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Does the quality of bilateral investment treaties matter for outward foreign direct investment?

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  • Li, Shi
  • Urata, Shujiro
  • Zhao, Long

Abstract

Bilateral investment treaties (BITs) have been attracting the attention of policymakers with an interest in hosting foreign direct investment (FDI) to promote economic growth. Studies on the impacts of BITs on FDI inflows have produced mixed results. Unlike many studies, this research considers the quality of BITs. The analysis of FDI locational choices of Chinese multinational enterprises reveals significantly positive impacts of high-quality BITs. Furthermore, BITs exhibit a significantly amplified influence on the FDI of multinational corporations upon their implementation, in contrast to when they are initially signed. Additionally, private enterprises are more inclined towards engaging in FDI with nations possessing high-caliber BITs than state-owned enterprises. These findings suggest policymakers prioritize the quality of BITs and guarantee a seamless transition into effect after their signing, rather than solely focusing on their establishment.

Suggested Citation

  • Li, Shi & Urata, Shujiro & Zhao, Long, 2024. "Does the quality of bilateral investment treaties matter for outward foreign direct investment?," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 207-218.
    • Handle: RePEc:eee:reveco:v:91:y:2024:i:c:p:207-218
    DOI: 10.1016/j.iref.2024.01.026
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    More about this item

    Keywords

    Bilateral investment treaties; Quality level; Foreign direct investment; Mixed logit model;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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