Destination of Foreign Investment and Trade from Autocratic Countries

This article addresses the central research question of foreign activity location in international business literature focusing on typically autocratic-emerging countries. What determines the magnitude and geographic location of their trade and investment? Focusing on political system differences, aggregate foreign direct investment (FDI) and exports of 47 autocratic countries along with 136 other countries are analyzed to get the full picture. Modified gravity models accounting for additional variables like common language, trade agreements, and historical ties are estimated using WLS, controlling for other distances between countries established in the literature. The results indicate that multinationals in autocratic countries take advantage of their at-home experiences from operating in such political systems and heavily export to and invest in other autocratic countries. The results suggest that this advantage is stronger for FDI than exports, potentially reflecting its longevity relative to trade. The results also confirm the findings in the literature for general preference for foreign activities in democratic countries across the spectrum of political systems.