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The Impact of Terrorism on Foreign Direct Investment : Which Sectors are More Vulnerable ?

The impact of conflict and violence on foreign direct investment (FDI) is not a topic that has been done justice by the literature, and what few studies exist have contradictory results. This paper studies the impact that transnational terrorism has on FDI inflows by economic sector, in developed countries. Results indicate a statistically significant negative correlation between terrorist events and total FDI inflows. Amongst a list of 12 broad industrial sectors, FDI inflows for manufacturing, trade and repair, and construction were found to have a statistically significant negative correlation with terrorist events.