Human Rights, Foreign Direct Investment, & INGOs

Over at IPE@UNC, Lindsay Tello discusses the article on foreign direct investment and human rights shaming that Colin Barry, Michael Flynn, and I have in this month’s International Studies Quarterly.  Here’s the abstract:

Non-state actors, such as international non-governmental organizations (INGOs) and multi- national corporations (MNCs), have attained an increasingly prominent role in modern world affairs. While previous research has focused on these actors’ respectiveinteractions with states, little attention has been paid to their interactions
with each other. In this paper, we examine the extent to which the decisions of private actors seeking to invest abroad are affected by the reputational costs of doing business in countries publicly targeted by human rights activists. We find that “naming and shaming” by human rights INGOs tends to reduce the amount of foreign direct investment received by developing  states, providing  evidence that INGO activities affect the
behavior of MNCs. An additional implication of our findings is that shaming by
INGOs can impose real costs on targeted states in the form of lost investment.

I really appreciate Lindsay’s plug of the paper, and I would like to take the opportunity to share a few thoughts about where we are going from here.

Our paper is an attempt to advance three different literatures: the nascent literature on interactions between non-state actors, the longstanding literature on the relationship between government respect for physical integrity rights and foreign direct investment, and the growing literature on the effects of human rights INGO activities. Lindsay focuses particularly on the interaction between non-state actors, i.e. MNCs and INGOs, and like her, I believe that this is an important direction for future research.  One thing we see as
among the next steps is to look at more disaggregated FDI data.  As Nate Jensen has discussed recently, collecting these data can be incredibly difficult; luckily for me, my co-author, Colin Barry, has already engaged in the hard work of collecting data on 10,738
foreign subsidiaries of 77 major companies from 1993-2010.  We hope to use these data to understand which types of companies are most susceptible to the influence to INGO shaming.

While the study of interactions between non-state actors is still in its early stages, there is a long-standing literature that examines the degree to which state human rights practices and foreign direct investment are interrelated.  While we believe this
paper represents a substantial step forward in delineating the separate mechanisms that connect human rights practices to the receipt of foreign direct investment, there is still more to be done. Our focus in this paper was on how the external perception of the governments a company does business with may affect that company’s investment decisions. However, Lindsay points to another crucial question: How do labor standards (and shaming of individual companies for their exploitation of those labor standards) affect investment decisions?  We are hoping to get at this question in a couple of different ways.  First, Colin and I are currently working with David Cingranelli on a dataset that contains
information on seven different labor rights in law and practice for almost every country in the world from 1994 to the present.  We hope to utilize these data in future studies to determine how different types of labor standards affect investment decisions.  Second, we hope to eventually pair data on INGO shaming of individual corporations for their labor
standards with disaggregated FDI data, allowing us to get a more direct understanding
of the interaction between MNCs and INGOs.

Finally, while recent research has drawn attention to the ability of human rights INGOs to improve human rights practices, we understand far less about the costs that INGO “naming and shaming” can impose on states to encourage them to engage in these improvements. As such, we see this paper as a step toward understanding those
costs, but we still have many ideas about other ways in which INGO shaming is capable
of imposing costs on target states.  According to Keck and Sikkink’s “boomerang model” and Murdie and Davis’ findings, INGO shaming is more effective when that shaming is echoed by third party states. As such, we are currently working on a project that looks at the influence of human rights INGOs on US foreign policy; our early results suggest that INGO shaming influences both foreign policy outcomes and statements made by individual
policy-makers, such as members of Congress.

Of course, these are just some thoughts about where we would like to take our work.  Where would you like to see this go?  Give us some feedback in the comments.

K. Chad Clay

About K. Chad Clay

K. Chad Clay is an assistant professor in the Department of International Affairs at the University of Georgia and co-director of the CIRI Human Rights Data Project. His research focuses on the impact of international factors on human rights practices, political violence, and economic development. He received his PhD in political science from Binghamton University in 2012.

One thought on “Human Rights, Foreign Direct Investment, & INGOs

  1. Pingback: What is foreign direct investment? | Israel Foreign Affairs

Leave a Reply