Thread: What does political risk look like in a world of weaponized interdependence? @henryfarrell and I have a new piece in @HarvardBiz. Take away -- business needs to hold on to their hats. hbr.org/2020/01/choke-…
@henryfarrell @HarvardBiz 2/The standard story about political risk is focused on FDI recipient countries. Autocrats expropriate MNC investments. See @NateMJensen and @goodhouses amazing work on this. E.g. journals.uchicago.edu/doi/abs/10.101…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses 3/This led policy makers to focus on international solutions that address weak domestic property rights e.g. Bilateral Investment Treaties. cambridge.org/core/journals/…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses 4/In our recent work @henryfarrell and I have focused on how powerful states have started to use global economic networks for coercive ends under the banner of weaponized interdependence. mitpressjournals.org/doi/abs/10.116…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses 5/This flips the script on political risk. Globalization generates new risks for firms but not necessarily because of actions in the destination country. Instead the networks of globalization (the conduits of FDI) are the source of political risk. foreignaffairs.com/articles/unite…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses 6/Given the nature of global networks for money, info, and production, weaponized interdependence can ripple through the network. See, for example, the ZTE case and semi-conductors. knowledge.wharton.upenn.edu/article/why-th…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses 7/Firms will only face more disruption as states respond and attempt to insulate themselves. See recent @FT by @YuanfenYang. ft.com/content/c69932…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses @FT @YuanfenYang 8/For specific examples of what we call choke point political risk see semi-conductors. ft.com/content/0be9ed…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses @FT @YuanfenYang 9/also happening in 5G. businesstimes.com.sg/companies-mark…
@henryfarrell @HarvardBiz @NateMJensen @goodhouses @FT @YuanfenYang 10/As powerful states exercise control over key network hubs, political risk is likely to be felt both in upstream and downstream business decisions.
@henryfarrell @HarvardBiz @NateMJensen @goodhouses @FT @YuanfenYang 11/Big takeaway for firms is that the networks of globalization are themselves a new source of political risk. Given the current security environment, this will only grow in the coming years.
@henryfarrell @HarvardBiz @NateMJensen @goodhouses @FT @YuanfenYang 12/For policy makers, the old forms of solutions e.g. BITs are unlikely to solve the problem. This is less an issue of weak domestic law in FDI receiving countries but more about the reassertion by powerful states of their national security interests.
