size, age, productivity and has been a relatively novel area of study with several contributions during the COVID-19 pandemic (Cirera et al. 2021). New measures of global uncertainty have allowed this line of enquiry to expand (Ahir et al. 2022). The link with investment concentration seems rather intuitive: the set of global firms able to sustain positive returns under greater variation in the business environment, greater fluctuations in demand and cost structure shocks is naturally narrower. As such, destination-country uncertainty is expected to strongly shape investment concentration patterns.

Our analysis confirms that destination country idiosyncratic uncertainty correlates, not only with higher levels of investment concentration, but also with a lower number of investors; a trend that is particularly pronounced in developing countries. Table 2 illustrates formally the relationship between FDI concentration and uncertainty, netting out country and year time-invariant effects. Uncertainty is quantified using the _World Uncertainty Index_ as described in Ahir et al. (2022). The findings are robust to alternative measures of uncertainty (see table B4, which uses exchange rate volatility) as well as different thresholds for the concentration ratio (see table B5 and table B6), and a formal control for the share of services in GDP (Table B7 in Appendix). Besides greenfield investment, the pattern holds as well for M&As (as shown in table B13) with stronger significance in the years until the COVID-19 pandemic. Overall, the association between uncertainty and investment concentration mirrors similar findings in the trade literature, whereby greater risk in destination markets is associated with the narrowing of the extensive margin of trade (Juvenal & Monteiro 2021).

Market concentration in source economies is also expected to have an effect on investment concentration at destination, by reducing the number of large firms able to sustain investment in host economies. Measured at the level of source economies, the concentration of outward FDI into fewer MNEs is a regular trend, particularly pronounced in the United States as would be expected (see Figure A6). However, this concentration of FDI into a smaller number of investing firms appears only weakly associated with domestic market concentration, as proxied by sales of the largest public companies in total industry output. A formal comparison of concentration ratio of sales of three largest public enterprises in total output (using _Worldscope_ and _EU KLEMS_ databases for United States, Germany, the UK and France), and the three largest investors in total outward FDI, yields positive correlations only in two services industries - telecommunications and financial services - that do not constitute the bulk of FDI into developing countries (see Figure A7).

More generally, separating source and destination effects in investment projects proves challenging given the small numbers of bilateral observations of investment projects over time (compared e.g. to trade transactions), and thus the limited variation that can be explored for neat identification. This constraint adds to poor comparability of measures of source market concentration across countries, that would be suitable for the purpose.<sup>6</sup>

> 6It is noteworthy that, while the numbers of MNEs headquartered in the European Union and the United States investing in developing countries have decreased (Figure A9), the number of US investors in other high-income countries has not.

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