Sichen Li

Research

What explains the rise in national security-related investment restrictions and why are high-tech firms disproportionally targeted? I argue that national security-based investment restrictions serve two goals of governments: (1) to prevent technology diffusion to their geopolitical rivals, and (2) to enhance their regulatory influence over high-tech firms that are not effectively regulated by traditional industrial policies. I hypothesize that governments are more likely to invoke national security when their domestic firms control chokepoints, i.e., key technologies, in global innovation networks (GINs), and when governments lack regulatory control of these firms. I test this hypothesis by compiling an original dataset of 700 CFIUS reviews and conducting network analysis of US firms’ positions in GINs using 188k patent license and assignment agreements involving Chinese and US firms from 2000 to 2021. The results show that compared to peripheral firms in GINs, those controlling key technologies are 48% more likely to face CFIUS reviews. Furthermore, firms weakly regulated by the government are 8% more likely to be reviewed by CFIUS compared to those with median exposure to government regulations. Firms’ central positions in global innovation networks paradoxically incentivize governments to restrict their access to foreign capital, contrary to the conventional wisdom that technological interdependence leads to investment liberalization.

How Political Tensions Fuel Cross-border Investment: American Consumer Hostility and Mergers and Acquisitions by Chinese and Japanese Firms, with Megumi Naoi

This paper leverages firm-level data on Japanese and Chinese mergers and acquisitions (M&As) in the United States spanning over three decades to demonstrate that political tensions between two countries increase cross-border mergers and acquisitions, contrary to the conventional wisdom that political tensions reduce cross-border investment. We develop and test a consumer-driven mechanism, whereby the rise of American consumer hostility toward Chinese (since 2016) and Japanese products (in the 1980s) in the United States incentivizes Chinese (Japanese) companies to engage in mergers and acquisitions with American firms to make their national identity less visible to consumers. We find that Chinese firms producing final consumer goods and Japanese firms producing final goods for corporations in global supply chains are more likely to increase mergers and acquisitions with U.S. companies compared to comparable firms that are producing intermediate goods. Profit-seeking firms have a repertoire of tools to address changing consumer preferences abroad and therefore political tensions can fuel, rather than dampen, globalization.

The Geopolitical Consequences of COVID-19: Assessing Hawkish Mass Opinion in China, with Joshua Byun and D.G. Kim, Political Science Quarterly, Vol.136, No.4, 2021.

Our central findings are twofold. First, the Chinese public in the COVID-19 era holds conspicuously optimistic beliefs about the growth of China’s relative power vis-à-vis the United States: over half the respondents surveyed expect China to catch up with or surpass the United States in terms of relative power sometime during the next decade, and about 17 percent believe that this has already happened. This optimism corresponds remarkably well with the widespread perception that the COVID-19 pandemic is accelerating China’s rise as a global power. Second, there are strong reasons to believe that “COVID-19 optimism” is fueling increased support for hawkish foreign policies among large segments of the Chinese public. The more strongly respondents believe that COVID-19 is hastening the growth of China’s relative power, the more they are likely to support the use of force against the United States and its allies, as well as supplanting U.S. dominance in the Asia-Pacific. Importantly, however, there is some evidence that this is a qualified hawkishness. Detailed analysis of the policy rationales offered by many of our respondents indicate that public support for the use of force against the United States tends to be premised on a situation in which China is being coerced or aggressed upon first.