A new study co-authored by UCR Political Science faculty member Steven Liao, along with In Song Kim and Sayumi Miyano, offers groundbreaking insights into how foreign direct investment (FDI) transforms host-country trade dynamics and political coalitions.

In recent years, scholars have increasingly examined how firms’ participation in FDI and trade deepens global value chains and influences political preferences. Yet, much of this research has focused on the effects in home countries—overlooking how FDI reshapes the host economy and its politics.

Published in the American Journal of Political Science, the article, “How FDI Reshapes Host Markets’ Trade Profile and Politics,” bridges this gap by exploring how firm-level investment and trade interact to alter the structure of host markets. The authors find that FDI not only expands a host country’s export portfolio but also empowers new domestic coalitions that support trade liberalization.

Analyzing greenfield FDI projects globally since 2003, the study reveals that host countries experience an average increase of over 45 new export products within a year of investment. Using detailed Vietnamese customs data, the authors link FDI to firm-level trade records, finding that Vietnamese exports and imports of FDI-related products increased by 90% and 30%, respectively, within four years of initial investment. Furthermore, these products benefited from greater tariff reductions in bilateral Free Trade Agreements—illustrating how investment can reshape both economic and political landscapes.

This work provides a critical contribution to understanding the intersection of global production, trade, and domestic political change—highlighting the ways that multinational investment reconfigures not just economies, but also the political coalitions that sustain globalization.

For the full article, see:
Kim, In Song, Steven Liao, and Sayumi Miyano. 2025. “How FDI Reshapes Host Markets’ Trade Profile and Politics.” American Journal of Political Science. September 12. https://doi.org/10.1111/ajps.70010