Work

Geopolitical rivalry and FDI location choice: evidence of strategic avoidance among Chinese, Japanese, and Korean firms during the first Trump era

Year: 2026

Type: article

Abstract: This study examines how the outward FDI (OFDI) location choices of Chinese, Japanese, and Korean firms shifted amid rising geopolitical tensions during the first Trump administration. Using project-level data from fDi Markets covering 4020 greenfield investments in 61 countries, it identifies a pattern of geopolitically driven mutual avoidance. After 2017, Japanese and Korean firms became less likely to invest in countries with strong Chinese FDI presence, especially in R&D and manufacturing, while Chinese firms similarly avoided co-locating with Japanese and Korean firms. These patterns indicate that firms prioritized mitigating geopolitical and reputational risks over agglomeration benefits, leading to a decoupling of investment patterns. The study introduces “geopolitically driven FDI avoidance” as a counterpart to agglomeration theory, offering micro-level evidence of global value chain fragmentation under systemic shocks and highlighting implications for firms and policymakers navigating an increasingly bifurcated global investment environment.

Source: Asia and the Global Economy

Author: Jinhyuck Joseph Park

Institution: Sogang University

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: gold

Estimated APC paid: $1,500

Funder: Sogang University