Industrial Robots Are Boosting Foreign Investment and Reshaping Global Trade

Automation is not reducing global investment but actually increasing foreign direct investment, especially in manufacturing, as firms expand abroad after adopting robots. Rather than replacing jobs or globalization, robots are reshaping global production networks and driving a more connected, efficiency-focused world economy.

Are robots quietly replacing global trade and investment, or are they helping it grow? A new study by the World Bank's Trade, Competition, and Business Global Department, in partnership with the International Finance Corporation and researchers from University College London, offers a clear answer. Automation is not shrinking global investment. It is expanding it.

Over the past two decades, the use of industrial robots has increased rapidly worldwide. Countries like China are now leading in robot adoption, overtaking traditional leaders such as Japan and the United States. This shift has raised concerns that companies may rely less on foreign markets and bring production back home. But the reality, according to the study, is more complex and far more optimistic for global economic integration.

Automation Is Driving Investment Abroad

At first glance, automation seems likely to reduce the need for foreign investment. If robots make domestic production cheaper and more efficient, why invest overseas? But the research shows the opposite is happening. Companies that adopt more robots at home are actually investing more abroad.

As firms become more productive through automation, they gain the capacity to expand. Instead of pulling back, they look outward, setting up new operations in other countries. The study finds that even a small increase in robot use leads to a noticeable rise in foreign direct investment. Automation, rather than replacing globalization, is helping firms grow beyond borders.

More Projects, Not Fewer Jobs

One of the most interesting findings is how this increase in investment takes place. It is not just about bigger projects, but more of them. Companies are launching new investments in different countries, expanding their global presence step by step.

At the same time, fears that robots will reduce jobs in foreign operations do not hold up strongly in the data. The number of jobs created per project remains mostly unchanged. This suggests that robots and workers are not simply competing with each other. Instead, they often work together, with automation improving productivity while still requiring human involvement.

Manufacturing Leads the Shift

The growth in foreign investment is mainly happening in manufacturing. Companies that automate production at home are more likely to invest in manufacturing facilities abroad. These investments are aimed at improving efficiency, such as accessing cheaper inputs or specialized production capabilities.

However, automation does not seem to have the same impact on other types of investment. Activities like retail, logistics, and customer services are largely unaffected. This means robots are reshaping the production side of globalization, but not necessarily the consumer-facing side.

What It Means for Developing Countries

For countries trying to attract foreign investment, the findings bring both opportunities and challenges. Automation alone does not guarantee that more investment will flow into a country. Factors like market size, labor costs, and stable institutions still matter most.

However, countries that adopt automation can attract better-quality investments, especially in manufacturing. At the same time, there may be fewer opportunities in labor-intensive service sectors, as automation reduces the need for such activities. This signals a shift in the type of jobs and industries that will grow in the future.

A New Phase of Globalization

The bigger picture is clear. Automation is not ending globalization. It is changing how it works. Companies are not retreating from the global economy. They are reorganizing it, using technology to build more efficient and connected production networks.

For policymakers and businesses, the message is simple. Embracing automation does not mean turning inward. It means preparing for a more advanced and interconnected global economy. In this new phase, robots are not replacing global investment. They are helping drive it forward.