Expropriation, Nationality, and Diplomacy

Abstract

Expropriation of foreign-owned property continues to be part of the modern economy. Under what conditions do governments have the ability to expropriate foreign direct investment (FDI) in a globalizing world? I argue that governments have more permissive space to expropriate when host to a greater diversity of nationalities of foreign firms. One means of observing this dynamic is through diplomatic advocacy, because diplomats scale back their efforts when FDI national diversity weakens diplomatic leverage. This paper uses case studies of European and American investors in Argentina, Ukraine, Russia, and Romania to link variation in expropriation to FDI national diversity via diplomacy. If we take FDI national diversity as a marker of global integration, more integrated governments are – counterintuitively – more likely to expropriate.