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What's the Risk? Bilateral Investment Treaties, Political Risk and Fixed Capital Accumulation

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  • Kerner, Andrew
  • Lawrence, Jane

Abstract

This article argues that the political risk associated with foreign direct investment (FDI) is primarily a function of investment in fixed-capital, and not a homogeneous feature of FDI. As such, empirical tests of a political institution's ability to mitigate political risk should focus directly on investments in fixed capital and not on more highly aggregated measures of multinational corporation (MNC) activity, such as FDI flow and stock data that are affected by the accumulation of liquid assets in foreign affiliates. We apply this to the study of bilateral investment treaties (BITs). We find that BITs with the United States correlate positively with investments in fixed capital and have little, if any, correlation with other measures of MNC activity.

Suggested Citation

  • Kerner, Andrew & Lawrence, Jane, 2014. "What's the Risk? Bilateral Investment Treaties, Political Risk and Fixed Capital Accumulation," British Journal of Political Science, Cambridge University Press, vol. 44(1), pages 107-121, January.
    • Handle: RePEc:cup:bjposi:v:44:y:2014:i:01:p:107-121_00
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    Citations

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    Cited by:

    1. Gordon Sirr & John Garvey & Liam A. Gallagher, 2017. "Bilateral Investment Treaties and Foreign Direct Investment: Evidence of Asymmetric Effects on Vertical and Horizontal Investments," Development Policy Review, Overseas Development Institute, vol. 35(1), pages 93-113, January.
    2. Williams, Christopher & Lukoianova (Vashchilko), Tatiana & Martinez, Candace A., 2017. "The moderating effect of bilateral investment treaty stringency on the relationship between political instability and subsidiary ownership choice," International Business Review, Elsevier, vol. 26(1), pages 1-11.
    3. Lisa Lechner, 2018. "Good for some, bad for others: US investors and non-trade issues in preferential trade agreements," The Review of International Organizations, Springer, vol. 13(2), pages 163-187, June.
    4. Yu Wang & Randall W. Stone, 2023. "China visits: a dataset of Chinese leaders’ foreign visits," The Review of International Organizations, Springer, vol. 18(1), pages 201-225, January.
    5. Simon Hartmann & Rok Spruk, 2023. "The impact of unilateral BIT terminations on FDI: Quasi-experimental evidence from India," The Review of International Organizations, Springer, vol. 18(2), pages 259-296, April.
    6. Simon Hartmann & Thomas Lindner & Jakob Müllner & Jonas Puck, 2022. "Beyond the nation-state: Anchoring supranational institutions in international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 1282-1306, August.
    7. Trey Billing & Andrew D. Lugg, 2019. "Conflicted Capital: The Effect of Civil Conflict on Patterns of BIT Signing," Journal of Conflict Resolution, Peace Science Society (International), vol. 63(2), pages 373-404, February.
    8. Ganga, Paula & Kalyanpur, Nikhil, 2022. "The limits of global property rights: Quasi-Experimental evidence from the Energy Charter Treaty," Energy Policy, Elsevier, vol. 167(C).
    9. Gamso, Jonas & Nelson, Roy C., 2019. "Does partnering with the World Bank shield investors from political risks in less developed countries?," Journal of World Business, Elsevier, vol. 54(5), pages 1-1.
    10. Florencia Montal & Carly Potz-Nielsen & Jane Lawrence Sumner, 2020. "What states want: Estimating ideal points from international investment treaty content," Journal of Peace Research, Peace Research Institute Oslo, vol. 57(6), pages 679-691, November.
    11. Marvin Jahn & Paul Stricker, 2022. "FDI, liquidity, and political uncertainty: A global analysis," International Economics and Economic Policy, Springer, vol. 19(4), pages 783-823, October.
    12. Gertz, Geoffrey & Jandhyala, Srividya & Poulsen, Lauge N. Skovgaard, 2018. "Legalization, diplomacy, and development: Do investment treaties de-politicize investment disputes?," World Development, Elsevier, vol. 107(C), pages 239-252.

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