12 January 2016
- RSIS
- Publication
- External Publications
- Improving Reputation BIT by BIT: Bilateral Investment Treaties and Foreign Accountability – International Interactions
Improving Reputation BIT by BIT: Bilateral Investment Treaties and Foreign Accountability – International Interactions
The literature on foreign direct investment (FDI) has paid an increasing interest to international institutions such as bilateral investment treaties (BITs), but whether BITs help attract FDI is an unsettled question. Building on the existing literature, this article argues that BITs can change investors’ perceptions and the corresponding investment they make because signing BITs signals the involvement of another powerful country which is able to compel the host government to comply. This implies that the effect of BITs is not constant across signee countries: BITs are effective only when they are signed with rich and influential countries. Using FDI data and data on investor risk assessments, this article finds that BITs signed with OECD countries that provide official development assistance lead to an increase in FDI inflows (both from these signee countries and from other countries) and a reduction in the risk rating. BITs signed with other countries, despite in a larger quantity, have no influence on investor perceptions or FDI inflows
Lee, Chia-yi and Noel P. Johnston. 2016. “Improving Reputation BIT by BIT: Bilateral Investment Treaties and Foreign Accountability.” International Interactions 42 (3): 429–451.
The literature on foreign direct investment (FDI) has paid an increasing interest to international institutions such as bilateral investment treaties (BITs), but whether BITs help attract FDI is an unsettled question. Building on the existing literature, this article argues that BITs can change investors’ perceptions and the corresponding investment they make because signing BITs signals the involvement of another powerful country which is able to compel the host government to comply. This implies that the effect of BITs is not constant across signee countries: BITs are effective only when they are signed with rich and influential countries. Using FDI data and data on investor risk assessments, this article finds that BITs signed with OECD countries that provide official development assistance lead to an increase in FDI inflows (both from these signee countries and from other countries) and a reduction in the risk rating. BITs signed with other countries, despite in a larger quantity, have no influence on investor perceptions or FDI inflows
Lee, Chia-yi and Noel P. Johnston. 2016. “Improving Reputation BIT by BIT: Bilateral Investment Treaties and Foreign Accountability.” International Interactions 42 (3): 429–451.
