**Destination country characteristics.** Potential destination-specific drivers of variation in FDI concentration across country groups are examined in a similar framework, adding interactions of variables with a developing country group indicator to distinguish characteristics particularly relevant for this group. Specifically, in order to investigate the role played by country characteristic _xit_ , we estimate the following equation:

As in the previous equation, _Yit_ denotes our measure of FDI concentration. Our main variable _xit_ of interest is _Uncertaintyit_ as a country-specific measure of the overall risk experienced in economy _i_ and year _t_ , including geopolitical and economic events (see Ahir et al. (2022)).<sup>2</sup> In addition, _Zit_ denotes time-variant country-level control variables, including the logarithm of population, logarithm of GDP and the average exchange rate over the three years preceding the investment. The combination of country-year controls and the set of fixed effects is introduced to account for local economic conditions other than uncertainty (such as developments in GDP, population, exchange rates; as well as regional and global trends) affecting investment.<sup>3</sup>

# **4 Stylized Facts**

This section outlines two key stylized facts about the increasing concentration of FDI in developing economies.

**Fact 1.** _FDI concentration is on the rise, especially in developing countries_ . Based on observations of capital expenditure for greenfield FDI projects, Figure 1 reveals that FDI concentration has been increasing in developing economies, particularly since the global financial crisis.<sup>4</sup> This upward trend has even accelerated in recent years. FDI concentration in high-income economies has followed a U-shaped pattern, declining until 2013 and rebounding since then at an accelerating pace. The more pronounced trajectory of the concentration of investment in developing countries becomes apparent after taking into account the time-invariant characteristics of the countries (Table 1).

> 2The measure is intended to capture both the risk and ambiguity components of uncertainty. While risk reflects the (known) probability of an outcome, ”ambiguity” arises when the distribution of outcomes is itself unknown. The data are publicly available at World Uncertainty Database. Uncertainty is measured by the number of occurrences of the word ”uncertainty” in Economist Intelligence Unit (EIU) reports for 143 countries since the 1950s. A higher number indicates greater uncertainty. Uncertainty in year _t_ is approximated as the logarithm of the average number of uncertainty-related words in EIU reports in the three years prior to the investment (standardized to have a mean of zero and a standard deviation of 1).

> 3In Appendix B, we provide several robustness checks that test our findings against other potential markers of FDI concentration, such as the growing importance of the services sector and increasing concentration in source countries.

> 4This evidence is robust to a battery of robustness analyses: using different thresholds for the number of top investors (Figure A1); using different thresholds for the minimum number of investors (Figure A2); or using the Herfindahl-Hirschman index (HHI) as a measure of concentration (Figure A3).

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