFDI regulatory regimes in the 1970s and 1980s in both countries, and illustrates how the institutions have evolved and effectively worked to serve states’ political goals. The empirical findings show that relative gains-seeking driven by the political logic of globalization – insecurity and competition – has enabled both countries to transform the domestic regulatory institutions. However, at some critical junctures, the historically constituted institutional relations within the two states also constrained the recasting of domestic institutions. In the U.S., even though capital and technology transfer had impaired its domestic productive capabilities and U.S. companies’ economic positions in strategic sectors in the 1970s and 1980s, the Treasury Department steered the institutional change of CFIUS and shielded it from the more politicized – yet also more democratic – site of decision-making in Congress. In China, institutional change and policy liberalization have also been mainly characterized with an elite-led process, which countered the demands of the greater conservative social coalition in the 1970s and impeded the legalization of a national security review regime for IFDIs amid the trade war. A comparison of the two cases shows that the state capacity to regulate IFDI for strategic goals increased in the U.S., while decreased somewhat in China. Today’s policy instruments are outcomes of long-term exposure to the changing international markets. Lastly, these findings also demonstrate that historical institutionalism and neorealism can complement each other in explaining change and continuity in world politics.