Abstract
This paper examines how geopolitics shapes the FDI strategies of emerging economy multinationals (EMNEs) by examining the impact of favorable and unfavorable geopolitical conditions. While most studies have shown that firms are more cautious when dealing with geopolitical risks in their international investment decisions, our sample shows the opposite. Latin American firms invest more in countries that are perceived as riskier and present more contained investment strategies in countries that are perceived as less risky. We also show that political capabilities moderate these relationships by increasing the propensity to invest more in both situations. This paper contributes to the international business-international relations interface by highlighting the counter-intuitiveness in risk evaluation/perception. Moreover, we present political capabilities as a complementary variable in the study of home-host country relationship effect.