From Efficiency-Seeking to Resilience-Seeking FDI: How Geoeconomic Fragmentation is Reshaping Global Investment

Abstract

Foreign direct investment (FDI) has traditionally been associated with efficiency-seeking strategies in which multinational enterprises locate production and investment activities according to cost advantages, market access, resource availability, and the efficiency of global value chains. However, the international investment environment has changed substantially in recent years. Rising geopolitical tensions, trade conflicts, economic sanctions, supply-chain disruptions, and increasing strategic competition among major economies have altered the conditions under which multinational enterprises make international investment decisions. In this context, firms may increasingly prioritize resilience, diversification, political stability, institutional quality, and supply-chain security alongside conventional efficiency considerations.

This study investigates whether the growing process of geoeconomic fragmentation is associated with a shift from efficiency-seeking toward resilience-seeking foreign direct investment. The study develops an empirical framework linking FDI inflows to geopolitical, institutional, macroeconomic, and trade-related factors and examines whether the importance of resilience-related characteristics has increased in the context of a more fragmented global economy. The analysis distinguishes between traditional determinants of FDI and emerging determinants associated with investment resilience, including geopolitical risk, institutional stability, trade exposure, and the capacity to absorb external shocks. A panel-data framework is proposed to examine these relationships across countries and over time, with particular attention to changes in the determinants of FDI before and after the intensification of geoeconomic fragmentation.

The study contributes to the literature by conceptualizing resilience-seeking FDI as an emerging dimension of multinational investment behavior and by examining whether geopolitical and supply-chain considerations are becoming increasingly important in determining international investment locations. The findings are expected to provide new insights into the transformation of global investment patterns and to offer policy implications for countries seeking to remain attractive destinations for foreign investors in an increasingly fragmented international economic system.