Economic Elites and FDI Inflows: Empirical Findings

This chapter provides an empirical test of the hypothesis that a greater number of competing economic elites in a nondemocratic state will be associated with reduced foreign direct investment inflows in that state and that this effect will be larger when political competition is also present. This chapter builds upon the models developed in the prior chapter and introduces new variables, including a novel measure of economic elite density derived from World Federation of Exchanges data on the market share concentration of large firms. In the course of the analysis, this chapter demonstrates a robust negative association between the number of economic elites and FDI inflows during the period since 1980. The number of economic elites is also found to be an important conditioning factor on the effect of political competition in such settings. This chapter also provides case study vignettes on two exemplar cases where economic elite concentration has led to highly stable policy incentives with regard to investment: Kazakhstan and Singapore.