U.S.– China Hegemonic Competition and FDI Location Choice in Asia

Amid escalating strategic rivalry between the United States (U.S.) and China, the international business environment is undergoing a profound transformation. Drawing on hegemonic stability theory, this study examines how the U.S.-led international order has historically facilitated cross-border business activity, and how the ongoing U.S.–China hegemonic competition is fundamentally altering this dynamic. Specifically, the study investigates how intercountry cooperative or conflictive relations amid hegemonic rivalry are influencing firm-level foreign direct investment (FDI) location decisions. To quantify and track changes in these intercountry relations over time, the study leverages a novel dataset comprising millions of international events extracted from global news media. The findings reveal a growing tendency for U.S. firms to prefer investment destinations with favorable ties to the U.S., while increasingly avoiding countries with closer relations to China, particularly in Asia, a key region of hegemonic rivalry. As economic policies become increasingly instrumentalized, this pattern has intensified in recent years, underscoring the growing influence of geopolitical alignment on corporate strategy. The study contributes to international business literature by providing empirical evidence on how great power competition shapes FDI behavior and calls for a reevaluation of established theories and practices in the era of hegemonic rivalry.