Authoritarian Capitalism and Foreign Investment

A core determinant of firms’ international investment decisions is the ability of host-country political institutions to reduce policy uncertainty. While prior research has focused largely on formal constraints within democracies, this paper introduces a novel theoretical framework that reclassifies all political regimes -- democratic and authoritarian -- based on the protections they provide to private capital. This approach allows us to differentiate countries that appear similar under existing measures of executive constraint but vary widely in their institutional treatment of investors. Using firm-level foreign direct investment data, we show that this regime classification significantly improves predictions of investment patterns. Our results reveal that semi-competitive authoritarian regimes attract more investment than their noncompetitive authoritarian counterparts, underscoring the importance of moving beyond democracy-centric frameworks when assessing political risk.

About the Speakers

Richard Carney is an Associate Professor and Head of the Global and Area Studies Division at the Chinese University of Hong Kong in Shenzhen.  He is the author of Authoritarian Capitalism (Cambridge University Press, 2018) which won the Ohira Memorial Prize for scholarly works on the Asia Pacific. His subsequent book, China’s Chance to Lead (Cambridge University Press, 2023), examines how China has acquired global influence via infrastructure development and digitalization. It received the Choice “Outstanding Academic Title” Award. His next book, Cooperation amid Competition, is in preparation for Cambridge University Press. It examines when cooperation between China and the West on infrastructure, green energy, and digital connectivity projects occurs and endures and when it fails.

He has published articles in leading scholarly journals in finance, international business, and international political economy, including the Journal of Financial Economics, the Journal of International Business Studies, and the Review of International Political Economy. An advisor to the World Bank, his research has been recognized with many awards, including the Fordham – Gabelli Thought Leadership Award, the Best Paper Award on Emerging Economies Research at the Academy of International Business Meeting, and a Jean Monnet Fellowship.  He previously worked at the China Europe International Business School (CEIBS) in Shanghai where he taught in the Global Executive MBA program and was recognized for his teaching excellence. He has also taught senior-level policymakers at the Australian National University and at the Nanyang Technological University in Singapore. He was born in Canada and received his PhD from the University of California, San Diego.

Louis W. Pauly, the J. Stefan Distinguished Professor of Political Economy at the University of Toronto, established the Centre for the Study of Global Japan in the Munk School of Global Affairs and Public Policy in 2017 and directed it until June 2019. He remains an affiliated faculty member of the Centre as well as of the Innovation Policy Lab and the International Relations Program. He served as Chair of the Department of Political Science from 2012 to 2017 and held the Canada Research Chair in Globalization and Governance from 2002 to 2016. He was Director of the Centre for International Studies at the U of T from 1997 to 2011. A graduate of Cornell University, the London School of Economics, New York University, and Fordham University, he is a Fellow of the Royal Society of Canada, a Senior Fellow of Massey College, and a Fellow and Governing Board Member of Trinity College (Toronto). He has held visiting positions at the WZB Berlin Social Science Centre, Oxford University, Northwestern University, Osaka City University, the University of Munich, the Institute for Advanced Studies in Vienna, and the Brookings Institution. With Emanuel Adler, from 2007 to 2012 he edited International Organization, a top-ranked journal in the fields of international relations and international political economy. He was given the Distinguished Scholar Award in International Political Economy by the International Studies Association in 2015. Before his initial appointment at the U of T in 1987, Pauly held management positions in the Royal Bank of Canada, won an International Affairs Fellowship from the Council on Foreign Relations, and served on the staff of the International Monetary Fund.