Beyond economic development? Foreign direct investment and pre-election violence

Abstract

Incumbents who resort to violence in efforts to secure their hold on power have been a major challenge for sub-Saharan Africa. At the same time, opening up domestic markets to international capital in the form of Foreign Direct Investment (FDI) has provided governments with more resources to garner the support of their citizens. How are these developments related? We argue that FDI reduces the likelihood that incumbents use violence in competitive regions. FDI has direct economic benefits for the population. Especially in competitive regions, where violence might reduce turnout even among their potential supporters, incumbents thus adapt their re-election strategies and use fewer violent means. We draw on geo-referenced data on election violence, FDI, and previous election results and match these within subnational regions. Investigating subnational variation in 15 sub-Saharan African countries, we find empirical support for our argument. FDI lowers pre-election violence in competitive regions, but has no effect in both incumbent and opposition strongholds. These findings are robust to using 10×10 km and 25×25 km grid cells and have important implications for democratic countries’ foreign policies: allowing multinational companies to invest in developing countries reduces violence, but might simultaneously bolster incumbent regimes.