PICs permit cleaner separation of individual investment project risk from the parent firm, which may otherwise pool risk characteristics from managing multiple projects across different industries and countries. Consistent with previous IB research, our analyses of PICs announced in 53 countries from — indicate that investment risk measured as the percentage of equity-to-total capital funding a PIC decreases with greater host-country policy stability, lead-investor experience in the host country, and lead-investor equity stakes.
But contrary to previous IB research, we find that lead-sponsor experience and equity stakes reduce investment risk less as host-country policy stability decreases. From a PIC perspective, investor experience and equity stakes are complements to not substitutes for host-country policy stability.
Our PIC-based evidence re-invigorates research and new equity strategies experiences practice and policy debates about how investor experience and equity holdings affect foreign project decisions and suggests new avenues for future work.