Foreign Direct Investment in Political Influence

Abstract

Abstract Do foreign firms engage in domestic politics, and if so, why? I argue that foreign firms, impacted by US policies, employ subsidiaries in the US to represent their political interests in federal elections. Using original data collected for the population of corporate givers during the 2014 and 2016 election cycles, I find US subsidiaries of foreign firms to be significantly more politically active than similarly sized American firms located in the same industry. These subsidiaries are much more likely to sponsor a Political Action Committee and donate in greater amounts. I explore a variety of explanations for this disproportionate political activity, and demonstrate that it is driven in part by the foreign parent firms’ desire to gain a political foothold in the United States. Foreign direct investment therefore serves as an investment in political influence.