International investment has facilitated economic cooperation among states and multinational corporations (MNCs), yet it also suffers from regulatory uncertainties and institutional hazards. How does the rule of law in targeted markets affect MNCs’ cross-border investment? I argue that the rule of law has differential effects on different types of investment. By offering favorable market entry conditions, host countries strategize investment laws to encourage both strategic and financial mergers and acquisitions (M&As), two prominent types of cross-border investment. Strategic M&As establish new global value chains (GVCs) or strengthen existing ones that incorporate countries into collaborative economic activities, which are rarely observed in the latter that purely seeks for profit accumulation. Moreover, law de jure and de facto have interaction effects on foreign M&As. Firms take into account not only the level of impartiality, friendliness, and maturity of investment laws, but also the quality of their implementation. What’s more, weak rule of law deters strategic M&As more than financial ones due to GVC linkages that transfer spillover effects to home countries. Based on data from the International Country Risk Guide and Capital IQ for 140 countries (2010-2021), I estimate how the rule of law affects different sorts of M&As. Built upon the Obsolescing Bargain Model, this paper revisits the differential impacts of law on MNCs’ transnational investment from a new perspective of GVC linkage. The study also calls for emerging markets or new democracies to improve institutional quality and law enforcement capacity for sustained global economic cooperation.