The effects of economic and financial crises on FDI: A literature review

Keywords Economic crises and shocks; Financial crises; FDI; MNEs; Responses; Escape behaviour; Defensive behaviour; Risky behaviour; Disinvest; Flexibility; Fire-sale FDI Abstract This paper reviews the literature that examines the effects of economic and financial crises on foreign direct investment (FDI). Economic and financial crises have different impacts on FDI flows. Often, the amount of FDI flow is negatively affected by the crises. This paper contributes to international business (IB) literature by providing a basic framework of how FDI is affected by the crisis. This paper adopts the literature review research method. The paper finds two main effects of crises on FDI: indirect effects (macro level) and direct effects (micro level). The behaviour and responses of multinational enterprises (MNEs) to crises are divided into three fundamental types: escape, defensive, and risky behaviour. Theoretical and practical contributions and future research are also provided. Author Affiliation: Birkbeck, University of London, United Kingdom Article History: Received 22 February 2023; Accepted 2 March 2023 Byline: Emad Alchikh Saleh [Ealchi01@mail.bbk.ac.uk]