Knowledge sources, foreign direct investments, and the global geopolitics of technology

Foreign direct investment (FDI) historically represents one of the main connectors in the nodes of the globalization of technological innovation. By allowing multinational enterprises (MNEs) to establish lasting connections and conduct activities on a global scale, FDI has facilitated cross- border techno-scientific collaborations, the free flow of scientific knowledge, and the integration of advanced research and development ecosystems. In recent years, however, a series of major unforeseen disruptions—including the 2008 financial crisis, the deterioration of US-China trade relations, the COVID-19 pandemic, and the Russian invasion of Ukraine—have rapidly reshaped the global geopolitical landscape, prompting states to prioritize control over critical technologies and reduce reliance on foreign technological infrastructure in order to safeguard economic resilience and national security. Western governments are increasingly reinforcing FDI screening mechanisms with the stated aim of protecting strategic assets and capabilities in sectors deemed critical for national security and domestic technological competitiveness, while simultaneously promoting narratives that advocate for reshoring and friend-shoring initiatives to enhance economic resilience. In this context, this thesis aims to analyze the intersections between FDI flows, technological development, and geopolitics. The work is structured with a general introduction intended to provide the reader with an overview and guide them through the subsequent sections, followed by a comprehensive literature review of the relevant academic literature in the first chapter, two analytical chapters focusing on (i) FDI and geopolitical dynamics effects on knowledge sourcing strategies in U.S. MNEs active in the digital and green sector, (ii) inward strategic asset-seeking (SAS) FDI effects on technological sovereignty in Western economies. In Chapter One, the thesis explores the concept of SAS FDI, offering a comprehensive literature review of the definitions employed, the empirical methods used for detection, and their impacts on local innovation in host countries, as well as their implications in the contested realms of global technological competition. The findings reveal a growing convergence in terminologies across disciplines when referring to SAS FDI and highlight the effects of such investments on regional innovation in recipient economies vary significantly based on the type of FDI, as well as the industrial and geographical contexts in which they originate and are directed. The chapter also highlights how national security policies are increasingly being leveraged as strategic tools to exert control over FDI flows, particularly in critical sectors, with regulations intended to protect key assets increasingly becoming tactical instruments in broader geopolitical power struggles. The second chapter focuses on the strategic acquisitions by emerging market multinational enterprises (EMNEs) in OECD countries and assesses the post-acquisition innovative performance of both the target firms and the acquirers. It relies on (i) the ORBIS Mergers and Acquisitions database to collect data on all completed cross-border acquisitions originating from BRICS acquirers and directed toward OECD countries from 2016 to 2020, and (ii) the ORBIS Intellectual Property database for financial and patent-based annual measures spanning from 2014 to 2022. We employ text-mining techniques to detect SAS FDI and a nonparametric counterfactual method to measure the deals’ causal effects on a multi-dimensional set of variables assessing firms’ performance over time. We show that BRICS strategic acquisitions were concentrated in the most innovative regions of the Western world, targeting firms with strong pre-acquisition performance, particularly in sec- tors that are both technologically intensive and critical for national security. Our findings reveal that the market innovative outcomes for EMNE acquirers improve post-acquisition. Nevertheless, while the economic performance of target firms is unaltered by the deal, their intellectual property capacity tends to decline, raising important questions about the implications of these kinds of FDI for national technological sovereignty. In the third chapter, the thesis delves into the role of FDI and geopolitics in reshaping the knowledge- sourcing strategies of U.S. MNEs competing in two of the most geopolitically sensitive sectors: digital and green. First, I utilize Bureau van Dijk’s (BvD) ORBIS Intellectual Property (IP) database and leverage recent methodological advancements to identify all U.S. patents in the green and digital domains that were granted by the United States Patent and Trademark Office (USPTO) and filed between 2013 and 2020 by firms fully owned in the U.S. Thus, I map firms’ knowledge sources by georeferencing backward citations with the addresses of their inventors and/or applicants. Second, I utilize ORBIS Mergers and Acquisitions (M&A) and ORBIS Cross Border Investment data, both furnished by BvD, to collect all outward FDI undertaken by firms in our sample. Additionally, I leverage CEPII data to measure bilateral geopolitical (dis)agreement and gather other country- level information on both the U.S. and the destination economies of its MNEs. Finally, leveraging a gravity model, I assess the dynamic effects of FDI and geopolitical disagreement on firms’ foreign knowledge sourcing. The results highlight the critical role of FDI in shaping knowledge flows for U.S. firms in the digital and green sectors, serving as a vital mechanism for MNEs to access and integrate foreign knowledge essential for innovation. Geopolitical disagreement significantly influences a firm’s knowledge sourcing from specific countries. In the digital sector, heightened national security concerns lead to a noticeable decline in foreign knowledge sourcing as geopolitical tensions increase. In contrast, the green sector exhibits less sensitivity to geopolitical dynamics.