Knightian uncertain violence and the challenge of FDI-assisted development : policy recommendations where civilian lives are at risk
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Date
Authors
Thakur‑Wernz, Pooja
Barnard, Helena
Matthee, Marianne
Journal Title
Journal ISSN
Volume Title
Publisher
Palgrave Macmillan
Abstract
In this interdisciplinary paper, reviewing scholarship on both politically motivated and social violence, we use the Knightian
distinction between (measurable) risk and (unknowable) uncertainty to examine how international business is affected
when violence is directed at civilians, civilians are killed, and violence levels are constantly changing. Using data on 48
African countries (1997–2021), we show the uncertainty of these actions deters inward foreign direct investment (IFDI). As
a high-commitment mode of internationalization, IFDI involves deepening knowledge of and exposure to foreign locations.
Because uncertainty challenges the feasibility of deepening knowledge and is so hard to mitigate, investors behave differently
than under risky conditions—they avoid contexts with Knightian uncertain violence. Our post hoc analysis shows that
as IFDI decreases, exporting by local firms increases, suggesting another way to remain globally economically connected.
Although our work raises many questions that demand further research, we can already identify useful policy insights. When
violence makes a context uncertain to the point of virtual unknowability, IFDI will only assist development if policymakers
and MNEs alike work to reduce violence. Multi-sectoral partnerships, increasing educational opportunities, and especially
good governance are critical to ensuring IFDI is not appropriated by perpetrators of violence, but instead serves development.
Description
Keywords
Violence, Emerging markets, Uncertainty versus risk, Africa, Volatility, Violence against civilians, Inward foreign direct investment (IFDI), SDG-16: Peace, justice and strong institutions, SDG-17: Partnerships for the goals
Sustainable Development Goals
SDG-16:Peace,justice and strong institutions
SDG-17:Partnerships for the goals
SDG-17:Partnerships for the goals
Citation
Thakur‑Wernz, P., Barnard, H., MAtthee, M. 2024, 'Knightian uncertain violence and the challenge of FDI‑assisted development : policy recommendations where civilian lives are at risk', Journal of International Business Policy, vol. 7, pp. 356-390.
https://DOI.org/10.1057/s42214-024-00188-1.