Robots and Sectoral FDI: Why Automation Attracts Technology-Driven but Not Resource-Driven Investment in OECD Countries

The rapid diffusion of industrial robots is reshaping global production networks, yet we know surprisingly little about how automation affects the sectoral composition of foreign direct investment (FDI). We argue that robot adoption generates a competitive sorting process among advanced economies—attracting technology-intensive capital through two distinct channels while leaving endowment-driven and site-specific sectors structurally insulated. Using a balanced panel of 32 OECD countries over 2013–2024 and System GMM estimation, we find that robot density significantly increases Manufacturing FDI through a direct productivity channel and Services FDI through an indirect complementarity channel, while Construction, Mining, and Agriculture FDI remain invariant to automation intensity. Strikingly, the complementarity effect on services exceeds the productivity effect on manufacturing in magnitude, suggesting that automation's strongest locational pull operates not where robots are deployed but through cross-sectoral spillovers into knowledge-intensive activities. These findings remain robust to alternative variable measurements. We term this pattern the technological upgrading hypothesis: rather than uniformly reshoring investment from developing countries, automation creates within-OECD differentiation by pulling technology-driven FDI toward automation-frontier economies—a mechanism that aggregate analyses cannot detect and that carries significant implications for the geography of investment and the risk of FDI polarisation among advanced economies.