Inter-state War Dynamics and Investment: Insights From the Russia-Ukraine War

The Russia-Ukraine war beginning in February 2022 has led to renewed scholarly interest in how inter-state war affects managerial decisions. Focusing on the Russia-Ukraine case, we study how (1) perceived investment outlook and (2) an escalation in hostilities may impact the willingness of firms to continue investing in a country engaged in inter-state war. We find that firms are willing to continue investing—some regardless of the investment outlook and despite weak institutions--even as war escalates. We also find that willingness to continue investing is driven by a mix of profit-seeking behavior and altruistic motives. This study contributes to the literature on the drivers of corporate investment and how they are affected by the dynamics of inter-state war. Our findings can help managers make investment decisions that can benefit their firms and also benefit countries in times of war.