| Summary: | The natural flows of economic activities are often disturbed by political military exogenous events that cause the various economic activities to change course (Fishelson , 1993).Over the last century, such events have been dominated by religious fanaticism, ethnic nationalist conflicts and political ideologies, propelling a transnational phenomenon of international terrorism. This paper, using the Palestinian Israeli conflict ,Intifada, as such terrorist events, empirically elucidates, in accordance with a unique dataset on terrorism, the impact of terrorism on foreign direct investment into the state of Israel.
Global media has played a predominant role in the amplification of the perception, explicating the widely help perception of risk in the state of Israel. The centrality of this external influence (subjective perception), to changes in the decision making process of investors are associated with a redirection of economic activity away from foreign investment spending in the short term. Thus potential damage on the Israeli economy in the short term is substantial and posits important factors to the firm, whilst long term detrimental impact is negligible.
The findings indicate that despite the terror against the population of Israel, the proximity of the Israel economy to the global economy has broader implications to the foreign investor, and thus mediate the amount of inflow the State of Israel receive.
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