Risk and the technology content of FDI: A dynamic model

► This paper incorporates risk into the FDI decisions of firms. ► The risk of FDI failure increases with the technology complexity of a firm's product. ► This leads to a double-crossing sorting pattern of FDI. ► Firms of intermediate technology levels are more likely than others to undertake FDI. ► The prediction is consistent with the FDI pattern of US and Taiwanese firms in China.